Saturday, May 10, 2008
I would like to buy Term Insurance but am not sure if it can only be bought when tied to a living policy. Can you please advise if I can buy a Term Insurance by itself and if so, where?
You can call the insurance companies shown on the attached FAQ:
Some of them may try to distract you to buy their whole life, critical illness or other products. You must insist on the Term insurance.
Here are some benchmark rates for you to consdier:
Let me know when you have made the final decision. All the best.
With a Google account, you can create an Gmail account and even your own blog.
I welcome anyone with a different view to send it to me. I shall post their view, so long as it is expressed fairly. I will not post any personal attack or slanderous comments. I expect the person to be identified to me, but I will use a pseudonym (if they prefer).
I will give the right of reply to any person who feel that any posting in this blog give an unfair, incomplete or wrong presentation of their product or organisation.
If am willing to feature your product in this blog, if you can provide the answers to a few key questions that I ask. This will allow me to make an objective analysis.
I hope that my blog will attract a large number of people who find the views posted here to be useful and educational.
My wife and I would like to join you in your Protest Against NTUC Income's unilateral change in bonus payout. We are joining you in this protest because we have a few policies, bought for ourselves and our children, from NTUC Income.
Please let us know if you need to have our actual signature on the Letter of Protest which you plan to submit on 30-May AGM.
Please get your family members to sign on this form and also get the signatures of your friends and colleagues as well. You can mail to my home.
1) Can Income unilaterally change the bonus structure without policyholders' consent?
2) According to MAS's reply: "bonus declarations and bonus restructuring are commercial decisions". Can the commercial practices be applied to Income (a cooperative)?
3) According to Mr Ken Ng: "staying put would cut Income's investment flexibility and the potential to invest in assets such as equities that could earn a higher return in the longer terms". How much more return can policies holders expect should the change pass through? How long is "long term"?
4) What penalties will the Chief Actuary, CFO and CEO get, if their decisions are unsound, after they inplemented the new policies, and then subsequently leave the company, bearing in mind that their policies needed "LONG TERM" to see the "fruits" !
I suggest that you address the questions to NTUC Income and MAS. I am not able to answer them. I am as puzzled as you are.
I received the scanned statements by e-mail. I expected DBS to inform me about the charge for this service. I am used to banks asking for astronomical charges.
There was no mention of any charge. It seems that I am getting this service for free!
Well done, DBS.
NTUC is special; it is a cooperative; it is different from the rest. We have many advantages, there is no need to set aside 10% of the profit for distribution to shareholders.
Cooperatives, after deducting all expenses, the remaining profit can be distributed to POLICYHOLDERS. In the past expenses made of only 2%, the other 98% was distributed. We have an advantage of 10%. In other words we have more to distribute.
If we retain the 10%, we can still distribute high annual bonus. On top of this we have 20% saving on profit on corporate tax. This too serves as advantage over the other company.
Why talk of insolvency and smoothing when NTUC has a lot to spare.
Something is wrong somewhere. Unless expenses have gone up. Where? Pay very high salary to senior managers? (Other references deleted)
Remember NTUC was started to provide affordable insurance to the man in the street; to give low premiun, high protection and good return. What has happened to these cooperative values?
This was the mission. It is not the mission TO BE THE #1 INSURER AT ALL COST. The mission is to make sure all the men in the street are insured adequately and not to be saddled with high commission whole life products. To provide insurance at affordable premium and with decent return on investment. And not with products to enrich the agents at the expense of the customers and to make NTUC #1.
As long as the people have the passion, Kin Lian will give them the chance to do their best and strengthen what they are good at. That’s why people have serve faithfully to the organisation which is contrary to what the new management thinks that these old staff has no where else to go.
People have worked in Income long because they respected the leader then who is committed in looking after the best interest of NTUC Income and giving best values to the policyholders. It was meaningful then to serve the organisation which has a sound purpose and good values.
NTUC Income was never meant to a retirement place until the new CEO started to coin it himself. People were proud to be working at NTUC Income until the new management think likewise.
Friday, May 09, 2008
I am an ex-employee, Somebody posted above that staff who left are staff that Income do not want anyway. This is not true. When I was with Income, I was among the 10% of the staff who obtained A grade every year. I was assessed an A grade by my superior, my peers and my subordinates. My work and achievements were measurable and every year I met or exceeded the expectations.
Ironically, I decided to resign from an organisation and a work that I was very dedicated to. For 8 months I tired my best to work under the new management. I finally decided to leave as I knew that I could not fit into the new management style. I was not in sync.
Many of the things I had to do, I did not agree. Things that were right before became dicey or wrong under the new management. I could not go on if I did not believe in what I was doing.
For example, I believe that Income, like Fairprice for groceries, have to set the benchmark for the basic insurance products for the mass market such as term life cover, medical insurance and motor insurance. Income's products cannot be more expensive than those offered by the commercial insurers.
Hence, recent statement from Income's management that they need not be cheaper than the commercial insurance companies for motor insurance gave me the shudder.
If you do not have a registered account and wish to post your comment, please send an e-mail to email@example.com.
My family is covered under Incomeshield Plan B. Should we:
a) Buy an Assist Rider
b) Convert the existing plan to Enhanced Incomeshield Basic
Please read this FAQ:
If you are insured fro Plan B, which is treated in government B1 ward, it should be sufficient. I think that there is no need to upgrade to Enhanced Plan Basic (which covers "as charged"), as the difference in coverage is small.
Perhaps you can ask the insurance agent or the office to give practical examples of the difference in coverage between these two plans, based on a sample of hospitalisation in B1 ward.
The Assist rider covers the Deductible. I think that this is not necessary. You can self-insure this risk and pay the Deductible from your Medisave account. I am not sure if the premium charged gives good value to the policyholder.
My family members have been insured under X Shield for several years. Last year, we decided to upgrade the plan and add rider to enhance our coverage. All documents were submitted on the same day. Later we received policy contract, we were told that our daughter's plan will only commence in 1 Feb 08.
On 30 Dec 07, my daughter was admitted to hospital for investigation. After several tests, we were told that medical attention need to be administered immediately. In early Jan 08, we submitted a claim on X.
