Tan Kin Lian's Blog: Avoid participating policies

Tuesday, July 29, 2008

Avoid participating policies

Dear Mr. Tan,
I have several policies with X. I received a letter showing a cut in the bonus rates, to be compensated by higher rates of special bonus. But the rates of the special bonus for my different policies are quite different. How do I know if I am getting a fair rate of bonus?

REPLY
I am also quite confused with the different rates of bonus on my policies. More importantly, I find that my participating polices have still not reached the breakeven point after being in force for more than 10 years. I suspect that they have not distributed a fair rate of bonus, in spite of the attractive yield earned on the fund over the past ten years. I have raised this matter with X, but they keep giving me unsatisfactory replies.

My advice to the public is: Never invest in any participating life policy, including whole life policies where the premiums is paid for10 or 20 years. Here are the reasons:

1. The distribution cost is high and can take away up to 2 years of your savings. That is a lot of money to be given away.

2. You will not get a fair rate of return, as the insurance company will pay bonus that are far less than what the investments actually earned

Another actuary, who knows what is going on, told me that he avoids participating policies for the same reason. He will only buy Term insurance. He prefers to invest his savings in unit trusts, as the charges are lower and are transparent.

7 comments:

siewkhim said...: YES!!!!!! AGREE!!!!!

ALSO AVOID INVESTMENT-LINKED POLICIES.

ALSO INSURERS THAT MARKET PARTICIPATING AND INVESMENT- LINKED POLICIES.

AVOID AGENTS. BUY TERM POLICIES DIRECT.; July 29, 2008 6:31 PM
Falcon said...: So is it time to submit the signatures for the collective protest since NTUC Income is still giving you unsatisfactory answers? I believed all those who have signed will want you to do that.; July 29, 2008 8:56 PM
zhummmeng said...: We should take the law into our own hand by terminating our policies and make a run on the company. What do you think? Reasons don't work.They think reasonable people are weak people, they soon get tired. They take our patience as sign of
inaction.....indecision; July 29, 2008 10:20 PM
zhummmeng said...: Wholelife and endowoment have been under the spotlight lately. Why?
Just imagine more than 2 years of your premium go to pay the greedy agents and the company leaving the buyers high and dry.That is the reason. And even you are a maths idiot you can see it affects the return and amount of protection tremendously. So it is no wonder that whole life and endowment are favourites with insurance salesmen. Ignoring the needs of the buyers companies have been rolling out such products lately. Glaring examples are the cashback products that suck the buyers blue.As if not enough there are agents beguiling suckers to buy cashbacks to pay for wholelife till no more cashbacks .
What a heartless and cruel scam and often the victims are the man in the street and the poor in the heartland.The poor get poorer and the rich get richer and the insurance agents are the agents of this great divide.; July 30, 2008 12:18 AM
siewkhim said...: Guys,

Be realistic. You cannot fight an entity with strong financial stamina, political well connected and protected.

The story in the bible "David and Goliatd" was with divine intervention. So don't expect this to happen to us.

We have learned our lesson and we must teach other never to be involved with participating and investment-linked policies sold by any insurers in the shity damn world.; July 30, 2008 2:59 PM
zhummmeng said...: That is right, we must warn consumers of booby traps set up by greedy agents and thier masters.
I was at Bugis MRT and there was this NTUC roadshow. Snugly positioned one poster touted that "if you saved $250 monthly you can get $2000 every year". This is misleading and misrepresenting because by paying $3000 (250x12) you get back your own $2000 is really no saving but very bad saving. What happened to $1000? It is loss, isn't it?
I won't believe that people with conscience dare to cheat and mislead others into a real bad deal. I am sure there is a decent way to make a living and not connning your fellow human beings.
One would be better off saving in money market saving account which might give you up to 3.5% pa or simply in a plain vanilla saving account at less than 1%. The point is you have complete control and liquidity and you can decide in whatever way you want use your cash. If you decide to invest regularly you can get better return
than putting in revosave.If you decide to have a higher protection with CI cover you too can do that.With revosave can you do it?
Hold on to your cash tightly if you ever see a NTUC agent touting revosave or else you will be locked and condemned for the next 25 years for NOTHING.; July 30, 2008 10:37 PM
siewkhim said...: They claimed to be leaders in life and general insurance. They are more like "misleaders in life and general insurance"

Misleading is in fact legal cheating.

The way to prosper is to cheat the poor to benefit the rich.

AVOID THEM AVOID ALL THEIR DAMN LOUSY STINKING YACKY PRODUCTS ESPECIALLY PARTICIPATING AND INVESTMENT-LINKED POLICIES!!!!!!!!; July 31, 2008 10:18 AM