Sunday, October 09, 2016

Low payout under Eldershield

Dear Mr Tan,
Based on CPF annual report.
Last year premium for Eldershield is 364 million dollars.
Total premium since 2002 is more than 3 billion dollars.
Only 7,300 people claim and total claim is only 90 million dollars.
Total investment return from the reserve is more than 150 million dollars.
The claim per year is 10 million dollars, less than 7% of yearly return.
There are 120 million policy holders. The pay out is too low.

Eldershield provides life time cover.
The premium that is paid now will result in claims in 30 years time.
So, the immediate payout ratio is not indicative of the final payout.

However, it is true that Elderhshield gives a poor payout for the public, even after allowing for reserves for future claims.

If you want to know how much profits are being made by the insurance companies on Eldershield (technically described as individual disability insurance), you can view the results here.

The insurance companies are making a profit margin of 30% after providing for reserves for future claims. Yes, they are making a lot of profits, maybe $100 million a year! It is huge.

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