In past years, most insurance companies distribute nearly all of the 90% to its policyholders in the form of annual bonuses. In recent years, more insurance companies have started to keep a large porportion of the surplus in the fund, without distributing them as annual bonuses. Some companies have reduced their annual bonus by 50% or more. They promised that the undistributed surplus will be paid as terminal bonus when the policy matures or is terminated.
Many insurance companies have accumulated a large amount of the undistirbuted surplus. This is called orphan money. Each policyholder has involuntarily contributed to this orphan money, but the amount contributed by each policyholder is not identified. This retention is made without the agreement of the policyholders and against their wishes. Most of them preferred the surplus to be declared as an annual bonus.
It is easy for the insurance company to use the orphan money in many ways that do not benefit the policyholders that had involuntarily contributed to it. They can be used to pay high commission to increase the sale of new policies (which do not benefit the old policyholders), or to pay high salaries and commissions.
When the policies mature or are terminated, the amount of terminal bonus given to the policyholder is likely to be much lower than they are entitled to, based on their actual contribution in past years. There is no way for the policyholder to find out if they have been fairly treated. There is lack of transparency and accountability. The insurance company can declare that they have been fair in distributing the bonsues, but there is no way for this statement to be verified. The policyholder has no say in this matter.
Is this fair? Are the policyholders being cheated? Can you trust the future management to be fair?
As many financial institutions have acted unfairly in recent years, it is better not to trust them. Do not invest in the financial products that give a lot of discretion to the financial institution and insufficent rights to protect the consumer.
Tan Kin Lian
Hi Mr Tan
ReplyDeleteWas this the issue you wanted to bring up with NTUC a few months back and some NTUC big hats assured you that it is for the good of policyholders and to wait and see what happens?
Now, it seems that they not only cut yearly bonuses, they are also cutting terminal bonuses as well for bad years.
Honestly, I don't see a shred of benefit of such an excercise for current policyholders, but it seems that anything they decided to do they just shaft it down policyholder's throat, like it or not.
What is happening with the world of insurance companies? Their reputation is now in tatters. Their credibility is non-existent. Their assurances not worth the piece of paper it is written on.
Lost Citizen
Wow now I am really disturbed to learn about this!
ReplyDeleteMr Tan, you say that there is no way for the insurance company's statement to be verified. How can this be? Doesn't MAS or some other government body audit their books?
Tell me what is the REGULATOR doing? Do they need us to tell them what needs to be done? Or wait until all the money have disappeared like the Mini-bonds product?
ReplyDeleteIf I am the regulator, I would implement an extensive audit of these companies, and enforce the necessary safeguards against any loss to the policy-holders.
As the saying goes, "the thief comes but to steal, to kill and to destroy". And the thief is often times an insider, just like the Cortina watch heist at Raffles City.
Orphan money is used to pay high salary to ceo , senior managers and others and high commission to greedy and unscrupulous insurance agents.
ReplyDeleteMAS must make them disclose otherwise it will cause disquiet among the policyholders. The so called special bonus fund is in danger of being 'lost'.
I think if the regulatory environment in a country is weak, it is better to place your money in fd.
ReplyDeleteAt the ntuc AGM the ceo was unchallenged for the position of policyholder protection director.
ReplyDeleteHow can? How can he hold the position
when he is cutting the bonusese?What protection?
Banks now don't even want to give FD a higher interest rate than savings.
ReplyDeleteThey want to sell a package, eg X amount in FD at a higher rate + Y (equal or greater than X) amount in ILP or structured products! And they term this a promotion!
So it is very hard to save and compound your interest nowadays, if you stick to FD. But it is better than losing your principal otherwise.
I hope MAS will implement the following to stop cheating and all other malpractices both by the insurance agents and the companies.
ReplyDelete1. to clean up the bad insurance agents and advisers.
2. implement and make compulsory the need based selling as required by the CEDLI or section 27 of the FAA
3. to ban product pushing by removing product advice option and no advice option
4. to ban commission as remuneration; to suggest fee for advisory service
5. to restructure the cost of insurance products so that savvy customers can buy without the need for the agents or advisers.
6.to license all agents and to maintain a public register of agents.
7. MAS to enforce section 27 and make it compulsory to comply.
8. to conduct frequent audits of insurance agents and the companies.
9. MAS to enforce all the laws
10. MAS to vet all the products especailly the par products.
11. to raise the entry level for licensing
12. to require existing agents to upgrade to a diploma in financial planning or else leave the industry.
13. to reduce and control the number of agents
Best to put your money in stocks.
ReplyDeleteMax can lose 100%
Easily can profit 300%
I think if the regulatory environment in a country is weak, it is better to place your money in fd of other countries, unless the FDs are guaranteed.
ReplyDeleteSo what if there is disquiet? It is a fulfilling relationship amongst these tripartite groups. Take for example, gambling we all know it is bad, but it can be painted to be good like toto and 4D. Just legalise it and ensure that there is a donation (kickback) to the system.