To our greatest surprise, X had just refunded our daughter's rider premium and resend us a new policy contract putting her coverage back to the initial coverage saying the upgrade and rider has been decline due to "pre-existing condition". Can X approve upgrade and then later decline it, is it fair for policyholder in our case?
If X has approved the upgrade previously, a contract has existed. It does not matter that the upgrade will commence later. To my knowledge (and I am not a legal expert), it is not correct for X to cancel the upgrade and refund the premium.
I think that X can cancel the policy if there is a pre-existing condition that is material to the upgrade, but it must be known previously to the insured. I am not sure about their grounds on this matter.
You can raise this matter with X. If they do not give you a satisfactory explanation, you can file a complaint with FiDREC,
I've been approached to purchase an endowment policyand a limited pay whole life policy by two different financial advisers recently. My only policy is a whole life policy that covers me for $20,000. Please advise on the various factors that I should consider before purchasing either policy.
I hope that this FAQ can help you in this decision:
My advice is to buy a Decreasing Term (or Level Term) and invest your savings in a low cost investment fund.
Thursday, May 08, 2008
NTUC Income also had another non-core business, i.e. to manage a shopping mall. The willingness to handle this activity gave us the reason to invest in Eastpoint Shopping Mall in 1998. We bought the shopping mall at a good price.
Over the past ten years, the value of the shopping mall must have appreciated by $50 million.
Taking this into account, the overall business results of the so-called non-core business has been healthy. It is wrong to described them as "bleeding".
The non-core businesses are managed by separate people, and do not distract the insurance people from running the insurance business. Our intention, at that time, was that the "more than insurance" business will help to strengthen the branding of NTUC Income.
What Mandy (post 51) said is similar to what Tan Suee Chieh said in his media interviews. So far, I have avoided commenting on what TSC said, to avoid interfering with his management.
If I remember correctly, the so called non-core businesses of Income (except for Snow City and Singapore Dress) did quite well over the years as follows:
> they were operated viably
> they contributed to the branding of NTUC Income
> most successful were the car sharing and home repair services
All of these businesses were started with the approval of the investment committee of the board of directors.
Snow City and Singapore Dress made a loss of perhaps $5 million in total. This is more than offset by the gains from other investment decisions made during my management. I have left a surplus of $650 million to my successor.
I am particularly annoyed that TSC mentioned in a Straits Times interview that he had to discontinue the funeral services business. I wish to ask TSC to tell how much money was lost on this non-core business (if it really existed).
I hope that people like Mandy (who could be a fictitious name) do not slander me unfairly.
I believe I am also one of those affected by Income's recent changes. Thank you for highlighting to lay persons like us what are the potential consequences.
I would like to comment that Income should make it a point to inform every affected policyholder directly and promptly. I only learned of it because I follow your blog often and have read about it in the press. And just a short while ago, I saw Income's letter at its website. Why is it so difficult to send out the letters as soon as possible? Will we get it in time for the AGM?
Perhaps you can raise this point directly with NTUC Income. You can write to the CEO or the chairman of the board.
I suspect that NTUC Income wants to spread out the despatch of the letters, so that they can handle the enquiries.
To begin with, I have nothing against the new management of INCOME but it’s the way things are being done. The first indication from the new CEO was to phase out the part time sales people because he came from a company that do not believe in part-timers. I won’t say he forgot, but he doesn’t understand the root and culture of NTUC INCOME and how it started. Under the leadership of Kin Lian, it has transformed INCOME to what it is today.
It was Dr. Goh Keng Seng’s wisdom to advise NTUC to start this co-operative Insurance as it had the built in advantage of reaching out to different strata of the workforce through the trade unionist and union members. For three decades, these part time sales force also know as INCOME Organisers had contributed tremendously to the success of this co-operative.
Kin Lian’s departure has also caused a great dislocation to the staff. I won’t say its wrong for the new CEO to bring in his own people to support his mission but too many replacements including middle management has caused fear and uncertainty among those who are not chopped yet. Many more staff are in limbo, don’t know when is their turn to go. From the number of postings in TKL’s blog from ex-employees expressing their bitterness is a testimony.
It is a sad thing, that such a thing happens to a co-operative own by the labour movement whose primary objective is to champion for workers rights. I hope the leadership of NTUC can look into this matter to instill some confidence to the existing staff.
I am also very disappointed with some agents who posted in the INCOME forum venting their anger at Kin Lian questioning his motive and calling him all sorts of names. The only reason I can think of is that those postings in Kin Lian’s blog about agents earning high commission and advocating people to buy term and invest will invariably affect their sales.
Some people asked if I have a motive, that is, if I am setting up another insurance company to offer low cost products?
My motive is to offer to the people the option to buy low cost products, i.e. term insurance and investment funds. This topic has been covered in my blog and website over the past year:
Many people have asked me where they can buy low cost term insurance and investment funds.
I have directed them to the following:
> insurance companies, mostly NTUC Income
> invest in the STI ETF, through a stockbroker
> invest in unit trust, through an internet platform, e.g. Fundsupermart, Dollardex, POEMS
I am now advising a life insurance company in Singapore to offer these low cost products. I hope that they will be avialble in 6 to 12 months time. This has been mentioned a few times in my blog during the past weeks.
I hope that my actions in educating the public and advising a "new" life insurance company, will spur the existing life insurance companies, i.e the big boys, to offer low cost products as well.
This will be to the advantage of the large numbers of people who need the "noble" service of life insurance.
Some people have pointed out that I have earned enough money from my previous job, and I do not need to earn more money now. This is correct. I am doing what I can to offer an alternative, which I hope will benefit many people.
I want to thank the large number of ordinary people who have expressed their views in support of my effort. It has been very difficult for me to endure the personal attacks of people with vested interests.
A few people have asked about my motive in revealing the truth about life insurance, and how it reconcile with the products that are sold by NTUC Income during my time.
I have always held the view the the products must be priced fairly for consumers. The premium comprise of the cost of insurance, the marketing expense and administrative expense, with the balance being invested to accumulate the cash value and bonuses payable under the policy.
For marketing expenses, it was necessary to pay a fair remuneration to the agent to sell the life insurance. The commission rates paid to agents and agency managers in the market were far too high. The commission rates paid by NTUC Income were at a much lower level.
