Dear Mr. Tan,
May I ask if the non-guaranteed reversionary bonuses are determined by individual insurance company? Are these bonuses declarations subject to MAS regulatory control or are they depend on the “mood” of the insurance company?
I have similar situations with company Y. To our disappointment, the payouts of non guaranteed reversionary bonus for the matured policies (belonging to my wife and me) are grossly reduced to a mere 0.12% of the sum assured, instead of the 0.45% as per point of sales illustration. More unbelieving was the fact that the company declared their overall total assets investment return for 2007 was 5.7% p.a. with fixed income return of 4.9% p.a. and a strong equity portfolio investment return of 8.6%.
We feel that we are not given the fair share of the illustrated payouts of the reversionary bonus during last few years, with the strong performance of the economy and the insurance company in particular. Now, we learnt that the illustrated numbers at the point of sales are no more than a set of empty promised number.
I see no other alternatives, besides writing to the insurance company for clarifications and going to FiDREC to seek redress. Do want to learn from you on how can the interest of the policyholders be protected from the giant insurance company from either “misrepresenting” or “under declaring” their payouts to earn more from us, the commoners.
REPLY
You should write to MAS and ask them to find out the reason from company Y on your behalf. It is the duty of MAS to ensure that the insurance companies treat their policyholders fairly in respect of the declared bonuses for these type of approved products.
MAS now requires the bonus distribution to be decided by the board of directors, on the recommendation of the appointed actuary, and that the process be governed by an "internal governance policy" as set out in MAS 320.
In my view, this does not provide sufficient protection for the interest of consumers. There is a conflict of interest within the board, that represents the shareholders.
I hope that MAS will change the approach. It is better to have an independent actuary, appointed by MAS, to look at the bonus distribution and make sure that they have been declared fairly to consumers.
In the absence of adequate safeguards, it is better for the consumer to avoid investing in life insurance policies. It is better to invest in a low cost investment fund, due to its transparency. The investor will be able to keep most of the investment gains, less the transparent charges.
Tell your family and friends about your bad experience with this insurance company. It will happen, again and again. Tell them to avoid high cost life insurance products, which provides poor value. Most of your investment gains are taken away as expenses and profit, leaving you with a poor return.
Thursday, May 29, 2008
Wednesday, May 28, 2008
A better bonus philosophy
EXTRACTS FROM STATEMENT BY
NICK RHODES, APPOINTED ACTUARY OF INCOME, 2002-2007
Income, as a Cooperative, distributes less to shareholders .... so a variable and high annual bonus can be paid, to the benefit of policyholders.
Income has managed to maintain remarkable stability in its non-guaranteed Terminal Bonus over the years - not even reducing it when STI was down at 1,300.
As a result, in my opinion, the Income bonus philosophy was much better than that adopted by competitors, since the policyholder could predict with greater certainty the value of his policy as it approached maturity.
Other companies have an inferior product - and it would be unfair to policyholders for Income to unnecessarily follow "market norms".
NICK RHODES, APPOINTED ACTUARY OF INCOME, 2002-2007
Income, as a Cooperative, distributes less to shareholders .... so a variable and high annual bonus can be paid, to the benefit of policyholders.
Income has managed to maintain remarkable stability in its non-guaranteed Terminal Bonus over the years - not even reducing it when STI was down at 1,300.
As a result, in my opinion, the Income bonus philosophy was much better than that adopted by competitors, since the policyholder could predict with greater certainty the value of his policy as it approached maturity.
Other companies have an inferior product - and it would be unfair to policyholders for Income to unnecessarily follow "market norms".
An amicable solution
I discussed with NTUC Income's management to seek an amicable solution that will be in the best interest of policyholders and the reputation of NTUC Income.
Tan Suee Chieh asked me not to appear to "take credit" for getting Income to make some changes. He wanted both parties to appear to "win-win". I agreed.
I am disappointed that he made a statement to the media that I changed my tone after understanding the issues behind the restructuring of the bonus. This is not true. I have told Suee Chieh a few times that I am against the restructuring of the bonus,
Tan Suee Chieh asked me not to appear to "take credit" for getting Income to make some changes. He wanted both parties to appear to "win-win". I agreed.
I am disappointed that he made a statement to the media that I changed my tone after understanding the issues behind the restructuring of the bonus. This is not true. I have told Suee Chieh a few times that I am against the restructuring of the bonus,
Allow policyholders to choose
Some policyholders have asked me to insist that they be given the right to choose between the new and old bonus structure. I hope that this is possible and believe that it is the best option.
If NTUC Income's managment is convinced that the new bonus structure is likely to give a better return to the policyholders, they should be able to convince most policyholders to move to the new structure.
If NTUC Income's managment is convinced that the new bonus structure is likely to give a better return to the policyholders, they should be able to convince most policyholders to move to the new structure.
View from Appointed Actuary (2002-2007)
Dear Kin Lian
A high terminal bonus (which some companies suddenly reduced to zero when STI was low in 2002/3) is used by most companies to pass much of the investment risk to policyholders, without giving any significant additional return. If a policyholder wants an investment linked product, he can buy one - a policyholder who buys With Profit wants and deserves a more predictable ultimate claim value.
Stock Companies (i.e. all companies offering With Profits life insurance policies in Singapore, other than Income) are constrained in that their shareholders demand a stable dividend. The amount that can be transferred to Shareholders is limited to 1/9th of the cost of bonus - hence the annual bonus has to be sustainable with a very high degree of confidence, even in extreme financial conditions - and hence has to be low.
Income, as a Cooperative, distributes less to shareholders and is not constrained in this way - the transfer from Par Fund to Shareholders Fund has been no more than 2% of the cost of bonus - so a variable and high annual bonus can be paid, to the benefit of policyholders.
Income has managed to maintain remarkable stability in its non-guaranteed Terminal Bonus over the years - not even reducing it when STI was down at 1,300. As a result, in my opinion, the Income bonus philosophy was much better than that adopted by competitors, since the policyholder could predict with greater certainty the value of his policy as it approached maturity.
Other companies have an inferior product - and it would be unfair to policyholders for Income to unnecessarily follow "market norms".
Nicholas Rhodes,
Appointed Actuary of Income 2002-2007.
A high terminal bonus (which some companies suddenly reduced to zero when STI was low in 2002/3) is used by most companies to pass much of the investment risk to policyholders, without giving any significant additional return. If a policyholder wants an investment linked product, he can buy one - a policyholder who buys With Profit wants and deserves a more predictable ultimate claim value.
Stock Companies (i.e. all companies offering With Profits life insurance policies in Singapore, other than Income) are constrained in that their shareholders demand a stable dividend. The amount that can be transferred to Shareholders is limited to 1/9th of the cost of bonus - hence the annual bonus has to be sustainable with a very high degree of confidence, even in extreme financial conditions - and hence has to be low.
Income, as a Cooperative, distributes less to shareholders and is not constrained in this way - the transfer from Par Fund to Shareholders Fund has been no more than 2% of the cost of bonus - so a variable and high annual bonus can be paid, to the benefit of policyholders.
