Tan Kin Lian's Blog: Do not terminate your policies

Saturday, June 21, 2008

Do not terminate your policies

An Income agent said that several of his policyholders have terminated their policies as they have lost trust in Income. I wish to advise policyholders not to terminate your policies for this reason, as you will be incurring a large loss due to the high upfront charge.

The chairman of Income have given three assurances regarding the restructure of the bonus. His speech is posted in Income's website:
http://www.income.com.sg/aboutus/2008Bonus/chairman.asp

Para 17 and 18 of his speech are reproduced below:

17. Some policyholders have raised specific concerns on the special bonus in blogs. Allow me to address them.

> While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated. As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.

> Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.

> I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund.

18. I hope I have managed to give you a better understanding and appreciation of the position regarding the bonus restructuring. We will not hurt policyholders and shareholders. And we shall also not allow NTUC Income to be hurt.

I have written to Income that the payout on a 5 year Growth policy that is reaching maturity this year is rather low and does not meet the standard of "fair and consistent with the experience of the Life Fund". This probably applies to many other Growth policies that is maturing in the near future.

Let us give some time to Income to sort out this problem.

I will also be writing to Income to suggest that higher bonuses be allocated to existing policies (even if they are in non-guaranteed form) to reflect the good experience of the Life Fund in the recent years. I hope that the final outcome will give a better return for Income policyholders.

16 comments:

Everlearning said...: It is apparently difficult for policyholders to believe that insurance companies would pay the actual amount or close to the amount stated in their policies. Many policyholders have terminated their policies at this moment because, I believe, they have lost trust in the system that only works against their interests.; June 21, 2008 3:58 PM
David said...: In the 70s,80s to mid 90s even FD rate for S$ is quite good, from 5% to even 12% pa.
In recent years and now, to get such rates, one has to go into risky or long term tie-you-down investments or insurance and even so, with no assurance. I think the future will also be same.
Things have certainly become worse for the insured and those who are risk averse and many have been misled. And they are mostly the average Joes.; June 21, 2008 10:57 PM
zhummmeng said...: I recommend that they terminate the policies if they find the policies not giving what they claim... Assurance is nothing but assurance only.
To demonstrate the sincerity why not the insurance company guarantees that after all they will have enough stashed away in special bonus to smoothen the kinks for a long time. They have a long time horizon to play play with policyholders' money. They may even adopt the ponzi strategy as emergency but temporary measure if they run into a bad patch. Nobody knows. Only the actuary and management know. Of course don't over do like the Equitable life. It even removed annual bonus and 'pushed' everything to special but unfortunately their luck ran out at the casino in a streak of losses. Too bad for the policyholders if too much is 'put to gamble' in the special account.Terminate and cut losses if you have an alternative investment to recoup the losses in the short term .; June 22, 2008 12:24 AM
Unknown said...: It's very strange to read so many talks (over many postings) about term insurance, but have one ever thought of insurance beyond 60 or 70? Many of us have only 1 or 2 child, and even if you have 5, are they capable of footing our medical bills when we are in our 60s & 70s?

Many talked of complicated insurance products, but they were really made complicated by regulations and so called transparencies where most of the time people do not understand all the numbers and writings passed to them by so called good practise! So has all the extra regulations made a difference in the way consumers are sold the products? A trustworthy agent with integrity is far more important than giving me a 100 pages documents!

I went to one bank recently and overheard the girl over the counter speaking softly to an aunite who just withdrew a cashier orders in favour of an insurance company, in chinese, saying, "this one interests better! don't put all your money with the insurance company."

I really wonder are these counter girls allowed to give advice as such? I can't help but believe that these counter girls are paid good referral fees, otherwise I don't remember tellers in the past being so ever eager to drag the customers to see the "financial advisors" seated in well furnished cubicles!

Since we are talking about banks .... I have never come across an insurance company adverise, agressively, to encourage people to spend & borrow on credits, but many banks do! On one hand banks give you rates as little as 0.25% per year and loan it out at up to 24% per year!

Yet during the currency crisis, many remembered they have policies and could borrow from the cash values to ease the financial strain. But the ever trustworthy banks will tell the financially stretched person that he is not worthy to borrow!

When you have $ they call you & ask if you want this card that card and revolving credits. Then when you have no money and really needed some help, they tell you your credit not good to borrow!