Administrative expenses were kept low. There were no extravagrancy. We were frugal. I felt that this should be so, as most of our policyholders were from the ordinary people who has to work hard to earn their monthly income.
The remaining premium were invested to accumulate the cash values and bonuses payable under the policy. The bonuses were distributed to all policyholders fairly.
NTUC Income pays a lower level of tax as a cooperative society. This helps to offset the marketing and administrative expenses, and give an attractive return to the policyholders.
Most insurance policies sold by NTUC Income in the earlier years enjoyed a high rate of bonus and gave an attractive return to the policyholders. A yield of more than 5% (even 6%) over the past 20 years can be considered to be quite good.
After leaving NTUC Income, I have more time to study what is really happening in the market. I get more feedback from the general public about the insurance plans that they have bought from other insurance companies.
I was also asked about the structured financial products sold by the banks and other distributors. These products have many of the bad characteristics of high cost life insurance products.
It becomes quite clear to me about how the general public is being exploited by the bad products offered by the financial services industry. They took away high charges (not properly explained by the financial advisers) and gave a poor return to consumers. I decided to be more active in giving my views in my blog.
This is my personal reply to Adrian Khiat, whom I know well. Adrian is a fair person, although he has recently written a strong criticism of me.
I am concerned about the change in the bonus structure affecting 310,000 policies sold earlier by NTUC Income. I am also conerned about the move by NTUC Income to be more "like the industry". They destroy the values that NTUC Income stood for, as a cooperative society, during the time that I headed it.
I do not wish to interfere with the new management of NTUC Income in respect of the way that they manage NTUC Income now and the new products that they introduce.
My wish is that they keep the old bonus structure for the old policies that were sold earlier, based on the benefit illustrations that were promised to the policyholders. There should not be an unilateral and arbitrary change.
The management can make an offer to these policyholders to move to the "new bonus structure". Let it be voluntary.
There are some good life insurance products in the market. Some other products can be improved by reducing the marketing and other costs, and offering fair terms to consumers.
In this way, the life insurance industry can do its "noble" role of serving the public by truly serving them with the insurance protection and a fair return on their savings.
Tan Kin Lian
Wednesday, May 07, 2008
I will most certainly send to you me and my wife's signature to protest against the low annual bonus. The terminal bonus to me, is something which any insurance company can indicate, or 'pluck from the air'.
Currently, my wife and I both have ID2 Plan and have been contributing $X monthly to the plan since Sep 2006. Do you think we should withdraw from this plan and go on to the STI ETF that you had highly recommended in your blog?
Our wish is to grow our money for our retirement. We had always trusted NTUC and its agent to managed this for us. We both have Protection Policies and a Foundation for our son since 2000 as well. They are all affected by the low annual bonus which I am extremely concerned.
I think that it is all right for you to continue with the Ideal (ID2). You have already incurred half of the upfront charge of 45%. Anyway this upfront charge is much lower than other ILPs in the market.
If you buy the STI ETF you will need a sum of $3,300 to buy 1,000 shares.This may be inconvenient for you.
I had a similar letter on the change in bonus structure from Income relating to growth policy. I have been rather unhappy with income of late but I wonder how likely is this protest to succeed?
I have other concerns. I feel that Income is not looking after its policy holders.
1. One of my policy was purchased using CPF. When I enquired on the possibility to use change and refund the CPF portion to my account, the agent tried to sell me other policies and disregarded my enquires. Subsequently, I wrote to income and they claimed this change is not possible. I spoke and wrote to CPF and the advised this is possible. What should I do?
2. My motor insurance was increased 53% despite me being with the company and having no claims at all (50% NCD). I enquired upon renewal which was a month back and got a call a day later for the purpose of doing a survey with Income. As i was busy, the person promised to return call but never did.
It seems that the company is passing off its costs to its good customers and refusing to explain. Could you advise on insurance companies that you engage? I feel this will be helpful for me as INCOME doesn;t try to engage my issues.
I suggest that you write an email to firstname.lastname@example.org. I am sure that they will attend to your issues.
Actually, I had a total of about 20 life insurance policies. They include 5 current life policies in my name (of which two are affected by the bonus cut), 9 policies that have been transferred to my children, and 5 investment linked policies.
Some other policies have since matured or expired (i.e. term insurance policies) or were consolidated (i.e investment-linked polices).
You have written about the "effect of deduction". I am still not clear about this concept. Where can I find this figure? What does it mean?
When an insurance agent sell you a life insurance policy, the agent is required to give you a Benefit Illustration. It shows the projected cash value and protection value (i.e the amount payable on death) at various durations of the policy.
There is a column called the "effect of deduction". It shows the amount that is taken away from you at the various durations. This amount is used to pay the marketing expenses, management expenses and life insurance cover.
For example, if your total savings over a period of 30 years is $150,000 and your gain is $100,000 (say), you should get $250,000. If the "effect of deduction" is $60,000, you will only get $190,000. Int his case, the deduction takes away 60% of the gain.
If you invest through other products, the expenses and fees usually take away about 15% and leaves you with 85% of the actual gains. The deduction under a life insurance policy is much higher and usually leaves you with less than 50% of the actual gain.
If you are being sold a life insurance product, ask the agent to show you the "effect of deduction". If the deduction is less than 20%. the policy gives good value. If it is higher, you should look for other investments.
Many consumers ended up with poor returns. If they terminate the policies before the "magic" durations, they lose out on the terminal bonuses and get a poor cash value. Those who waited for the "magic" durations may also be disappointed. If the investment markets fell, the terminal bonus rates were also taken away. After all, they were not guaranteed.
In an environment where the terminal bonus rates could be changed so easily, and could be made different for different groups of policyholders, it is difficult for policyholders to "trust" the terminal bonus rates. It is better to avoid these types of policies.
It is better to invest your money in low cost investment funds, which are more transparent. You are likely to get a higher return. Read this FAQ:
I really do empathise your plight - as what your former staff said: I quote " that if you are still the CEO, you would probably singing the same tune"....
I do agree with you that the bonus cut is uncalled for. As a layman, every now and then, whenever thereis a 'cut' in bonus, citing economic down turn - as an excuse, and policy holders are the 'guinea pig" to get the 'cut'.