Income has managed to maintain remarkable stability in its non-guaranteed Terminal Bonus over the years - not even reducing it when STI was down at 1,300. As a result, in my opinion, the Income bonus philosophy was much better than that adopted by competitors, since the policyholder could predict with greater certainty the value of his policy as it approached maturity.
Other companies have an inferior product - and it would be unfair to policyholders for Income to unnecessarily follow "market norms".
Nicholas Rhodes,
Appointed Actuary of Income 2002-2007.
Life Annuity Vs CPF-Life
Dear Mr. Tan,
I am 58 and retired. Three years ago, I used my minimum sum to bought a Life Annuity.
With the recently announced CPF-Life, higher MSRA interest, D-Bonus and V-Bonus, is it better for me to:
(a) Terminate the Life Annuity and transfer the money back to CPF RA (to earn the SMRA interest rate and various bonus) or
(b) Retain the Life Annuity and instruct the insurer to postpone the pay-out age from 62 to 65 (to qualify for the V bonus)?
REPLY
The CPF pays an attractive rate of interest on the retirement account, i.e. 4% plus 1% bonus. It also pays the bonus for deferring the payment.
I know of an annuitant who decided to cancel the annuity and transfer the savings back to CPF. He received a good cash value and found the new arrangement to be finacially better.
Perhaps, you should study both options and make the decision, based on the actual figures. You can ask for the actual figures and carry out a cash flow projection over the next 5 or 10 years, to make a better decision.
I am 58 and retired. Three years ago, I used my minimum sum to bought a Life Annuity.
With the recently announced CPF-Life, higher MSRA interest, D-Bonus and V-Bonus, is it better for me to:
(a) Terminate the Life Annuity and transfer the money back to CPF RA (to earn the SMRA interest rate and various bonus) or
(b) Retain the Life Annuity and instruct the insurer to postpone the pay-out age from 62 to 65 (to qualify for the V bonus)?
REPLY
The CPF pays an attractive rate of interest on the retirement account, i.e. 4% plus 1% bonus. It also pays the bonus for deferring the payment.
I know of an annuitant who decided to cancel the annuity and transfer the savings back to CPF. He received a good cash value and found the new arrangement to be finacially better.
Perhaps, you should study both options and make the decision, based on the actual figures. You can ask for the actual figures and carry out a cash flow projection over the next 5 or 10 years, to make a better decision.
Buy a life annuity with cash or CPF
Dear Mr. Tan,
I am 58 years old still and is still working. I have a retirement account in my CPF. Should I purchase an annuity using cash or should I use my retirement account?
REPLY
It is better to keep your minimum sum in the CPF as it earns a better return. You can buy the life annuity using cash. Read this FAQ:
http://www.tankinlian.com/faq/seniors.html
I am 58 years old still and is still working. I have a retirement account in my CPF. Should I purchase an annuity using cash or should I use my retirement account?
REPLY
It is better to keep your minimum sum in the CPF as it earns a better return. You can buy the life annuity using cash. Read this FAQ:
http://www.tankinlian.com/faq/seniors.html
Dubious practices in respect of Terminal Bonus
Dear Mr. Tan,
The article "Salutary bonus lessons from the UK" (Straits Times, 28 May 2008) highlighted that "onerous benefit guarantees were a big factor behind the closure of Equitable Life...".
You have raised some good questions on the risks of terminal bonuses. The declaration of unsustainable annual bonuses was indeed a key factor for the collapse of Equitable Life. However, Equitable life also adopted "dubious practices" in respect of "terminal" or "final" bonuses, and failed to set aside adequate technical provisions for terminal bonuses.
These imprudent practices are highlighted in a BBC article entitled "Where Equitable Life went wrong", which provides a more comprehensive picture of the Equitable Life case. http://news.bbc.co.uk/2/hi/business/3547441.stm
SH
REPLY
The bonus rates declared by NTUC Income in the past were sustainable. In the early 1990s, they were calculated based on a long term yield of 6.5%. In the late 1990s and early 200s, there were reduced to reflect a long term yield of 5.25%. The actual yield earned during the past 10 years was 7.8%.
At any point of time, the bonus rates were adjusted (upwards or downwards) to reflect the projected long term yield of the fund. This projected yield is based on the mix of investments that is prudent for the fund.
It is possible for a life company to declare unsustainable bonus rates. For example, if the bonus rates were calculated based on a projected yield of 10% in today's environment in Singapore, it would be considered to be unsustainable.
NTUC Income did not declare unsustainable bonus rates in past years. In fact, it had been quite conservative in calculating the annual bonus. It kept 20% of the each year's bonus aside, to be declared as a special bonus payable on maturity and claim. This helped to provide a safety margin.
The article "Salutary bonus lessons from the UK" (Straits Times, 28 May 2008) highlighted that "onerous benefit guarantees were a big factor behind the closure of Equitable Life...".
You have raised some good questions on the risks of terminal bonuses. The declaration of unsustainable annual bonuses was indeed a key factor for the collapse of Equitable Life. However, Equitable life also adopted "dubious practices" in respect of "terminal" or "final" bonuses, and failed to set aside adequate technical provisions for terminal bonuses.
These imprudent practices are highlighted in a BBC article entitled "Where Equitable Life went wrong", which provides a more comprehensive picture of the Equitable Life case. http://news.bbc.co.uk/2/hi/business/3547441.stm
SH
REPLY
The bonus rates declared by NTUC Income in the past were sustainable. In the early 1990s, they were calculated based on a long term yield of 6.5%. In the late 1990s and early 200s, there were reduced to reflect a long term yield of 5.25%. The actual yield earned during the past 10 years was 7.8%.
At any point of time, the bonus rates were adjusted (upwards or downwards) to reflect the projected long term yield of the fund. This projected yield is based on the mix of investments that is prudent for the fund.
It is possible for a life company to declare unsustainable bonus rates. For example, if the bonus rates were calculated based on a projected yield of 10% in today's environment in Singapore, it would be considered to be unsustainable.
NTUC Income did not declare unsustainable bonus rates in past years. In fact, it had been quite conservative in calculating the annual bonus. It kept 20% of the each year's bonus aside, to be declared as a special bonus payable on maturity and claim. This helped to provide a safety margin.
Collective Protest - set aside for the time being
I discussed with NTUC Income's management to seek an amicable solution that will be in the best interest of policyholders and the reputation of NTUC Income. I communicated two concerns on behalf of the policyholders:
1. The restucture of the bonus system results in a lower annual bonus distributed yearly to policyholders, to be compensated by a higher rate of special bonus (which is not guaranteed). I ask that there should be satisfactory assurance on the payment of the special bonus on surrenders and claims, so that the policyholders will not lose out on the restructuring of the bonus.
2. In some past years, policyholders received a bonus cut (compared to what was illustrated at the point of sale) when the investment yield was low. As NTUC Income had earned a good yield of 7.8% earned during the past 10 years, I suggest that the shortfall in the bonus for the poor years be restored as early as possible, subject to financial solvency. I pointed out that the actual yield is higher than the projected yield at the point of sale.
To allow more time to find a settlement, I indicated that I will set aside the Collective Protest for the time being. I hope that an amicable solution can be found, so that the protest will not be necessary.
