Wednesday, May 30, 2018

Premium and claim under Eldershield

Mr. Tan
Why is there a low payout in claims compared to premiums received under Eldershield?
The health minister said that a total of $2.6 billion was collected in premium and the claim paid out was $100 million since 2002.…/compulsory-eldershield-…/

Under Eldershield, the premium is paid up to age 65 and cover is provided for the whole of life.
Most of the claims are likely to occur after age 80.
So, we should not compare the premium vs claim on a year to year basis.
This is the same as whole life policy - the premiums are paid now, but the death occurs at a future date.
If you compare the premium and claim under a whole life policy, you will also see a low payout rate each year, because most of the premium are for payment in the future.
Although the claims will be paid in the future, it is quite likely that the premium paid for Eldershield is much higher than the expected future claim.
The actuary who calculated the premium probably assumed claim rate that are quite conservative, and the actual claim are lower than assumed.

Tan Kin Lian

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