All this while, we have no one to champion our grievances ..... and have to stomach the bonus 'cut' in silence. I feel there is no "transparency and accountability" on this issue as in my opinion, most management staffs are refrain from making "unnecessary comments" on the said subject.
Now, I am extremely delighted that with you at our side, the 'reduction in bonus' is now taken to task. I do hope other insurance companies, before taking out the 'knife' to "butcher" the policy holders' policy bonus rate, will think twice now.
Keep up the good work and now, my perception of you is changed.
Thank you. In this case, the cut in bonus is unnecessarry as the invesment yield in 2007 was very high.
If NTUC allows some policyholders to stay on the "old bonus structure", can NTUC punish these policyholders by giving a low rate of annual bonus in the future?
The actuary and board of directors are required to act fairly in the distribution of the bonus among different groups of policyholders. If they act in a malicious manner, they can be subject to law suits and be personally liable.
I receieved a letter from NTUC showing changes to my bonus. They explained that the annual bonus has been reduced, but the surrender and maturity value is better. How is this possible?
Read this FAQ:
It explains the difference between annual bonus and special bonus and the impact on the policyholders.
I invite the management, or their representative, to send their views to my blog with their names. I shall be happy to give them their coverage, similar to letters in the newspaper.
In their anonymous replies, they often put words into my mouth. For example,"Mr. Tan, I am sure that if you are still the CEO of NTUC Income, you would have done the same thing". Let me speak for myself. Do not push your views on me.
I ask these commentators to act honourably and avoid attacking my character, with unstantiated statements, under the cloak of anonymity. I have allowed some of these attacks to be posted, so that other people are aware about what is going on.
If anyone has a point that you want my answer, you can send an e-mail to me. I will reply to it, and post it into my blog.
In my view, there are two segments of the industry:
1. Bad segment. This segment offers products that give poor value to consumers and pays high commission to agents to sell the products often through misleading means. This has been a problem of the life insurance industry for decades and continue to be a big problem today.
2. Good segment. This segment offers products that give good value to consumers, e.g. low cost term insurance. They give a good return to consumers on their long term savings, e.g. no load mutual funds. This segment represents a smaller share of the market. I hope that it will grow in the future.
In my articles, I wish to educate consumers on how to identify and avoid the bad segments. The agents involved in this market segment have caused disappointments to hundred thousands of policyholders over the years. These agents, and their insurance managers, have been giving a bad name to the life insurance industry.
I encourage consumers to find out and go to the good segment of the market. You need life insurance to provide financial security for your family. You need to grow your savings for your retirement.
I also encourage more insurance agents to move to the good segment of the market. You can earn an honest income (i.e. not at the expense of your customer) by selling good products in bigger volumes at lower margin.
Instead of paying a fixed fee, the charges are determined by the fund's performance. The better it performs, the higher the charge, but if it doesn't perform you don't pay.
This can be compared with the present initial charge and is deducted from your money before it is invested.
Also known as an exit fee, this is payable when you sell your units, and is usually levied on a sliding scale to attract investor loyalty. For example, if you sell after one year you could be charged 5%, after two years the fee drops to 4%, after three years to 3%, after two years to 2%, and after five years to 1%. After that you won't pay.
With no-load funds the investor does not incur any charges other than the annual service fee. These funds are suited to investors who invest directly with the asset management company (by-passing the broker and his commission).
These are added on to the annual service fee and paid to brokers on a quarterly basis as an incentive not to switch investors to other funds. At present brokers are paid a one-off upfront fee.
All the above fee structures can be applied in combination, depending on the asset management company, for example, by lowering the initial fee but introducing an exit fee.
Performance-related fees would be levied on some of the existing funds if unitholders agree, and on new funds. The annual service fee may be raised for new funds.
Investors will need to compare the various products and their fee structures before committing their savings.
1. Select well diversified funds with low expense ratios, e.g. indexed funds
2. The upfront charge should be 1% or less. Better still, go for no-load funds.
3. The expense ratio should be 1.2% or less (for actively managed funds) or 0.6% or less (for indexed funds).
4. Transact directly through an internet portal, e.g. Fundsupermart, DollarDex, POEMS
If have S$200K in my saving account and S$75K in time deposit earning about 1.25%/year. How should I invest for a better return and what products to invest in ? Stock, property, time deposit or unit trust etc. I am for a net return of 5-8%.
I hope that this FAQ will help you to find the answer:
I would like to seek your advice. Based on your years of experience in this industry, do you know of any insurance policy I can purchase for my twins who were born at 25 weeks?
If there is, how can I benefit from such policy as the parent? (e.g. When they turn 21 years old, I can also take it out and gain from the lower premiums paid for kids policies etc.)
They are both 1.5 years old now and growing healthy like any other kids (my younger kid has a certain malfunction but was operated successfully and growing like a normal child now)
I really don't understand why X rejected our application...(but one of my HR colleagues under the Benefits Section asked me to check out Y for congenital coverage).
Looking forward to your advice.
I hope that this FAQ will help you to make the best decision for your twins:
You can buy Medishield (from CPF) to cover their hospital expenses.
What do you mean by policyholder's "reasonable expectation"?
In a participating life insurance policy, the contract states that a bonus will be added each year based on the profit for the year and distributed in a manner that is approved by the board of directors, acting on the advice of the actuary.
To prevent abuses, the Monetary Authority of Singapore (MAS) has issued guidelines to require the insurance company to declare its bonuses fairly and equitably, to meet the "reasonable expectation" of the policyholder.
Take the example of a policy with a benefit illustration stating that a bonus of $X will be added yearly to the policy, subject to the investment yield at 5.25%.
If the insurance company earns much more than 5.25%, the policyholders would expect the bonuses to be increased. It would not be fair for the directors to reduce the bonus. The policyholder can object to this reduction as a breach of "reasonable expectation".
If the yield is lower, the policyholder will have to accept that the bonus will be reduced, but they can insist that the reduction has to be applied fairly across all the policies. The insurance company cannot cut the bonus for some policies and increase the bonus for other policies.
Tuesday, May 06, 2008
> The cash value for the life annuity gave quite an attractive return from the past 6 years
> The CPF was willing to accept the cash value back into the retirement account
> The retiree was able to get a deferment bonus of $1,600 (not sure about the exact amount) a year X 3 years for deferring the withdrawal to 65 years.