The Straits Times reported that Income had issued a statement that the old bonus structure is unsustainable. I disagree. For policies taken in the earlier years, they were based on a projected yield of 6.5%. For policies issued in the later years, they were based on a projected yield of 5.25%. These were realistic estimates of the future yield made at that time. The actual yield earned over the last 10 years turned out to be higher, at 7.8%.
Under the old bonus system adopted by NTUC Income, the sustainable rate of bonus is not a rate that is fixed. It is a rate that is adjusted from time to time, to reflect any change in the projected yield. If the yield goes up, the rate of bonus is adjusted upwards. If it comes down, it is adjusted downwards.
During the 1970s and 1980s, the bonus rates were adjusted upwards very few years. During the late 1990s, in the low interest rate environment, the bonus rates were adjusted downwards. In recent years, there is a case for the bonus to be adjusted upwards.
I believe that this system is fairer to policyholders and allows them to enjoy a higher vested bonus each year. This increases their cash value and reduces their loss, if they have to terminate the policies in the earlier years.
Tan Suee Chieh said that my change of tone was probably due to a better appreciation of issues behind the bonus structure. This is not the case - and I had told Tan Suee Chieh about it earlier. I had understood the issues earlier and had concerns about the change. My wish now is to find a solution that is in the best interests of the policyholders and the reputation of NTUC Income.
Some policyholders have asked me to insist that they be given the right to choose between the new and old bonus structure. I hope that this is possible and believe that it is the best option.
If NTUC Income's managment is convinced that the new bonus structure is likely to give a better return to the policyholders, they should be able to convince most policyholders to move to the new structure.
1. The restucture of the bonus system results in a lower annual bonus distributed yearly to policyholders, to be compensated by a higher rate of special bonus (which is not guaranteed). I ask that there should be satisfactory assurance on the payment of the special bonus on surrenders and claims, so that the policyholders will not lose out on the restructuring of the bonus.
2. In some past years, policyholders received a bonus cut (compared to what was illustrated at the point of sale) when the investment yield was low. As NTUC Income had earned a good yield of 7.8% earned during the past 10 years, I suggest that the shortfall in the bonus for the poor years be restored as early as possible, subject to financial solvency. I pointed out that the actual yield is higher than the projected yield at the point of sale.
To allow more time to find a settlement, I indicated that I will set aside the Collective Protest for the time being. I hope that an amicable solution can be found, so that the protest will not be necessary.
The Straits Times reported that Income had issued a statement that the old bonus structure is unsustainable. I disagree. For policies taken in the earlier years, they were based on a projected yield of 6.5%. For policies issued in the later years, they were based on a projected yield of 5.25%. These were realistic estimates of the future yield made at that time. The actual yield earned over the last 10 years turned out to be higher, at 7.8%.
Under the old bonus system adopted by NTUC Income, the sustainable rate of bonus is not a rate that is fixed. It is a rate that is adjusted from time to time, to reflect any change in the projected yield. If the yield goes up, the rate of bonus is adjusted upwards. If it comes down, it is adjusted downwards.
During the 1970s and 1980s, the bonus rates were adjusted upwards very few years. During the late 1990s, in the low interest rate environment, the bonus rates were adjusted downwards. In recent years, there is a case for the bonus to be adjusted upwards.
I believe that this system is fairer to policyholders and allows them to enjoy a higher vested bonus each year. This increases their cash value and reduces their loss, if they have to terminate the policies in the earlier years.
Tan Suee Chieh said that my change of tone was probably due to a better appreciation of issues behind the bonus structure. This is not the case - and I had told Tan Suee Chieh about it earlier. I had understood the issues earlier and had concerns about the change. My wish now is to find a solution that is in the best interests of the policyholders and the reputation of NTUC Income.
Some policyholders have asked me to insist that they be given the right to choose between the new and old bonus structure. I hope that this is possible and believe that it is the best option.
If NTUC Income's managment is convinced that the new bonus structure is likely to give a better return to the policyholders, they should be able to convince most policyholders to move to the new structure.
Risk of high terminal bonus
Many insurance companies introduce life insurance policies with low annual bonus and high terminal bonus.
If the policyholder surrender the policies before the terminal bonus is payable, usually during the first 20 years, they will get a low cash value. The insurance company makes a big profit.
The policyholder is likely to get a cash value (on surrender) that is lower than the total premiums that was paid. The policyholder usually gets a poor deal and has to bear a high cost for the insurance protection, compared to the alternative of buying a low cost term insurance.
Even if the policyholder is able to wait a long time (say, 20 years or longer) for the terminal bonus to become payable, the policyholder still faces the risk that the terminal bonus (which is not guaranteed) may be reduced in the future. Policyholders of insurance companies have suffered a big loss in payout due to a severe reduction in terminal bonus on a few occasions in past years.
NTUC Income used to declare a high rate of annual bonus from its annual surplus, consistent with the long term yield of the fund. This allows the policy to accumulate a high cash value and reach a breakeven point (i.e. the cash value equals the premiums paid) as early as possible.
As the long term yield changes, the rate of annual bonus is adjusted (usually upwards, but sometimes downwards).
NTUC Income has now decided to change the bonus structure to declare a lower rate of annual bonus and to increase the rate of special bonus. This affects 310,000 policies and is stated to be in line with "industry practice". The bad aspect of this industry practice is that the insurance company can to pay out a lower cash value and make a bigger profit on a surrendered policy - although NTUC Income has stated that this is not their intent.
NTUC Income has said that they will increase the terminal bonus for surrenders and claims, so that the payout to the policyholder will be not less than the old bonus structure.
It is important for each policyholder to know the answers to the following questions:
1. What is the rate of terminal bonus payable on each of their policy for each year from now until the maturity date or for the whole of life. Under this new system, a different rate of terminal bonus will apply for each type of policy, each year of entry, each year of termination and the type of termination (i.e. surrender or claim).
2. Will the rates of terminal bonus be published for all policies, so that each policyholder is able to see not only the rates that will apply to each of his policy but to all other policies as well?
3. How will the rates of terminal bonus be changed in the future, to reflect the change in the long term yield of the fund and to ensure that all the policyholders are treated fairly?
It is important for each policyholder to get sufficient assurance that their interest will be protected by the change in bonus structure. This requires full disclosure of the new rates of terminal bonus and the principles guiding the changes in these rates in the future.
It is best for each policyholder to be given an individual choice of staying with the old bonus structure or move to the new structure.
If the policyholder surrender the policies before the terminal bonus is payable, usually during the first 20 years, they will get a low cash value. The insurance company makes a big profit.
The policyholder is likely to get a cash value (on surrender) that is lower than the total premiums that was paid. The policyholder usually gets a poor deal and has to bear a high cost for the insurance protection, compared to the alternative of buying a low cost term insurance.
Even if the policyholder is able to wait a long time (say, 20 years or longer) for the terminal bonus to become payable, the policyholder still faces the risk that the terminal bonus (which is not guaranteed) may be reduced in the future. Policyholders of insurance companies have suffered a big loss in payout due to a severe reduction in terminal bonus on a few occasions in past years.
