Wednesday, June 22, 2016

The life insurance landscape has changed considerably

During the 30 years that I was CEO of NTUC Income, I followed a simple but very important principle - the insurance products that are sold by NTUC Income should give good value to the policyholders, i.e. that they should get insurance coverage at a lower cost and an investment return that is higher than what they can get from other types of investments.

I was not only giving them a better return compared to other insurance companies, but I aimed to give a better return compared to other types of investments.

I was focusing on the investments that are available to ordinary people, e.g. unit trusts, fixed deposits and bonds. At that time, the low cost index fund (such as the STI ETF) was not available. If someone is an expert in investing in shares, he or she is not "an ordinary people" and can do better than buy a life insurance policy from NTUC Income. I was not focusing on these investment experts.

I was not focusing on how much profit could be made by NTUC Income. It has to make a profit but the maximizing of the profit was not the objective. The objective was to provide insurance products that the buyers can get good value, i.e. low cost insurance coverage and a good investment return.

I was able to achieve this goal by operating efficiently and at low cost. At that time, NTUC Income was operating what can be described today as a "low cost index fund".

Due to competition, the other life insurance companies had also to provide returns that are not that far short of what was available from NTUC Income.

The environment today is different in many significant ways.

First, most life insurance companies how have the goal to generate as much profit as they can. They do not care much about the return earned or the losses suffered by their policyholders.

Second, the regulator, namely the Monetary Authority of Singapore, does not pay attention to the fair treatment of policyholders. They expect the policyholders to be educated to look after their own interest. This is a mistaken concept, but it has been operating for the past two decades.

Third, NTUC Income, under its new management, does not seem to be keeping its expenses at the low level in the past. It is also offering new insurance products that do not provide better value to the policyholders compared to other types of investments.

Fourth, ordinary people can now invest in a low cost index fund, such as the STI ETF, to enjoy the benefit of diversification and get an attractive return over the long term.

Under the new environment, I advise consumers to avoid investing in all types of life insurance products. To get the insurance coverage, they should buy term insurance or personal accident insurance.

4 comments:

Yujuan said...

Precisely Mr. Tan dun maximize profits for NTUC Income that Board of Directors unhappy, got green eyed looking at other Insurers making tons of money at expense of policyholders.
There is no integrity on the Insurance scene, taking every opportunity to siam off responsibilities.
Now NTUC Income is part of the wolf pack, a female policy holder has to sue this Insurer to pay her $700,000 medical bill incurred in a private hospital on her as charged Shield Plan, mistakenly thinking she's well covered. But the Court only got NTUC to pay her only $100,000. A painful expensive mistake.

Anonymous said...

Since you left NTUC things have changed . It is no longer a cooperatives but a social enterprise. What is this social enterprise? Is it a more expensive animal that generates low return compared to other non social enterprises? If you checked the return of life fund of ntuc income it is the LOWEST of the lot? How come? The management is paid MORE than you and yet the investment on this new management is getting lower return.The return should be afew times higher than you when they are paid a few times more , right? Isn't something wrong?
The products are getting more rotten and not the best. How come if it is a social enterprise which enjoys more tax perks and without share holders? Similarly, the agents are becoming more salesmen like drug peddlers peddling snakeoil when they should be becoming like consultants providing ADVISORY SERVICE. Do you know the salesmen are called "financial consultants" , a title I am ashamed to use if I don't measure up to the title.Some are called Executive Financial Consultants and my hairs will stand up and I get goose pimples when I see them. They should be called Executive Financial Snakeoil Peddlers. Try talking to them and you will agree with me that none, maybe a few do, is qualified. They talk like sampoo salesgirls, accomodating receptionist or car salesmen telling half truths.
The board should review the new management and restructure the whole outfit to revive its its old role as the people's insurance cooperatives, the industry's benchmark

Anonymous said...

This insurance company has gone to the dogs with incompetent salesmen and women. How come MAS didn't check on their Balanced Score Card.? If MAS did I am sure 95% will not pass. If MAS found nothing wrong with their balanced score card there is something fishy. Their supervisors and independent auditor must be in cahoot with the agents.If you have talked and dealt with the agents you know they are not qualified and how come they can pass the balanced score card?
MAS must check on them.

Anonymous said...

Many things got run to the ground in recent years. SingPost also under new management with foreigners heading it fell from a much trusted postal service to now where not receiving your mail is the norm. Ntuc income, also with a foreigner at the helm ended up with many disgruntled customers. All these are the result of those decision makers at the TOP who thought that foreigners are better and chose them over true blue Singaporeans. Et tu Brute!

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