This turn out to be a good deal!
In 3 weeks time, after the annual general meeting of NTUC Income, I expect my blog to revert to the quieter days.
Which company insure your car? Kindly advise me. I am thinking of getting out of X. I read in your blog that a policyholder had her car insurance premium increased despite many years of accidents free. She now registered with somewhere else and the premium is cheaper.
I suggest that you call a few insurance companies and check the premium. Their particulars are shown here:
In my case, I am now insured with Y and their service is good.
I am 55 year old. Should I put my $100,000 saving in the FD or buy an annuity. Kindly advice me which is investment can give me a higher return.
I suggest that you buy a life annuity. Read this FAQ:
If you are interested, I will ask X to advise you.
My husband and I just invested $X and $Y in the Growth Plan in Feb 2008. We just received a letter from NTUC telling us that Annual Bonuses will be cut. We don't really understand what this means for us. Could you please advise us if the Growth Plan is still a good investment or not?
We feel a little short-changed and puzzled by the change, especially as we have only just bought this Plan. If NTUC had plans to revise the Annual Bonus – and I use the word "revise" euphemistically – then they should not have continued to sell the Growth Plan to customers under the guise of the old Plan and rates.We are very confused by all this and don't know if we have made a stupid choice. What should we do now? We are risk averse and usually just put our savings in bank accounts and fixed deposits.
I suggest that you write to the CEO of NTUC Income. I think that he will give you an explanation and advice. Wish you all the best.
I know many of these agents personally. They are people who work hard to make a living. They are willing to earn lower commission rates (compared to the market) to bring good value products to the policyholders. They believe in the cooperative principles.
Some of these agents tell me that they continue to sell the good value products that were introduced in past years. They include life annuity, flexi-link, ideal (ID7), family insurance and term insurance products. These products offer good value, compared to similar, high cost products that are being sold in the market.
As the agents earn low commission on the sale of these products, the customer should make it easy for them to close the sale with minimal effort.
Some people criticised these agents to be "product pushers". It is all right to recommend specific products that give good value and are suitable for the ordinary families. These products do not need a complicated and time consuming "needs analysis".
I hope that the general public will continue to support these agents, so that it is possible for them to offer good value products for the benefit of policyholders.
To attend, you have to be a life policyholder or shareholder. You can call the cooperative secretary and ask for a pass to be sent to you.
I read this morning's media report regarding your dissatisfaction with NTUC Income policy.
A few months prior to your retirement, I had the occasion to formally write to you as I wasn't satisfied with an NTUC policy which I had taken up. I did not receive even the courtesy of a response nor a simple acknowledgment of my correspondence.That to me was sheer rudeness let alone gross discourtesy to a customer.
Don't bite the hands that fed you. You know the system well . If dissatisfied, please go somewhere else, probably Russia, where, perhaps, you will find greater justice and fairplay
I normally reply to letters that are sent to me. It could have been misplaced. The other remarks in your letter are unnecessary.
I have read the postings in your blog and news reports about your campaign to get NTUC Income to reverse its decision to cut policyholders' annual bonus.
Objectively, you are doing the right thing. I applaud you for doing it inspite of some criticisms that you are like Mahathir, i.e doing it out of bitterness. Far from it. Those who read your blog know that you have always been objective. When NTUC Income was doing the right things, you applauded the actions. You also recommended NTUC Income's products that were truly superior to products from other financial institutions. Now that NTUC Income is doing the wrong thing, it is only right that you speak. This is what I really call guts and honour.
The guts to speak up when things are not right. I see you in mould of ex-US President Jimmy Carter, somebody with conviction and honour. He don't care what President George Bush thinks as long as he knows that he is doing the right thing. He has the guts to speak to Kim Jong Il and the Hamas leaders even when the US Government boycotted these leaders.
NTUC Income's action is wrong for two reasons. Firstly, it cannot cut the annual bonus (which is guaranteed and vest in the policyholders) unilaterally of existing policies. It cannot just say that it will give a higher terminal (or special) bonus when this bonus is not guaranteed. If the funds are not doing well at the points when the policies mature or are surrendered, some policyholders may well get no terminal bonus.
NTUC Income cannot say these is what commercial insurers do. It is precisely because policyholders want a higher annual bonus that they bought from NTUC Income and not from the commercial companies.
Secondly, NTUC Income cannot say that they hold the money back because they will invest for policyholders and they might get higher returns at the end. As they say, "a bird in the hand is worth two in the bush". The higher return is dependent on various contingencies which may never materialise.
I take NTUC Income's action as a breach of promise to policyholders and in bad faith.
Cut in annual bonus
I refer to your article entitled "Tan Kin Lian, an upset Income customer" (Today, 3 May 2008).
I have two life insurance polices with NTUC Income that are affected by the cut in annual bonus. The reduction in bonus is about 45%. This large cut will apply not just for one year but for every year into the future.
NTUC Income told me that, to compensate for the cut in annual bonus, they will be increasing the terminal bonus (previously called special bonus) payable on surrender, maturity or death. I have now received the scale of terminal bonuses which vary according to duration for my two policies. Each policy has an entirely different scale. They appear to be calculated to be slightly more than sufficient to compensate for the cut in the annual bonus.
I suspect that a different scale of terminal bonus will apply to other policies according to their type and year of entry.
I wish to raise the following issues:
1) How many scales of terminal bonuses will NTUC Income be using for the various policies affected by this cut in the annual bonuses?
2) How will the scales of terminal bonuses be changed in the future, to reflect changes in the investment yield?
3) What are the principles that will be followed to maintain fairness between the policyholders with different entry years and different policy types?
4) To what extent is the higher rate of special bonus guaranteed, as it is intended to compensate for the cut in the annual bonus?
5) Will NTUC Income be prepared to lay out these principles in a transparent manner to be disclosed to all affected policyholders?
6) For policyholders who have suffered a reduction in annual bonuses during the past years, does NTUC Income intend to use some of the exceptional
surplus in 2007 to pay additional bonuses to policyholders to make good their shortfall (as compared to the bonuses that were projected at the time of taking up the policies)?
7) Will NTUC Income give an option for policyholders to remain on the old bonus structure, if they do not accept the change to the new bonus structure?