NTUC Income used to declare a high rate of annual bonus from its annual surplus, consistent with the long term yield of the fund. This allows the policy to accumulate a high cash value and reach a breakeven point (i.e. the cash value equals the premiums paid) as early as possible.
As the long term yield changes, the rate of annual bonus is adjusted (usually upwards, but sometimes downwards).
NTUC Income has now decided to change the bonus structure to declare a lower rate of annual bonus and to increase the rate of special bonus. This affects 310,000 policies and is stated to be in line with "industry practice". The bad aspect of this industry practice is that the insurance company can to pay out a lower cash value and make a bigger profit on a surrendered policy - although NTUC Income has stated that this is not their intent.
NTUC Income has said that they will increase the terminal bonus for surrenders and claims, so that the payout to the policyholder will be not less than the old bonus structure.
It is important for each policyholder to know the answers to the following questions:
1. What is the rate of terminal bonus payable on each of their policy for each year from now until the maturity date or for the whole of life. Under this new system, a different rate of terminal bonus will apply for each type of policy, each year of entry, each year of termination and the type of termination (i.e. surrender or claim).
2. Will the rates of terminal bonus be published for all policies, so that each policyholder is able to see not only the rates that will apply to each of his policy but to all other policies as well?
3. How will the rates of terminal bonus be changed in the future, to reflect the change in the long term yield of the fund and to ensure that all the policyholders are treated fairly?
It is important for each policyholder to get sufficient assurance that their interest will be protected by the change in bonus structure. This requires full disclosure of the new rates of terminal bonus and the principles guiding the changes in these rates in the future.
It is best for each policyholder to be given an individual choice of staying with the old bonus structure or move to the new structure.
Investing in unit trusts and shares
I helped my three children to open an account with an online portal to invest in unit trust and a stockbroker to invest in shares. I will transfer some of my shares, REITS and unit trusts to them.
I want them to learn how to manage their own investments. This will encourage them to invest their own savings from their monthly salaries in shares and low cost unit trusts. These products, have low cost and are transparent.
During the visit to the online portal and stockbroker, they are given a hands-on guidance on how to manage their investments through the website. This is their first personal experience on investments.
They will learn how to take care of their investments, instead of relying on advisers who charges high fees that are not properly disclosed to the investor. I want them to avoid investing in high cost investment-linked plans that takes away two years of their savings.
I wish to encourage young people to visit an online portal (i.e. Fundsupermart, DollarDex, POEMS, DBS Vickers) to open an account and learn how to manage your investments through the portal.
I hope that parents with adequate savings, can can transfer some cash or shares to your children to start their personal investment accounts.
I want them to learn how to manage their own investments. This will encourage them to invest their own savings from their monthly salaries in shares and low cost unit trusts. These products, have low cost and are transparent.
During the visit to the online portal and stockbroker, they are given a hands-on guidance on how to manage their investments through the website. This is their first personal experience on investments.
They will learn how to take care of their investments, instead of relying on advisers who charges high fees that are not properly disclosed to the investor. I want them to avoid investing in high cost investment-linked plans that takes away two years of their savings.
I wish to encourage young people to visit an online portal (i.e. Fundsupermart, DollarDex, POEMS, DBS Vickers) to open an account and learn how to manage your investments through the portal.
I hope that parents with adequate savings, can can transfer some cash or shares to your children to start their personal investment accounts.
Compassionate Fines
Someone once said that Singapore is a “fine” city. We have a fine for littering, a fine for jay-walking, a fine for late payment of taxes, a fine for traffic offences and a fine for paying a fine late.
It is all right to have fines to impose discipline on the people. This is how Singapore gets the reputation of being a clean, orderly and safe city. It has its advantages.
However, in their zeal, the authorities may forget that their manner of imposing the fine can cause additional unintended hardship.
Read more about my article in the Online Citizen.
http://www.theonlinecitizen.com/
It is all right to have fines to impose discipline on the people. This is how Singapore gets the reputation of being a clean, orderly and safe city. It has its advantages.
However, in their zeal, the authorities may forget that their manner of imposing the fine can cause additional unintended hardship.
Read more about my article in the Online Citizen.
http://www.theonlinecitizen.com/
Collective Protect - Action
If you wish to send more signature, you can continue to do so. You can mail to me, or send it to kinlian@gmail.com.
You can get the Collective Protest from from: http://www.tankinlian.com/faq/collectiveprotest.html
You can get the Collective Protest from from: http://www.tankinlian.com/faq/collectiveprotest.html
Duplicative coverage
COMMENT POSTED IN MY BLOG
I have a friend who gave up Medishield because she has company medical benefit.At age 50, she contracted breast cancer, the company medical paid for her treatment. She left her job at 55, and because of her breast cancer, though in remission, she is not able to get a Shield Plan. Now she contracted liver cancer and is not covered by any medical insurance. So whether to insure the Shield Plan when employed with medical benefit or not, is really something to think much harder.
.said
REPLY
The coverage for medical expenses is already provided by the company. The insurance adviser is advising these employees to buy an Enhanced plan (costing $200 or more a year) just to cover the small risk of not getting continuing insurance after leaving a job. This cost is too high for the risk.
Soon, there will be a cheaper way to get this type of protection. For example, the company medical plan can be taken with an insurance company that offers the continuity of cover.
The employees do not have to buy their personal Shield coverage. They can cancel their existing coverage. This will save $200 or more yearly for the employee. The saving can be invested to get additional money for retirement (instead of being wasted on a cover that is mostly unnecessary).
I have a friend who gave up Medishield because she has company medical benefit.At age 50, she contracted breast cancer, the company medical paid for her treatment. She left her job at 55, and because of her breast cancer, though in remission, she is not able to get a Shield Plan. Now she contracted liver cancer and is not covered by any medical insurance. So whether to insure the Shield Plan when employed with medical benefit or not, is really something to think much harder.
.said
REPLY
The coverage for medical expenses is already provided by the company. The insurance adviser is advising these employees to buy an Enhanced plan (costing $200 or more a year) just to cover the small risk of not getting continuing insurance after leaving a job. This cost is too high for the risk.
Soon, there will be a cheaper way to get this type of protection. For example, the company medical plan can be taken with an insurance company that offers the continuity of cover.
The employees do not have to buy their personal Shield coverage. They can cancel their existing coverage. This will save $200 or more yearly for the employee. The saving can be invested to get additional money for retirement (instead of being wasted on a cover that is mostly unnecessary).
Logic9 (Sudoku)
Sudoku is a popular game. It appears daily in Today paper and in MyPaper. It appears in the Sunday Times.
You can learn the tips of how to solve the Sudoku puzzle at all levels, including the difficult ones, from:
http://www.tankinlian.com/logic9/
Look for Tips to Play Logic9. You can also practice these tips by Play.
This link is also available from the right panel under the heading Logic9 (Sudoku).
You can learn the tips of how to solve the Sudoku puzzle at all levels, including the difficult ones, from:
http://www.tankinlian.com/logic9/
Look for Tips to Play Logic9. You can also practice these tips by Play.
