In recent months, I have received many e-mails from policyholders of various insurance companies asking about the reduction in the bonuses on their participating policies. The companies explained that the bonus cuts were necessary in the light of the financial situation and indicated that the terminal bonus will be increased to give a high payout on the policies.
However, the terminal bonuses are not guaranteed and many years later, these policyholders are told that the terminal bonuses have to be cut due to some other reasons at that time.
The insurance company claimed that the bonus rates have been approved by the appointed actuary and fairly distributed to policyholders. What is fair is subjective and may not be fair from the prespective of the policyholders - as they have no say.
Many policyholders have found that the bonuses have been reduced compared to what they were told at the point of sale, and that the insurance company continued to make bigger profits for shareholders and pay higher managenent expenses and commissions. They are not convinced that they have been fairly treated over the years, but they have no way to exercise their contractual or legal rights.
This practice has been prevailing in some insurance companies in past years and has now spread to many other companies. It is now becoming quite common for insurance companies to treat their policyholders in this arbitrary manner.
In some countries, the regulator has insisted on the use of asset shares to determine the bonuses to be distributed to participating policyholders. They have also placed caps on the amounts of commission and expenses that can be charged to the life insurance fund. Malaysia has introduced these measures to a satisfactory degree. I hope that Singapore will implement similar measures for the protection of the policyholders.
While the situation remains unclear and arbitrary, it is best for consumers to avoid putting in a lot of savings in a life insurance policy. These includes endowment, whole life, critical illness and investment linked policies sold with high commissions to the agents. You have locking the savings for a long time and is likely to get a poor return. If you terminate the plan in the earlier years, you will to suffer a large loss with have to lose more than half of your savings.
It is all right to pay a low rate of premium for a term insurance policy, including a rider that covers critical illness. The cost should be less than $2 for every $1,000 of coverage. If you cover $100,000, the premium should be kept to $200 a year, or less.
Tan Kin Lian
So far, I only know TM AsiaLife has yet to cut any bonuses. I have a life policy with them.
ReplyDeleteAm I right?
Consumers must NOT make the same mistake as they had. I am sure they can see what stated in the quotation 20 years ago can be changed. What was the basis of contract 20 years ago doesn't bind the insurer now. Is it fair? You have no right.You are at the mercy of the insurers.
ReplyDelete1.As mentioned many times here in this blog that whole life products are neither good as protection vehicle nor a good saving plan.
The reasons are cost which has been going up, low interest rate, and poor investment return. Over the years there have been many so called 'new' products'. Are they really new? Can insurance products be improved, like your Honda car, your computers or new discoveries?
No!!! the same components or 'raw' materials are mixed and remixed or reshaped without any real enhancement or benefits.. Any claim of enhancement is illusionary, subjective, imagination, psycological, bullshits and they are added to justify higher premium to feed the greed of their insurance agents.
So , don't be fooled. Dont' use your old insurance agents and don't use another new insurance agents too, for both are the same , product pushing insurance agents. Use a an honest and competent adviser who will put your interest first.
Stop buying whole life or endowment and you don't have worry of bonus cut and you don't need to attend AGM to grill any ceo and the board.
It is quite interesting at the AGM the audience making up some outside policyholders could be easily satisfied when told of that expense ratio has come down in the past 2 years. Expense ratio is a misleading ratio . It is expressed as expense over revenue. In other words the ratio can be reduced by increasing the revenue. But what is revenue? It is sales turn over for the year and NOT PROFIT.A very high revenue doesn't mean there was profit, it could be losses. And mentioned was that higher cost was needed to achieve the increased revenue .The question is was there losses? Is it because of these losses that bonus cut is necessary? to stall for time by pushing them to so called special bonus which is NOT gauranteed.
From the horse's mouth was that the expense ratio for revenue went up. Is it a surprise? More commission,splurging on the greedy agents who work only when there are more incentives, posh avenues for meeting, wining and dinning and millions spent on overseas trips(many),gift vouchers, is it a wonder the expenses went up?
Where did the money come from?
From some suckers' pockets? How could the whole life and endwoment products give good return, high protection at low cost when cost is rising?
Next time look closely or get an expert to interpret the illustration tables and you can see a lot of tweaking of figures and agents won't disclose to you.
Please, to avoid having headache don't buy whole life and also avoid confrontation with insurers.
Mr. Tan, you a were right to withdraw the ' younger candidate' from the election for policyholder directorship.Even if you didn't you couldn't stand a chance. Almost the whole audience was made of 'own people'. I beleive they were lobbied to attend to give support to their ceo .It was like a deja vu of the AWARE EGM.
ReplyDeleteSo you see, consumers and policyholders ,these people were there to defend their rice bowl and NOT your interest. Isn't it showing their true color? On whose side are the insurance agents?
The agents of course have to defend their rice bowl. This is natural. What is unnatural is that policyholders do not seem interested to defend their monetary interests. This way, the board of directors and CEO can then say that what they are doing have the support of the majority of policyholders. Perhaps a better system of policyholder representation can be created. For example, a simple survey like what we see regularly in Mr Tan Kin Lian's blog can be done so interested policyholders can give their views by voting yes or no in support of their own wishes instead of making it difficult for policyholders by making it mandatory to register, get a card then go to physically attend the AGM as space is limited and costs are high to have a bigger venue. I am sure the management of Income are smart enough to know such other avenues exist to know policyholders views but obviously they are enjoying the way it is done now since now they can say anything they like and it appears very good in the national newspapers about their level of management. In other words, why rock the boat when doing so will jeopardise their own positions?
ReplyDeletehow to get $100k coverage death and critical illness for $200/yr?
ReplyDeleteAbout term insurance policy, $2 for every $1000 of coverage?
ReplyDeleteIs it a must?
Coz I just bought from NTUC iTerm.
My coverage is $300K, I am 33 years old.
I pay around $85 per month (Death, PD, personal accident) - so it is not include critical illness..
Is it too expensive?
Do you have any recommendation for term insurance? Is NTUC Income the best or any other?
Thanks.
Teja
As a consumer, we want a low cost but max coverage.
ReplyDeleteAt < $2 per $1000 of coverage, is this possible? Is this rate dependent on age too?
starlight
Even I just an ordinary layperson who attened AGM first time noticed that majority were 'own' people. Quorum was 579. Could 'own' people be 90%? Reading 2008 Minutes of Meeting, 310 attendees were policyholders. Many who spoke up expressed themselves very clearly, I don't think I could have been better than them. The 2008 Minutes has been adopted this AGM? Like the attendee who said in this AGM, "the taste is in the pudding". To be fair to them, they did give assurance to be fair. I try to keep the faith and hope they will keep theirs. I hope the pudding will not turn out unpalatable on maturity date.
ReplyDeleteHi Mr Tan,
ReplyDeleteI had met a few people who had visited your blog for advice on insurance matters.
That few prospect I met had used group term insurance such as POGIS and Safra Term as well as their company coverage as their core cover. One reason is because the premium is low and they feel that they need not pay any commission to agent.
You can perhaps write a bit on the pros and cons of depending on a group term plan or company's coverage. Thanks.
Adrian Khiat
http://akhiat.blogspot.com
They are group insurance, cheap and good and they serve specific purposes.
ReplyDeleteOnce you have outlived their purposes you can throw them away, not much wasted compared to whole life.
where to find cheap term insurances? search one company by one company?
ReplyDeleteWhenever there is a recession, bonus tends to be cut for your policy. It is best just to have one policy that your really need & surrender the rest.
ReplyDelete