When the policies were sold, each policyholder was given a benefit illustration showing how the future bonuses would be distributed. While the actual bonuses were not guaranteed, I expect that NTUC Income would honour the underlying promise to distribute the bonuses in the manner that was illustrated.
My personal preference is to stay with the old bonus structure, as it is more transparent and a higher proportion of the bonus is vested each year.
I do not like the new bonus structure as the terminal bonus can be withdrawn in the future. I am also less confident of getting a higher payout, if the investment yield improves.
I believe that this unilateral change is to the detriment of the policyholders. It contravenes the "reasonable expectation" of the policyholders. Many policyholders have written to me on this matter, as I was the former chief executive of NTUC Income. I consider it my duty to voice their concerns.
I suggest that NTUC Income should reverse the bonus cut and restore the bonus to at least the same level as for the previous year. In fact, the policyholders expect a higher annual bonus, due to the high investment yield achieved in 2007. It is disappointing to see the cut in bonus when the investment results justify an increase.
Tan Kin Lian
Monday, May 05, 2008
I've few policies under NTUC Income which bought many years ago.
Recently in Jan 08, I bought another policy called "VIVOLIFE" for my child aged 12 believing that it provides good returns. Lately, I received a letter from NTUC Income announcing the change of bonuses. I did not fully understand the impact of the changes until reading your blog. I thank you for defending our rights.
I'm contemplating to cancel this new policy. I understand that I'll get nothing if the policy cancel during the 1st year. I'm prepared to lose it and will not support the NTUC in future if they proceed with their unfair policies.
Thank for for telling me about this matter.
I talked to a Taiwanese friend who works for a Taiwan multi-national company. I commented about the government policy that allowed too many foreign workers aimed at the cost-competitiveness of the country. This has indirectly resulted in older workers not being able to find jobs or have to compete with low-paying foreign workers who feed a family in his home country of lower standard of living. I opined that maybe the government policy should be tightened.
She was surprised to hear my views, and offered another perspective. The use of foreign workers is unavoidable, and is part of globalisation. It is happening in many countries, e.g. Australia, Taiwan, Malaysia and Europe. Even at the specialist level, the substitution of local labour with cheaper foreign labour is unavoidable.
The key is whether the government have instituted enough social welfare policies to help the population in times of needs and defray their cost as much as possible. For example, the Taiwanese government has a very comprehensive medical care program for all her citizens. The cost of medical is low as it is subsidised heavily. She finds Singapore's medical expenses ridiculous and wondered how the poor would be able to afford it.
In Taiwan and Australia, the government have entrusted itself to take care of all her citizens who have contributed all their life to the good of the country. In Singapore, we call these welfare states as being unsustainable. But is it really that way? Have we looked at it seriously?
How is it that an insurance company can operate profitably to insure and take care of the ill and sick. Why is it that the government cannot risk pool effectively with the economy of scale for four million population that are compulsory customers of the national medical program?
Maybe it is timely to relook at the assumption that heavily subsidized medical or social welfare policies are not sustainable for a country like Singapore. Has the assumption changed from the time when Singapore was still a developing country, to the present time when Singapore is growing with all its might, investing billions into other countries.
We can use our surpluses to help Singaporeans to tide over in times of need. Would it be possible to just take out a tiny 0.5% of the budget allocated to GIC to achieve a program that can help create a sustainable health care system or other social policies?
Perhaps the other political parties can add value and suggest alternatives - instead of just critisizing the government. Sadly, the other political parties are lacking in substance and I would not entrust my future with them.
Someone said, "To enter politics, a leader must have passion. He wants to shape the destiny of the country and improve the lives and standard of living of people. He also wants to have a place in history of good things he has done for the country and people. "
I spoke to the Fundsupermart personnel who told me the following:
> I can invest cash or CPF savings
> The payments are done automatically, after the authorisation has been signed
> There are no additional charges
This sounds like a good way to make long term investment. I will arrange for all members of my family to visit the Fundsupermart office to sign the forms to open the accounts, bank authorisation, etc. They can have $x of monthly investment deducted from my bank account.
They can learn how to manage their accounts through the internet. By educating them, they will be able to manage the investments in unit trusts on their own in the future.
The next step is to decide on how to choose the unit trusts. I shall be looking at the following:
> well diversified
> invested mostly in blue chips
> low expense ratio (less than 1.3% p.a.)
If you have any tips, please send to email@example.com. This will save me from making detailed research.
I believe that DollarDex and POEMS may have similarly attractive offers. If they send some details to me, I shall post them in this website.
I read the articles in your blog I am sure you will get the support you need. I do not have any NTUC Income policy that is affected. Finally the right and just will prevail. Unfortunately in our society the poor and the helpless people are made to pay for the greed of others. We need champions like you to stand up from time to time to fight for their right. God Bless.
I advised them to shop around for the lowest rates by calling the hotlines of the insurance companies. Here are the telephone numbers:
Some motorists have told me about savings of more than 20% by shopping around.
I have to disappoint this person. In my view, the restructuring of the bonus is unfair and is detrimental to the interest of policyholders. It contravenes their "reasonable expectation".
There is no need to restructure the bonus, unless the solvency is at threat. This is not the case, coming from a year of high investment yield. If this is the real reason (and I doubt it), then it should be stated openly and the cut in bonus should apply to all policies.
I do not like a large part of my policies' bonuses to be unvested, as it can be taken away at any time. I do not like the manner in which this restructuring has been done.
I wish to tell this person that I am not "bitter". I will continue to give a fair analysis of the various investment options available to the investing public.
I hope that NTUC Income will continue to uphold its principles of being a cooperative and giving fair value to the consumers. I will be happy to recommend NTUC Income in these circumstances.
He has been particularly unhappy that I do not recommend investing in the Combined Fund with an upfront charge of 3%. I find this charge to be too high, especially as many unit trusts have now reduced their upfront charge to 1.5% or less - for investors who invest directly.
I find that too many financial products have been launched in the market to take advantage of the naive, trusting consumer. They give poor value to the consumer. You can read my views here:
On a separate point, I continue to receive many rude postings against insurance agents of NTUC Income. I have to block them from being posted. To the people who made these postings, please discontinue it, as it gives an unnecessary burden in moderation.