This link is also available from the right panel under the heading Logic9 (Sudoku).
Tuesday, May 27, 2008
Bad experience with insurance advisers
Dear Mr Tan,
I had a bad experience with my previous financial adviser who asked me to buy a expensive policy. I have lapse my policy as I find it too expensive and not practical.
I am a 28 years old, single. I do not want to spend too much in paying for higher premium. I know that Term Insurance is the most ideal. Which is better - Level or Decreasing Term?
My financial adviser recommended me a Term Insurance cover up to age of 65. I will be covered after 65 without paying premium. The premium is about $108.00 per month. The sum assured is $60,000. Is it good?
I have a NTUC M Incomeshield (previous known as MediShield) policy. My current financial adviser has advised me to top up $120 per year to enhance the coverage. I am also covered under my company insurance.
REPLY
It is best for you to ask a few insurance companies to quote to you the premium for term insurance. Read this FAQ:
http://www.tankinlian.com/faq/termd.html
Here are some benchmark rates for your reference:
http://www.tankinlian.com/faq/benchmark.html
The adviser is dishonest. He or she is selling a high cost whole life policy with premium payable up to age 65, and telling you that it is a low cost term insurance. If you buy a decreasing term insurance, you need to pay a much smaller premium.
As you are covered under your company scheme, there is no need for you to buy the enhanced plan.
You can lodge a complaint against these two advisers for giving you bad advice.
I had a bad experience with my previous financial adviser who asked me to buy a expensive policy. I have lapse my policy as I find it too expensive and not practical.
I am a 28 years old, single. I do not want to spend too much in paying for higher premium. I know that Term Insurance is the most ideal. Which is better - Level or Decreasing Term?
My financial adviser recommended me a Term Insurance cover up to age of 65. I will be covered after 65 without paying premium. The premium is about $108.00 per month. The sum assured is $60,000. Is it good?
I have a NTUC M Incomeshield (previous known as MediShield) policy. My current financial adviser has advised me to top up $120 per year to enhance the coverage. I am also covered under my company insurance.
REPLY
It is best for you to ask a few insurance companies to quote to you the premium for term insurance. Read this FAQ:
http://www.tankinlian.com/faq/termd.html
Here are some benchmark rates for your reference:
http://www.tankinlian.com/faq/benchmark.html
The adviser is dishonest. He or she is selling a high cost whole life policy with premium payable up to age 65, and telling you that it is a low cost term insurance. If you buy a decreasing term insurance, you need to pay a much smaller premium.
As you are covered under your company scheme, there is no need for you to buy the enhanced plan.
You can lodge a complaint against these two advisers for giving you bad advice.
Questions on Life Annuity
Dear Sir,
After reading through your website, I have some doubts about the benefits of annuities.
1. Are the monthly payouts inflation proofed? If not S$1 is not worth so much in 20+ years.
2. Are there any tax benefits?
3. Are there any early cancellation costs?
4. How does the return compare with say STI ETF's over 20years?
5. Funds are locked in?
6. What are the exact costs as compared to say holding Equities for the same period?
It seems not to be so easy for the average person to gauge the exact returns over the life of the annuity. In such case only the sweet parts are mentioned to attract allay peoples fears. I would appreciate your view on my comments.
REPLY
My views are expressed in this FAQ:
http://www.tankinlian.com/faq/life.html
After reading through your website, I have some doubts about the benefits of annuities.
1. Are the monthly payouts inflation proofed? If not S$1 is not worth so much in 20+ years.
2. Are there any tax benefits?
3. Are there any early cancellation costs?
4. How does the return compare with say STI ETF's over 20years?
5. Funds are locked in?
6. What are the exact costs as compared to say holding Equities for the same period?
It seems not to be so easy for the average person to gauge the exact returns over the life of the annuity. In such case only the sweet parts are mentioned to attract allay peoples fears. I would appreciate your view on my comments.
REPLY
My views are expressed in this FAQ:
http://www.tankinlian.com/faq/life.html
Seek a solution to the Bonus Restructure?
I have two rounds of discussion with the management of NTUC Income on the restructure (now called reshaping) of the bonus for 310,000 policies.
NTUC Income's management has assured me that the have the best interest of the policyholders in making this restructure of the bonus and will continue to observe the social purpose of NTUC Income (which they have stated previously). They are also willing to find ways to address the concerns of the policyholders. I have accepted their position on this matter.
I will provide an update within the next few days.
NTUC Income's management has assured me that the have the best interest of the policyholders in making this restructure of the bonus and will continue to observe the social purpose of NTUC Income (which they have stated previously). They are also willing to find ways to address the concerns of the policyholders. I have accepted their position on this matter.
I will provide an update within the next few days.
Investing my savings
I am now 60 years old. I have savings from my CPF (taken out at 55 years) and past savings from other sources.
At present, my total savings are invested in the following sources:
1. Foreign currency fixed deposits - 20%
2. REITS (real estate trusts) - 20%
3. Singapore and global shares - 50%
4. Life insurance policies - 10%
My investment in foreign currency fixed deposits earn an interest rate of 7% but is subject to currency risk. The REIT earns a dividend yield of about 5%. The Singapore and global shares earn a yield of about 3%.
All of these investments have risks. However, as I am investing them for 10 to 20 years, I can ride out the volatility in the markets. I hope that the good years will offset the bad years, and give me an average yield of more than 5%. In the case of the foreign currency fixed deposits, I expect the excess interest to offset a potential deprecation of the currency.
My savings in life insurance policies were made during the past 30 years. I keep these policies, if they continue to give a reasonable yield. I shall be discontinuing the policies that earn less than 3% p.a.
I will not be putting any new investments in a life insurance policy, as the return is poor. I do not like policies that have high terminal bonus, as a large part of the future yield is uncertain, non-transparent and beyond my control.
At present, my total savings are invested in the following sources:
1. Foreign currency fixed deposits - 20%
2. REITS (real estate trusts) - 20%
3. Singapore and global shares - 50%
4. Life insurance policies - 10%
My investment in foreign currency fixed deposits earn an interest rate of 7% but is subject to currency risk. The REIT earns a dividend yield of about 5%. The Singapore and global shares earn a yield of about 3%.
All of these investments have risks. However, as I am investing them for 10 to 20 years, I can ride out the volatility in the markets. I hope that the good years will offset the bad years, and give me an average yield of more than 5%. In the case of the foreign currency fixed deposits, I expect the excess interest to offset a potential deprecation of the currency.
My savings in life insurance policies were made during the past 30 years. I keep these policies, if they continue to give a reasonable yield. I shall be discontinuing the policies that earn less than 3% p.a.
I will not be putting any new investments in a life insurance policy, as the return is poor. I do not like policies that have high terminal bonus, as a large part of the future yield is uncertain, non-transparent and beyond my control.
Life insurance up to age 65
1. Is it necessary to take life insurance to cover the whole of life or up to age 65 only?
The primary purpose of life insurance is to protect against the loss of income due to premature death. You should have the protection for the period of your working life. Most people expect to stop work at 65. They need life insurance to cover the loss of income up to that age.