Everyone complains about how complex and expensive insurance products are, but when it comes to banks structured deposits (and many had been fooled, lost money and kept quiet because of "face"), no one complains that it's even more complicated, and forgot how many had been fooled at one time to believe it was FDs. Many people, especially old folks, lost big money, then only regulations were put in place for banks to stop selling structured like FDs!

At one time, capital guaranteed and capital protected were used interchangeably and freely, and we consumers again was fooled!

Many also forgot how banks launched many funds and many lost money to instruments they would never have bought if it was issued by an insurance company.

Remember we consumers are the creditors and banks are debtors. Our loans (deposits / savings) to banks are similar to banks revolving credits or overdraft to consumers. In other words, these loans are unsecured loans.

SO in the event the banks fold up, like barings, all you have of your hundreds thousands, you will only receive back $20,000! Think about that! So you believed that the banks are secured, in a world so dynamic, a economy so volatile now?

I do not know about what if insurance company folds up, but I have heard of one insurer made to stop operative its business but allowed to continue fulfulling its obligations to policyholders, in terms of claims & maturity, until it was able to resume operating its business again. Perhaps MR Tan would have knowledge of which insurers and can comment on what happens should an insurance company folds up. This would then give consumers a better idea about how secure our investments / savings are, with the banks or with the insurance companies.; June 22, 2008 1:02 AM
siewkhim said...: Dear Kin Lian,

If NTUC Income meant what it said, then why was the annual bonus rate not increased since tne investment experience of the participating fund has improved to 7.8% pa average last ten years?

But instead they revised the bonus structure and do not intend to make provision for their so -called "special bonus". If no provision is made for such bonus, what is the likely of its being paid?

And just after making all the assurances blah, blah blah, they are prepared to pay your wife's 5-year Single Premium Endowment maturity value to about 3.5% pa yield when the fund was averaging 7.8% pa past ten years.

Are we convinced with all these promises? People terminated their policies because they want to cut their losses and get on with their lives never to be involved with these crapy participating policies.; June 22, 2008 10:39 AM
siewkhim said...: This comment has been removed by the author.; June 22, 2008 2:02 PM
Everlearning said...: When the bank folds up, the maximum that the depositor could get back is $20,000, no matter how many different accounts one has with the bank. This is total absurdity! I find that our Government is not doing enough for our people. Obviously, banks or finance insititutions are not accountable if they fail in business or fold up. Law is passed and deemed right for bank not to return the exact money the depositor had, who is the loser?; June 22, 2008 2:19 PM
Unknown said...: After reading so many negative comments, I think the best way is to can the $ in the biscuit tin, just like ah ma ah gong time, or keep them in the pillow case!

It's very safe since interests rates from banks are so miserable now & rates from insurers are non-guaranteed!

However it is safe until ah ma ah gong kena cancer / stroke / kidney problem prematurely before their time to die, then all the hard earned money in the tin sure kena rob - rob by doctors & hospitals ... worse still to come, when ah ma ah gong children also kena rob because money in biscuit tin not enough to pay medical bills and also no money left for funeral ... so how?

This is only ah ma ah gong story, what if ah beng ah lian also can their money in the biscuit tin? then one nite go chiong lang gar one die one disabled ... their children suddenly no money for restaurants, for movies, for internet, no mobile phones, no new clothes, .... so how?

MR Tan mentioned many times buy terms invest the rest ... so easy?you mean ah ma ah gong ah beng ah lian also actuary trained, internet sauvy, highly literal, and financially smart that just buy terms lah, then invest!

Invest also got buy-sell price wat!

Invest also must pay management fees right?

As for terms, expiry usually 60 or 65, after this age then how? eventually one will use the investment returns to insure oneself? and a mjor health issue can wipe out all the years of investments .... then how?

Someone bought an insurance plan from a bank. He didn't buy from his usual agent cos the bank gave him an expensive mobile handset.

Years later he was diagnosed with a stage I cancer. He called the bank & asked for the advisor. THe advisor no longer works there, and he was passed to another advisor. The other advisor did not really help but gave him a hotline number to call cos he is knocking off fromwork at 4PM.

The hotline is to the insurance company, and he was told some issues need to be resolved concerning his applications years ago.

Now he is sick, and also worried, cos he needs to do all the claims himself, and he worried cos he has no idea if the plan would pay or not! He felt like calling his usual agent for advice, but when he saw the handphone given by the bank, he knows better not to call .....

consumers are blinded by free gifts ... or rather GREED blinded them ... and when things go wrong, they blame everyone excepts themselves!