Question: Could you give an example, from your own experience, of how leaders should manage failure?
Kalam: Let me tell you about my experience. In 1973 I became the project director of India 's satellite launch vehicle program, commonly called the SLV-3. Our goal was to put India 's 'Rohini' satellite into orbit by 1980. I was given funds and human resources -but was told clearly that by 1980 we had to launch the satellite into space. Thousands of people worked together in scientific and technical teams towards that goal.
By 1979 - I think the month was August - we thought we were ready. As the project director, I went to the control center for the launch. At four minutes before the satellite launch, the computer began to go through the checklist of items that needed to be checked. One minute
later, the computer program put the launch on hold; the display showed that some control components were not in order.
My experts - I had four or five of them with me - told me not to worry; they had done their calculations and there was enough reserve fuel. So I bypassed the computer, switched to manual mode, and launched the rocket.
In the first stage, everything worked fine. In the second stage, a problem developed. Instead of the satellite going into orbit, the whole rocket system plunged into the Bay of Bengal . It was a big failure.
That day, the chairman of the Indian Space Research Organization, Prof. Satish Dhawan, had called a press conference. The launch was at 7:00 am, and the press conference- where journalists from around the world were present - was at 7:45 am at ISRO's satellite launch range in Sriharikota [in Andhra Pradesh in southern India ]. Prof. Dhawan, the leader of the organization, conducted the press conference himself. He took responsibility for the failure - he said that the team had worked very hard, but that it needed more technological support. He assured the media that in another year, the team would definitely succeed. Now, I was the project director, and it was my failure, but instead, he took responsibility for the failure as
chairman of the organization.
The next year, in July 1980, we tried again to launch the satellite - and this time we succeeded. The whole nation was jubilant. Again, there was a press conference. Prof. Dhawan called me aside and told me, 'You conduct the press conference today.'
I learned a very important lesson that day. When failure occurred, the leader of the organization owned that failure. When success came, he gave it to his team. The best management lesson I have learned did not come to me from reading a book; it came from that experience.
Sunday, May 04, 2008
I know that you are a fair and open minded person. The new INCOME management wants to change the bonus structure to achieve greater flexibility, solvency and earn a higher yield. So far, you have written in your blog against this decision. Can you identify some positive reasons for their action?
Every system will have its advantages and disadvantages. The new bonus structure may attract a certain group of policyholders. But it is not suitable for other policyholders.
If NTUC Income wants to introduce a new bonus structure with low annual bonus, they should launch a new product and attract customers to buy it. They may even approach the existing policyholders to switch to the new product. If the customers are convinced about the benefit, they will accept the change.
NTUC Income said that the new bonus structure allows greater flexibilty of investment to achieve a higher yield. This remains to be seen. They can set aside a separate fund for the new bonus structure and put the new policies into this fund. If it can indeed earn a higher yield, the policyholders are entitled to the benefit. But it carries greater risk.
It is not correct to impose the new bonus structure on existing policyholders who were sold earlier on the old bonus structure.
In my personal opinon, the old bonus structure is more suitable for the current policyholders. Those who prefer the new bonus structure already have the choice of investing in investment-linked products (ILPs).
My family, relatives & I bought many policies of NTUC Income. I am disppointed by the change in bonus structure too
We bought policies from NTUC Income because it is a co-operative hence it will be policyholder-focus insead of shareholder-focus. It is also a low-cost operator. All these means that it can introduce good value products, and return more benefits to policyholders.
Moreover, insurance companies are investing in the same kind of assets, largely in bonds, due to regulatory requirements. Hence I believe their investment performance should be largely the same over in the long term. Hence low-cost and policyholder-centric factors are real differentiators to higher higher bonus payouts.
I read that the new bonus structure is more in line with industry practice. It is also industry practice to cut terminal bonus drastically during major financial crisis in the past such as SARS, 911, Asia Financial Crisis, to remain their financial solvency. I have been investing directly in the equity market for the past 10 years, so I am quite certain major financial crisis will occur again in future. Hence I favour higher annual bonus declaration than a significantly higher but uncertain terminal bonus.
I applaud and support your effort to advocate NTUC Income to reverse their position on this matter.
I always thought that Terminal Bonus is like Annual Bonus which is guaranteed once declared. Hence if my policy year crosses the year that terminal bonus is payable and is declared as per projected, such terminal bonus will be locked in to my policy.
The terminal bonus is not guaranteed. The terminal bonus is payable based the rate that applies at the time of maturity, or surrender or death claim. It is possible for the terminal bonus to be withdrawn at the last minute, just before it becomes payable. I do not like a high rate of terminal bonus, due to its uncertainty.
Life insurance company use this "gimmick" to entice customers to buy their products. Many policyholders have been disappointed with the reduction in the terminal bonus after waiting for many, many years. By that time, it was too late for them to change their mind.
I have been reading your blog with focus on the bonus reduction issue by NTUC recently. I wrote to NTUC based on the template provided by you - thanks!
It seems that my two policies were affected by the bonus cut. The 2007 bonus sums have been reduced by a fair amount. There seems to be a significant cash value reduction over the next 5 years as well. Would you review my policies and provide your brief comments please?
I'd think it's not advisable for me to surrender these 2 policies now - I'll just keep these as my 'bond' portion of my investment portfolio.
NTUC Income has reduced the annual bonus. But they claim that the terminal bonus, payable on surrender, has been increased to compensate for the reduction.
Personally, I do not like the terminal bonus as it is not guaranteed, and may be taken away. The annual bonus is vested and guaranteed each year as it is declared.
I will be organising a collective protest. You can read about it in my blog. I hope that you will join this effort.
I was always told that NTUC Income was the only one can give the policyholder the best and protect our interest and thus, for more than 10 years I have "invested" my hard-earn extra cash or CPF into "one basket", i.e. NTUC INCOME. I now feel uncomfortatble with INCOME when receiving their notice to reduce the annual bonus as below.
> You invested $50,000 more than 10 years ago. At that time, the projected maturity benefit was $136,403 representing a yield of 5.7% p.a.
> During the difficult years when investment yields were low, the bonus rate was reduced. The projected amount on maturity was revised to $114,047.