2. What type of life insurance plan is most suitable to provide the coverage?
I prefer a decreasing term insurance or family income insurance as they offers adequate coverage at a low cost. Here are some benchmark premium rates:
http://www.tankinlian.com/faq/benchmark.html
The premium rate is likely to be less than 10% of the cost of a whole life policy providing the same coverage.
3. How do I save for my retirement?
It is best to invest in a low cost investment fund. A low cost fund have an annual expense ratio of less than 1% per annum, with 50% or more invested in equities. The sales charge should be kept less than 2%.
4. Do I need critical illness coverage?
The expenses for treating the critical illness should be covered under a medical insurance poilcy. You can have an addtional cover of (say) one year's salary to cover the loss of income during the period of treatment. This can be covered under a critial illness policy taken up to age 65 and is optional.
5. Do I need life insurance coverage beyond 65 years?
You need an insurance policy to cover the medical expenses. In the past, some people need life insurance to provide money to pay estate duty. With the abolishment of estate duty, this is no longer needed.
6. Can I use life insurance to leave some money for my children?
If you have excess funds, you can buy a whole life policy with premiums paid through a single premium. You should avoid paying premium after your retirement. Make sure that your own needs (to pay your future living expenses) are taken care first, before you think of leaving money for your children.
You should choose an insurance company that gives you a good return on your single premium. Ask a few insurance companies to give you a quotation and compare the yield. You can get the telephone numbers of the insurance companies from this FAQ:
http://www.tankinlian.com/faq/termd.html
The primary purpose of life insurance is to protect against the loss of income due to premature death. You should have the protection for the period of your working life. Most people expect to stop work at 65. They need life insurance to cover the loss of income up to that age.
2. What type of life insurance plan is most suitable to provide the coverage?
I prefer a decreasing term insurance or family income insurance as they offers adequate coverage at a low cost. Here are some benchmark premium rates:
http://www.tankinlian.com/faq/benchmark.html
The premium rate is likely to be less than 10% of the cost of a whole life policy providing the same coverage.
3. How do I save for my retirement?
It is best to invest in a low cost investment fund. A low cost fund have an annual expense ratio of less than 1% per annum, with 50% or more invested in equities. The sales charge should be kept less than 2%.
4. Do I need critical illness coverage?
The expenses for treating the critical illness should be covered under a medical insurance poilcy. You can have an addtional cover of (say) one year's salary to cover the loss of income during the period of treatment. This can be covered under a critial illness policy taken up to age 65 and is optional.
5. Do I need life insurance coverage beyond 65 years?
You need an insurance policy to cover the medical expenses. In the past, some people need life insurance to provide money to pay estate duty. With the abolishment of estate duty, this is no longer needed.
6. Can I use life insurance to leave some money for my children?
If you have excess funds, you can buy a whole life policy with premiums paid through a single premium. You should avoid paying premium after your retirement. Make sure that your own needs (to pay your future living expenses) are taken care first, before you think of leaving money for your children.
You should choose an insurance company that gives you a good return on your single premium. Ask a few insurance companies to give you a quotation and compare the yield. You can get the telephone numbers of the insurance companies from this FAQ:
http://www.tankinlian.com/faq/termd.html
Reversionary Bonus
Dear Mr. Tan
I had abstracted out the policy contract for you to vet through hope you can help us.
Bonus (All life and endowment policy from Income)
If the policy is with profit policy, a reversionary Bonus will be added to the policy each year out of the surplus arising from the actuarial valuation of the life assurance fund. The amount of bonus will be determined by our actuary. The Bonus will not vest until two years from the entry date and is paid at the same time as the sum assured.
Bonus (vivolife- New life policy from Income)
This is a participating policy. Bonus when declared will be added to the policy out of the surplus arising from the actuarial valuation of the life assurance fund. The amount of bonus will be recommended by our appointed actuary and approved by our Board of Directors. Bonus will not vest two year from the policy entry date.
Most of the policyholders policy contract are mention in paragraph
1 . A reversionary Bonus will be added to the policy each year out of the surplus arising from the actuarial valuation of the life assurance fund. That mean they should declare the annual bonus in full sum once declared.
Those who brought vivolife policy under paragraph 2 stated that Bonus when declared will be added to the policy out of the surplus arising from the actuarial valuation of the life assurance fund. Reversionary word is missing. It does not mention the bonus will added to the policy each year so it can be reversionary or terminal bonus once declare will be added to the policy.
Hope this piece of information will help you to prepare our case cheers.
JL
I had abstracted out the policy contract for you to vet through hope you can help us.
Bonus (All life and endowment policy from Income)
If the policy is with profit policy, a reversionary Bonus will be added to the policy each year out of the surplus arising from the actuarial valuation of the life assurance fund. The amount of bonus will be determined by our actuary. The Bonus will not vest until two years from the entry date and is paid at the same time as the sum assured.
Bonus (vivolife- New life policy from Income)
This is a participating policy. Bonus when declared will be added to the policy out of the surplus arising from the actuarial valuation of the life assurance fund. The amount of bonus will be recommended by our appointed actuary and approved by our Board of Directors. Bonus will not vest two year from the policy entry date.
Most of the policyholders policy contract are mention in paragraph
1 . A reversionary Bonus will be added to the policy each year out of the surplus arising from the actuarial valuation of the life assurance fund. That mean they should declare the annual bonus in full sum once declared.
Those who brought vivolife policy under paragraph 2 stated that Bonus when declared will be added to the policy out of the surplus arising from the actuarial valuation of the life assurance fund. Reversionary word is missing. It does not mention the bonus will added to the policy each year so it can be reversionary or terminal bonus once declare will be added to the policy.
Hope this piece of information will help you to prepare our case cheers.
JL
Save for a child's education
Hi Mr tan,
I stomped onto your website and I found it really enlightening. I have 2 children aged 2 and 4 years old.. What is your advice on the right investment tool , considering the need to save up for high cost of education in the future and that children do not have any medical insurance? could you advice please. Thanks.
REPLY
My advice is contained in this FAQ:
http://www.tankinlian.com/faq/education.html
It is better to:
1. Save in a low cost investment fund
2. Buy Medishield or other medical insurance to cover your child
3. Have a decreasing term insurance on the parent's life
You can also have a more integrated saving plan, as suggested in this FAQ:
http://www.tankinlian.com/faq/savings.html
I stomped onto your website and I found it really enlightening. I have 2 children aged 2 and 4 years old.. What is your advice on the right investment tool , considering the need to save up for high cost of education in the future and that children do not have any medical insurance? could you advice please. Thanks.
REPLY
My advice is contained in this FAQ:
http://www.tankinlian.com/faq/education.html
It is better to:
1. Save in a low cost investment fund
2. Buy Medishield or other medical insurance to cover your child
3. Have a decreasing term insurance on the parent's life
You can also have a more integrated saving plan, as suggested in this FAQ:
http://www.tankinlian.com/faq/savings.html
Monday, May 26, 2008
Investing retirement savings
Dear Mr Tan,
I wish to invest S$ 200,000 for my retirement savings for 10 to 15 years time. I have studied a few products and found that NTUC Growth policy is the best, giving lowest risk and reasonable return. Could plse give me you expertise advice.
