My doctor asked me about the work of FISCA. I said that there are a lot of challenges, due to the unfair treatment of consumers.
I quoted the example of a policyholder who paid 21 years of premiums under a whole life policy with some riders. At the end of 21 years, he just got back to the total premiums paid, i.e. break-even point. The total amount was $54,000. A similar policy taken with a good insurer would have paid $75,000 (or 39% more).
The doctor was surprised. Surely there must be some standard for the consumer to compare the payouts? Where did the difference in the maturity payout go to?
I said that most consumers are in the dark. They are not able to compare what the payouts would have been, if they had taken a similar policy from another insurer. The insurer that gave a poor return probably had higher expenses and kept a larger part of the surplus as surplus or orphaned money.
Many years ago, if a policyholder sends a complaint to MAS, the MAS officer would ask the insurance company for an explanation. The insurance company would have to justify the low payout and have to give the answer truthfully.
This practice has stopped in recent years, after the formation of FIDREC. The policyholders are now asked to send their complaint to FIDREC. Unfortunately, FIDREC does not have the same powers as MAS.
To ensure fair treatment of consumers, it is important that the concept of asset share for each individual policy, as practiced in Malaysia, must be adopted in Singapore. This will ensure that consumers get a fair payout and make the practice more transparent.
Tan Kin Lian
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