I REFER to last Thursday's letter by Mr Larry Haverkamp, 'Transparency in insurance: Policyholders underpaid'. He suggests that insurers have built up 'orphaned money' by under-declaring bonuses to participating policyholders. This is not the case in Singapore. With the introduction of the Risk-based Capital Framework in August 2004, insurers in Singapore are required to record the total amount of assets held in the participating fund as backing the liabilities to the participating policyholders. This means all assets in the participating fund belong to the participating policyholders. The issue of 'orphaned money' therefore does not arise.
In addition, there are rules governing the distribution of bonuses for participating funds. Under the Insurance Act, when insurers declare bonuses to participating policyholders, they can distribute not more than $1 to shareholders, as compensation for their management of the fund, for every $9 of bonus declared to policyholders. This ensures that insurers have an interest to manage the participating fund properly to achieve reasonable long-term returns for policyholders in accordance with the stated investment objectives of the fund.
These requirements ensure there is no incentive for insurers to intentionally under-declare bonuses in the hope of building up large amounts of 'orphaned money' to benefit their shareholders in future.
The Monetary Authority of Singapore (MAS) informed insurers in July this year that the definition of a participating policy in the First Schedule of the Insurance Act will be amended to provide even greater clarity that the assets of the participating fund belong to participating policyholders.
Angelina Fernandez (Ms)
Director (Communications)
Monetary Authority of Singapore
MY COMMENT
I have sent a reply to the St Times. I will wait a few days to see if they will publish my letter. After that, the letter will be published in this blog.
5 comments:
The backing of of the liabilities does not include every cent in the life fund. It is only the portion that is guaranteed. That is what RBC requires.
The rest is for the insurer to play and fool around with it and the orphaned fund is not even in it.The orphaned money is for the insurer to dip in for extra expenses.
Looks like MAS is still sleeping or pretending to be awake when they are actually sleeping.They have not answered the question that a rogue management can use the money meant for policyholders to buy expensive chairs for themselves, use the money meant for policyholders to advertise non-stop to push up the statistics of sales, use the money meant for policyholders to hold extravagant parties for themeselves in posh hotels and live it up at policyholders expenses.
What MAS, an institution that is under the control of the govt, is doing is surely eroding the trust we have of the PAP govt and it will definitely be reflected in the votes in the next election. So LHL would do well to take note and take action now before it is too late. There is a price for hiring incompetent people, and it is showing now.
I saw an article in today's ST about mas saying policyholders' interests are protected. I haven't had time to read it. I wonder how insurer can say economic downturn affects bonus but at same time promise new policyholders better returns than existing policyholders.
CEO can say anything. They are now dishonest and unscrupulous and greedy.
Want to highlight one very sore point about MAS.
I found in ADRAIN'S BLOG THAT he has a friend who applied for FA license but was NOT approved after many months because of a jay walking fine many years ago which he has forgotten.
I have a friend too whose application for a FA license was delayed for 6 months because he forgot to disclose a minor misconduct long time ago.The misconduct was paying for his sister's premium with his own cheque.
It is so easy for tied agents to move between companies and also it is so easy to join an insurance company without much stringent check but not for FA, like Adrain's firend for jay walking fine.
It is very clear who is MAS protecting and whose
interest MAS is promoting. That is why the guidelines and all the notices are just wayang to make them appear they are working.The actual fact they are dragging their feet and hope that everybody forgets.MAS is very reluctant to enforce because they know all the agents especially the tied agents will be in big shit. I can say 99.99% of them are malpractitioners, engage in mis-selling, unscrupulous, product pushers and would stoop to prostitute themselves for the commission.Churning, twisting and switching are so common like desease,cancerous. Every agent is squeezing the consumers and provide nothing.
MAS knows about all this and it is holding it back because the whole industry is bankrupt that
they turn out rubbish products to con the consumers.
Now you know the true color of MAS.
Post a Comment