REPLY
Read these FAQs:
http://www.tankinlian.com/faq/returns.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/expense.html
I hope that they will help you to make your decision.
I wish to invest S$ 200,000 for my retirement savings for 10 to 15 years time. I have studied a few products and found that NTUC Growth policy is the best, giving lowest risk and reasonable return. Could plse give me you expertise advice.
REPLY
Read these FAQs:
http://www.tankinlian.com/faq/returns.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/expense.html
I hope that they will help you to make your decision.
Investing your savings - for the young
Hi Mr Tan,
I've just graduated recently. To start planning for my future, I've decided to buy an investment product from a local bank. My projected investment horizon is around 15 years. My risk appetite is low to moderate, and I wish to earn around 5 to 8 % returns on my investment.
I am also looking into foreign currency fixed deposits (FCFD)and in a savings account. I plan to save up to 20% of my income. Some doubts in mind are:
1) Is the rate of returns of 5 to 8% achieveable? Or am I paying too much fees for these funds?
2) Is such spreading of my savings sufficient? I am contributing S$100 per month into this investment product, another S$100 in a savings plan and some money in FCFD.
REPLY
I suggest that you avoid a regular premium ILP as it has high charges.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
I hope that this FAQ will give you a better idea on how to invest your savings.
http://www.tankinlian.com/faq/savings.html
I've just graduated recently. To start planning for my future, I've decided to buy an investment product from a local bank. My projected investment horizon is around 15 years. My risk appetite is low to moderate, and I wish to earn around 5 to 8 % returns on my investment.
I am also looking into foreign currency fixed deposits (FCFD)and in a savings account. I plan to save up to 20% of my income. Some doubts in mind are:
1) Is the rate of returns of 5 to 8% achieveable? Or am I paying too much fees for these funds?
2) Is such spreading of my savings sufficient? I am contributing S$100 per month into this investment product, another S$100 in a savings plan and some money in FCFD.
REPLY
I suggest that you avoid a regular premium ILP as it has high charges.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
I hope that this FAQ will give you a better idea on how to invest your savings.
http://www.tankinlian.com/faq/savings.html
Life insurance for a Malaysian
Hi,
I am a Malaysian working in singapore right now. Its is better for me to buy insurance in Malaysia or Singapore. Based on transparency, I believe Singapore give better value instead. Pls advice.
REPLY
It is better for you buy a Term insurance and invest the difference. Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You can call these insurance companies to get a quotation on the cost of the term insurance:
http://www.tankinlian.com/faq/termd.html
By separating your insurance protection from your savings, you have the greatest flexibility in the future, in case you decide to work outside of Singapore.
I am a Malaysian working in singapore right now. Its is better for me to buy insurance in Malaysia or Singapore. Based on transparency, I believe Singapore give better value instead. Pls advice.
REPLY
It is better for you buy a Term insurance and invest the difference. Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You can call these insurance companies to get a quotation on the cost of the term insurance:
http://www.tankinlian.com/faq/termd.html
By separating your insurance protection from your savings, you have the greatest flexibility in the future, in case you decide to work outside of Singapore.
Make hotline simpler for customers
The bank of my DBS credit card showed the customer service line as 1800 111 1111. When I called this hotline, it goes to the DBS Bank main hotline. I have to answer many confusing questions before I can get to the credit card section. I got lost along the way two times. I gave up and called my customer relationship manager.
It is clear that the user of the credit card wants to ask about his credit card. It is better for DBS to give a number that goes straight to the credit card department.
This type of approach is used by many large organisations. I hope that they will change their system to be more customer friendly. Let us talk to the right people, without going through a maze.
I hope that officers of DBS and other orgaisations with similar systems provide this feedback to their management.
It is clear that the user of the credit card wants to ask about his credit card. It is better for DBS to give a number that goes straight to the credit card department.
This type of approach is used by many large organisations. I hope that they will change their system to be more customer friendly. Let us talk to the right people, without going through a maze.
I hope that officers of DBS and other orgaisations with similar systems provide this feedback to their management.
Exclusions under a medical insurance policy
Dear Mr Tan,
Some time back, I extended my Shield cover to an enhanced one. Because of my hypertension and diabetes conditions, the enhancement came with an exclusion clause to exclude these two conditions and their sequelae. I understood "sequelae" to mean conditions resulting from, or a consequence of, hytension and diabetes.
I would like to know from your experience that when invoking this exclusion clause, whether the onus should be on the insurance company to provide medical certification to prove cause and effect, ie that hypertension and/or diabetes result in or caused another condition for which an insurance claim is being made under the enhanced policy.
Hypertension and diabetes are generally recognised as risk factors for numerous diseases affecting the heart, kidney, liver etc, But it does not mean the these diseases are automatically a sequelae of hypertension or diabetes as there are also other causes.
If such exclusions are meant to have a blanket cover on such common and widespread disease without evidence of connectivity, then you can imagine how "useless" it is to pay to get insured in a nation-wide medical insurance scheme which is meant to be our main protection in the absence of any public-funded scheme. I hope you can illuminate.
REPLY
I suggest that you ask the insurance company to give their explanation on this matter. You can send it to me after getting that explanation. I shall see if it is a reasonable interpretation.
I believe that the onus of proof is on the insurance company, if they wish to reject a claim due to the exclusion clause.
It is important for an insurance company to provide contractual terms that are clear to the consumer.
Some time back, I extended my Shield cover to an enhanced one. Because of my hypertension and diabetes conditions, the enhancement came with an exclusion clause to exclude these two conditions and their sequelae. I understood "sequelae" to mean conditions resulting from, or a consequence of, hytension and diabetes.
I would like to know from your experience that when invoking this exclusion clause, whether the onus should be on the insurance company to provide medical certification to prove cause and effect, ie that hypertension and/or diabetes result in or caused another condition for which an insurance claim is being made under the enhanced policy.
Hypertension and diabetes are generally recognised as risk factors for numerous diseases affecting the heart, kidney, liver etc, But it does not mean the these diseases are automatically a sequelae of hypertension or diabetes as there are also other causes.
If such exclusions are meant to have a blanket cover on such common and widespread disease without evidence of connectivity, then you can imagine how "useless" it is to pay to get insured in a nation-wide medical insurance scheme which is meant to be our main protection in the absence of any public-funded scheme. I hope you can illuminate.
REPLY
I suggest that you ask the insurance company to give their explanation on this matter. You can send it to me after getting that explanation. I shall see if it is a reasonable interpretation.
I believe that the onus of proof is on the insurance company, if they wish to reject a claim due to the exclusion clause.
It is important for an insurance company to provide contractual terms that are clear to the consumer.
Option to stay with the old bonus structure
Dear Mr. Tan,
Just want to thank you for every effort you put in recently to resolve the matter with NTUC Income management. Ideally, I hope that they would grant us to stay on with the old bonus structure, maybe, just to those who had signed to indicate their preference.
At least one thing for sure, after this incident, many people (those who read about it) are cautious when they intend to take up an insurance policy. Nothing is absolute, even the terms are written in black and white. Once again, your effort is appreciated!