> With the latest round of bonus revision, the projected amount at maturity has increased marginally to $116,467. It represents a yield of 4.8% on your invested sum of $50,000 over 18 years.
I think that this revised yield is quite satisfactory. It give a better return than CPF. The Growth policy still represents a good investment because you took it earlier. I am not sure that a Growth policy today will give the same good value.
Tan Kin Lian
Dear Mr Tan,
Thanks a lot for taking time to give me the advice on my policy. I really appreciate it.
I wrote to INCOME before for advice on my cash value if I cancel some policies and the reply was a typical "stereotype" answer of my cash value. I also went to NTUC Income of Jurong East and Ubi before for advice. The customer service seems not well trained for providing advices and instead asking me whether I am interested in their new policy - Vivolife.
Once again, I would like to thanks for your kindness for taking time to reply me. You place the policyholder first before shareholder's point of view.
(I think you are hurt and upset of handing over to some new management team that does not follow the service commitment of the cooperative insurance society formed in 1970, " Income has always placed the interests of our policyholders foremost" stated in NTUC INCOME website - it will no longer valid after you leave the organisation.......)
A beer addict orders 5 glasses of beer. He gulped it down. Then he ordered 4 glasses, and gulped it down. He ordered 3 glasses and gulped it down. Then he ordered 2 glasses.
The bar tender said, "I have never seen a customer drink beer in this manner. It's surprising." The addict said, "Yes. I am also surprised. It seems that the less beer I drink, the more drunk I get."
Larry Haverkamp said, "The beer addict is focusing on the first derivative and not on the absolute quantum". Can you understand Larry?
I am one of the many silent majority that approves of your public admonishment of NTUC Income over the bonus issue. Frankly most of us have no idea of what we buy.
I am x years old now, married with a daughter. My wife is not working. My apartment is fully paid up. I have limited cash resources, thus I have to cash up my LIVING policies when my daughter goes for university. I have very limited insurance coverage, all with NTUC. That's why I am concerned over the bonus issue.
We have 2 LIVING policies. If we surrender the LIVING policies, is there something else that we can do? I need ultimately the cash values for a university education.
i suggest that you ask NTUC Income to quote to you the surrender value for the next five years on your Living policy.
Read this FAQ:
With the surrender value, you will get a better idea about your options. You can send it to me, and we can discuss it together.
The daily average has now exceeded my target of 1,000 visitors.
To my understanding, most of the policies taken during the last 10 or 15 years are affected by the bonus cut. The policies taken earlier are not affected.
NTUC Income appears to be sending out the letters in batches. I have not received the letters addressed to me, until I asked for them. My family members have not received their letters as well.
If you have not received the letters yet, you may also be affected by the bonus cut. The letter will arrive later.
If you wish to check, you can write directly to NTUC Income. Give them your NRIC. They will be able to check and inform you.
I intend to attend the AGM and voice my views. I hope to see other policyholders turn up at the AGM.
The expense ratio of several of the unit trusts marketed by Fundsupermart are between 1% to 1.5%. They are not low, but not too high (i.e. high cost fund charges between 1.5% to 3%). You can select a broadly based unit trust that shows a good yield over a 10 year period.
Some people have recommended to invest in indexed funds, which have low expense ratio. I agree. I hope that the low cost indexed funds will be available within the next 6 to 12 months. In the meantime, the StateStreet STI ETF is a good option, but it requires an investment of $3,300 each time.
For those who wish to invest in monthly sums, the unit trust offered by Fundsupermart is a good choice. The fee of 1.75% is much lower than the charges imposed by ILPs sold by insurance companies.
These high fees charged by ILPs are:
> allocation rates that take away two years of savings
> investment spreads of 3% to 7%
Apart from Fundsupermart, you can also study the options provided by DollarDex and by POEMS (Philipps Securities). I am sure that their marketing people will be posting their offers in my blog.
Lesson: Avoid ILPs sold by life insurance agents, as they have high charges that take away up to two years of your savings.
There is some confusion of this new scheme with "income smoothing" whereby the insurance company pays steady bonuses, regardless of its investment returns.This new bonus scheme is not income smoothing. It is the opposite. It is "income bunching". The policyholder's steady bonus stream is removed and a hefty terminal bonus is substituted.
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05/04 - 05/11
- Buy Term Insurance directly
- Register a Google account
- Posting in this blog
- Jakarta 11-14 May
- Signature for Collective Protest
- Difficult questions
- Well done, DBS
- NTUC Income is a cooperative
- A philosophy in people management
- New management style
- Post comments in this blog
- Choosing options in a Shield plan
- Pre-existing condition
- Endowment or Limited Pay Whole Life?
- Non-core business has been profitable
- More than Insurance
- Delay in notifying affected policyholders
- High departure of staff
- What is my motive?
- The Truth About Life Insurance
- Continue with the Ideal (ID2)
- Write to firstname.lastname@example.org
- My life insurance policies
- Effect of deduction
- Exotic Terminal Bonuses
- Lack of transparency and accountability
- Fair distribution of bonus
- Annual and special bonus
- Views from the management of NTUC Income
- Bad name to the life insurance industry
- Charges of unit trusts
- Invest to earn 5% to 8%
- Saving for a child's education
- Reasonable Expectation
- Transfer back to retirement account before 62
- Nearly 3,000 visits on Tues 6 May
- Get several quote on your motor insurance
- Buy a life annuity
- Write to ask the CEO of NTUC Income
- Insurance agents of NTUC Income
- AGM of NTUC Income
- Lack of reply to a letter
- Guts and honour
- Reply to Today: Cut in Annual Bonus
- Prepared to lose the premiums paid
- Is there room for welfare in Singapore?
- Buy unit trusts with Fundsupermart
- Personal attack
- Right and just will prevail
- Increase in motor insurance premiums
- Restructuring of bonus
- Give fair value to consumers
- Leadership - lesson from India
- Apply new bonus structure to new policies
- Prefer higher annual bonus
- Terminal bonus is not guaranteed
- Bonuses reduced by a significant amount
- Does the Growth policy still give good value?
- The less I drink, the more drunk I get
- Silent majority and bonus cut
- More than 1,000 visitors on Saturday
- Letter on Bonus Cuts
- Annual General Meeting of NTUC Income
- Indexed funds or unit trust?
- Smoothing or bunching
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