So we see many blame insurers & their agents ... it's a vicious cycle ... you go to a restaurant to buy a combo meal, which is discounted. The restaurant could give you the authentic stuffs, then cut his employees' pay for your discount, or the restaurant looks after the employees but your combo items gets dicsounted. This is business!

You ask for discount, you get discounted services!

So Singapore insurance agents (& property agents) are in difficult industry to be professional & gracious! AFterall many crappy agents are out to make living out of greedy customers who buy because of discounts or free gifts!

Discounted premiums = discounted services. It's no wonder I have heard of friends complaining that after 3 or 5 years, their agents from XYZ company are no longer contactable ....

So perahps one should look at oneself first before pushing all the blames to others!; June 23, 2008 12:55 AM
Falcon said...: There is a new Poll on the satisfaction index for NTUC Income in the link below:

http://forum.channelnewsasia.com/viewtopic.php?t=157026&highlight=ntuc

There is also a point rebuttal on the assurance by NTUC Income on its bonus cut.

Since there are some posters who have maintained that the majority of policyholders are now happy and satisfied with NTUC Income after their assurances in the newspapers, it is timely that a poll be taken to indicate the real feelings on the ground.; June 23, 2008 1:38 AM
Everlearning said...: My aunties in their late 70s have put their savings with the bank. They are simple happy folks (no investments, no insurance plans whatsoever that I know of) who use the privilege banking. Are there any protection given to them that their savings will be intact should the bank (DBS) folds up. Unlikely??? Absolutely not??? What happened to Citigroup US, Bear Stearns, JP Mo..... Impossible right???; June 23, 2008 11:29 AM
Everlearning said...: Oops! Not JP Mo... These are the international banks that were on the brink of bankruptcy: Merrill Lynch, Deutsche Bank, UBS, Bear Stearns and Citigroup. Wait a minute, our Government pumped billions of dollars into some of these. Maybe, I should not be so pessimistic after all about the unfair ruling. The Government will do likewise to our ailing banks.; June 23, 2008 2:48 PM
Khiat Han Hwee Adrian said...: We should not advice a client to terminate the policy just because of the bonus issue. It is a big NO NO.

There are situations whereby advisers may recommend terminating the life policy when the need to maintain the policy is not there anymore.

Adrian Khiat
http://akhiat.blogspot.com
I advice those who wants to terminate their NTUC Income policies to review their needs first. Then you think over if other companies give better value than NTUC Income if they want to replace the coverage they are terminating.; June 23, 2008 8:47 PM
Falcon said...: Adrian,
You still do not seem to get it. Policyholders are not terminating just because of the bonus issue. It is about the change in attitude in the new management. It is about the loss of trust, sincerity, integrity in the new management.
It is about the sense of betrayal, hurt and loss of peace of mind. We know it is difficult to find a replacement policy, especially when we have aged and our insurability has dropped. Precisely because NTUC Income knows these and is doing these to us at this time that we are so furious and disappointed.; June 23, 2008 10:34 PM
siewkhim said...: Dear Falcon,

You really hit the nail into wood. The proximate cause of these consequential issues is NTUC Income's decision to cut the bonus.

The bonus cut is normally approved by the BODs acting on the recommendation of the Appointed Actuary. The CEO is part and parcel of members of the BODs.

I am not too sure whether the CEO and his team thought through the issue before making recommendation to the BODs.

How come the marketing of NTUC Income made not objection to the bonus cut?

A bonus cut with a favourable investment experience is suicidal to new business as well as in force business. Don't they know? Or are there other agenda that made them do such a drastic thing?

The rest is yet to come.; June 24, 2008 3:20 PM
Falcon said...: Thank You Siew Khim, not many people can distinguish the trees from the forest. That is the reason why there are so many financial schemes out there which try to fool the ordinary folks. Many agents still think it is so simple and so many people need their help in differentiating A from B. They try to explain to their clients how to achieve 3% returns not realising that nowadays there are people who can achieve 300% returns without batting an eye. However, these people are still rare and there are still many who do not know what is happening. In particular I am most displeased with those who know a little bit and sing loud loud as if know a lot.; June 24, 2008 7:03 PM
siewkhim said...: Dear Kin Lian,

It is already more than a week. Please let us know NTUC Income's response to your letter regarding the bonuses on the participating policies to be based on actual experience.

Thanks; June 30, 2008 12:36 PM

Saturday, June 21, 2008

Do not terminate your policies

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