ReplyDeleteNtuc Income in its latest AGM talked about the money they donated to the NTUC movement to help the retrenched. So as long as there is this kickback, eyes can be closed, this is the tripartite relationship in Singapore. Policyholders become the suckers who pay and pay...
I just got my dividends pay-out from NTUC Income. It was less than half of the amount I used to receive in the past.
ReplyDeleteDoes it reflect that the insurance company is not doing that well as before? No notification letter is sent out to me and I was not mentally-prepared for another reduction from NTUC Income.
8.25 am
ReplyDeleteYou talking about INCOME share dividends?
It was reduced exactly by half from last year's.
But then any better choices, considering the very low risk?
Dividend is half and sometime ago they claimed the policy bonus and payout yield were not affected. Was it a dressing up strategy? Trying to cover up something,eh? The dividend is the truth, isn't it?
ReplyDeleteNo, NTUC Income is still making good profits. In fact, in the last AGM they proudly claim that they are now sitting on 50 million dollars profit on their investments vs a loss in the past. They have also contributed generously to various NTUC related charities. The only reason that you are getting less, as well as other policyholders, is that somebody there is getting more. You get half so somebody must be getting double. No prizes for guessing who is getting the lion share of policyholders and shareholders money.
ReplyDeleteDidn't I say ntuc is a source of funding for some people. Good salary for senior managers and good commission insurance agents equal less return for policyholders and smaller dividends for shareholders.
ReplyDeleteNo need degree in accountancy to crunch these figures.
Personally I don't think it is RIGHT for Income to donate the policyholders' gains to the NTUC retrenchment movement. No wonder our returns diminish with each passing year. Is this the sound financial management expertise which we sought from Income in the first place??
ReplyDeleteTo me, this is using someone's money without asking for his permission. It is VERY WRONG AND IRRESPONSIBLE ACT for them to do it, if what is written above is indeed true. We definitely are expecting an update from INCOME.
Besides, a donation with a political motive or to a politically affiliated organization is no different from the lobbying efforts of corporate America. It is a BAD practice, and may hamper the work of regulators to investigate any mismanagement/fraud.
Do you all think if we should convene an EOGM to seek a resolution once and for all?
ReplyDeleteSomeone wants to appear magnanimous, caring, generous and to live up to its social enterprise status. In short, he is ball carrying..
ReplyDeleteHe donated policyholders' money to make himself look good. An EOGM?
Goodness just what is happening in the insurance market?Almost every person I know has made a responsible decision to be insured.But after reading about the creativeness of these policies I find a disturbing similarity to the miniBomds.
ReplyDeleteI hope that the authorities will get their hands from under their butts before this bomb explodes in our faces!!!
Hahaha.
ReplyDeleteBig banks and insurance companies here in Singapore are doing a lot for charity as advertised on TV, but squeeze every penny out of the old, the less educated, the underprivileged and the poor who can only put their meagre savings with them for safekeeping.
Are they really doing good by supporting things like S-league, for example, when they have to resort to cutting bonuses of policyholders? Policyholders couldn't care less how much the institution wants to give to support such events, but they must show that the interest of policyholders and depositors come first. Not fair to take from them by cutting their bonuses and giving the money to support something else. It is irresponsible, clear and simple.
Lost Citizen
Policyholders may also be workers but non-union members. They too could suffer retrenchments, job losses, pay cuts, etc. They too need money but are not eligible for union help because they are non-members. Now money they toiled for and deprived themselves of money to save for rainy days goes to helping others. WHO HELPS POLICYHOLDERS? They are not consulted when drastic changes are made, not given an option to back out because umpteen years ago they signed on the dotted line for insurance policy on a different insurance proposal of bonus distribution. Well, policholders are the cash cows but when they also need money, WHO HELPS?
ReplyDeleteSorry, your bonuses were spent in Gold Coast on the greedy useless conscienceless agents to frolic on the beach. Heard around 2 millions were splurged to keep these agents and of course themselves , the senior managers, energised in the butt otherwise they won't work.
ReplyDeleteDon't hope for money to be splurged on the policyholders as compared to Mr. TanKL's tenor when anniversary bonuses were given to ALL participating policies from time to time. But NOW? please, don't ever dream. Dismiss that from your thought.. It is obscene, pornographic to think of it.
yeh, no more anniversary bonuses any more.When Mr. Tan Kin Lian was in charge bonuses were high and when there was profit he gave away to policyholders. He cared for policyholders but not this FT from malaysia.This FT only carries the union chief's balls. Worse he cut the policyholders' bonuses to give to charity.This is most disgusting.
ReplyDeleteWhat is the Income board of directors doing about such issues?
ReplyDeleteI believe the Board should exercise their duty to policyholders and share-holders too. Should we bring the matter to CASE? Or bring this to the attention of some ministers and ask them if this is a just nation.
Waz pt of ranting anon?
ReplyDeleteWhy no turn up at AGM. If ord holders had turned up at AGM, maybe TKL's candidate for policyholders' director would have been prep[ared to be stand.
Why shld anyone want to help "Talk cock, sing song, no balls" people