A consumer is unhappy about the low yield on a 20 year endowment policy that has matured. The insurance company did not revised the bonus rates during 2010, although the financial market has recovered. He asked for my views. Here is my reply:
Dear
I believe that this yield of 2.96% on your policy is probably what is paid for similar policies offered by several other companies during the same period. It may be slightly on the low side, but is not significantly lower. The only exception is NTUC Income that offers a yield that is probably between 4% to 5% for the same period.
You are unhappy that there has not been a revision of bonus rate for the past year. I am not aware if other companies have increased their bonus rate for the same period. I suspect that most of them still keep to the same bonus rate.
It will be difficult for you to get the insurance company to increase its bonus rate or for an external party, such as CASE, to make them do so.
Tan Kin Lian
2.96% is a very typical yield for 20-yr endowment policies maturing these days. All insurance companies did not increase their bonus rates for 2010, citing the small but sharp corrections in world stock markets in Jan & May 2010, lingering doubts over sustainability of recovery, after effects of QE, ending of QE, Euro sovereign debt problems, etc etc. Many excuses not to increase any bonus.
ReplyDeleteYields for par insurance products have basically been destroyed since the Asian Econ Crisis in 1998. Ever since then, the best you can hope for is 2% for 10-15 yr endowments, or 3% for 20-25 yr endowments. Even for Ntuc, those who bought in the last few years will see similar yields as other companies.
To make the return look good the companies and the agents give the inflation as 2% or lower if their products' return is 2.5% . And if the return is less than 2% they compare it to the bank rate..
ReplyDeleteThe truth is the inflation in Singapore is more than 5% depending which baskets of consumer goods inflation rates are computed. For the ordinary folks the inflation might even be higher.
It is load of lies these insurance salesmen will tell for the sake of commission. None of them tells the truth and puts their customers' interest first. People before profit is a lie too. They can say anything so long the lies bring in the sale.
Ever wonder why poor people are getting poorer? Their money never works harder but losing to inflation.
Imagine they save $100K and invest in a single premium endowment with projected return of 4% for next 15 years for retirement . Are they better off than 15 years before?
Pray that the endowment returns as projected and that inflation remains at 4% their life style is status quo. Chances are that they won't.
The poor indeed get poorer and the rich get richer. To get out of this rut NEVER entrust your money with insurance salesmen and the insurance companies becuase they are salesmen and the companies are predatory sales companies under the guise of insurance.