FL
Just want to thank you for every effort you put in recently to resolve the matter with NTUC Income management. Ideally, I hope that they would grant us to stay on with the old bonus structure, maybe, just to those who had signed to indicate their preference.
At least one thing for sure, after this incident, many people (those who read about it) are cautious when they intend to take up an insurance policy. Nothing is absolute, even the terms are written in black and white. Once again, your effort is appreciated!
FL
MAS Notice 320
MAS has issued a detailed notice governing the distribution of bonus on participating policies. It is shown here:
http://www.mas.gov.sg/resource/legislation_guidelines/insurance/notices/MAS_Notice_320.pdf
I shall be studying the requirements in detail and will post my explanations of the requirements. This will help us make sure that the disclosures by the insurance companies meet the spirt and intent of the notice.
http://www.mas.gov.sg/resource/legislation_guidelines/insurance/notices/MAS_Notice_320.pdf
I shall be studying the requirements in detail and will post my explanations of the requirements. This will help us make sure that the disclosures by the insurance companies meet the spirt and intent of the notice.
New Benefit Illustration
Life insurance companies are now required to use a new format of Benefit Illustration, based on the projected investment yield of 3.75% and 5.25% per annum. The lower yield of 3.75% reflect the current investment environment, with low yields on bond investments.
Policyholders should be aware that the charges imposed on a life insurance policy to pay for the marketing expenses (e.g. agent commission and sales incentives), administrative expenses and mortality charges (for the life insurance cover) remains to be quite high.
I estimate that the charges can reduce the yield by about 2.5% for an endowment policy and 3.5% by a whole life or critical illness policy.
If the gross yield is 3.75%, the net yield after the charges can be less than 1.5% or 0.5% for a saving over 20 years or longer. If the policy is terminated earlier, the yield will be negative (i.e. the cash value is less than the premiums paid). Read this FAQ:
http://www.tankinlian.com/faq/expense.html
I hope that life insurance companies will reduce their charges and expenses and give a better value to their policyholders under their endowment, whole life or critical illness policies. If you are considering to buy any of these policies, you should ask the insurance adviser to give you the answers to the following questions:
http://www.tankinlian.com/faq/right.html
You should also avoid high cost investment linked policies (ILP), as explained here:
http://www.tankinlian.com/faq/ilp.html
Due to the high charges and low return from a life insurance policy, it is better to buy a low cost term insurance policy and invest your savings in a low cost investment fund, as explained here:
http://www.tankinlian.com/faq/savings.html
Policyholders should be aware that the charges imposed on a life insurance policy to pay for the marketing expenses (e.g. agent commission and sales incentives), administrative expenses and mortality charges (for the life insurance cover) remains to be quite high.
I estimate that the charges can reduce the yield by about 2.5% for an endowment policy and 3.5% by a whole life or critical illness policy.
If the gross yield is 3.75%, the net yield after the charges can be less than 1.5% or 0.5% for a saving over 20 years or longer. If the policy is terminated earlier, the yield will be negative (i.e. the cash value is less than the premiums paid). Read this FAQ:
http://www.tankinlian.com/faq/expense.html
I hope that life insurance companies will reduce their charges and expenses and give a better value to their policyholders under their endowment, whole life or critical illness policies. If you are considering to buy any of these policies, you should ask the insurance adviser to give you the answers to the following questions:
http://www.tankinlian.com/faq/right.html
You should also avoid high cost investment linked policies (ILP), as explained here:
http://www.tankinlian.com/faq/ilp.html
Due to the high charges and low return from a life insurance policy, it is better to buy a low cost term insurance policy and invest your savings in a low cost investment fund, as explained here:
http://www.tankinlian.com/faq/savings.html
Sunday, May 25, 2008
Indonesian newspaper writes about life insurance
There was an article in the Kompass newspaper about life insurance. It was written in Indonesian language. My friend translated the key points of the article for me. The journalist wrote these points after interviewing a few consumers:
1. The consumer find the insurance agent to be disturbing their privacy. They keep calling the consumer, when they are no longer welcomed.
2. The consumer finds life insurance products to be complicated and does not understand the explanation by the agent.
3. The agent will keep in close touch with the consumer up to the point of sale. After that, the agent cannot be found.
I was quite surprised at the frankess and independence of the newspaper. They are willing to write a negative report on life insurance, even though it may affect their advertising revenue. My friend said that this paper is highly respected for its journalistic independence.
1. The consumer find the insurance agent to be disturbing their privacy. They keep calling the consumer, when they are no longer welcomed.
2. The consumer finds life insurance products to be complicated and does not understand the explanation by the agent.
3. The agent will keep in close touch with the consumer up to the point of sale. After that, the agent cannot be found.
I was quite surprised at the frankess and independence of the newspaper. They are willing to write a negative report on life insurance, even though it may affect their advertising revenue. My friend said that this paper is highly respected for its journalistic independence.
2006 Earthquake at Jogja
On the way from the airport, I asked the driver how many people were killed during the 2006 earthquake in Jogjakarta. He guessed that it must be 100,000 people, but he was not sure.
I checked Wikipedia. The number is much smaller. The 6.3-magnitude earthquake killed 5,782 people and left some 36,299 persons injured. More than 135,000 houses are damaged, and 600,000 people are homeless.
It is still serious, but the scale is smaller than the Sichuan earthquake in 2008.
I checked Wikipedia. The number is much smaller. The 6.3-magnitude earthquake killed 5,782 people and left some 36,299 persons injured. More than 135,000 houses are damaged, and 600,000 people are homeless.
It is still serious, but the scale is smaller than the Sichuan earthquake in 2008.
Jogjakarta, Indonesia
I stayed in Jogjakarta for the past two days. My last visit was more than 20 years ago, when I also visited Borobodur.
Jogja (the short name of Jogjakarta) is a charming city. All the buildings are less than five stories, as they cannot be taller than the Sultan's palace. There are still many buildings from the colonial era, in Dutch style.
I attended a life insurance event at the Prembanan, which is an old site containing a few Hindu temples. The people are friendly and peaceful. During the 1998 riots in Indonesia, Jogja was peaceful.
The Sultan is also the Governor of Jogja. My Indonesian friend said that he has high integrity. The people respect him very much.
Jogja (the short name of Jogjakarta) is a charming city. All the buildings are less than five stories, as they cannot be taller than the Sultan's palace. There are still many buildings from the colonial era, in Dutch style.
I attended a life insurance event at the Prembanan, which is an old site containing a few Hindu temples. The people are friendly and peaceful. During the 1998 riots in Indonesia, Jogja was peaceful.
The Sultan is also the Governor of Jogja. My Indonesian friend said that he has high integrity. The people respect him very much.
Commodity Prices
Hi Mr. Tan,
I would like to seek your advice on commodity investment during this period. I have bought X commodity fund a few months ago and my gain is around 5%, after paying the 5% sales charge to the bank.
Should I sell off this fund? Should I set a profit target or should I continue monitoring the commodity market and sell it once the commodities prices starts going down?
REPLY
I am not familiar with the timing of commodity prices. I cannot advise you on this matter.
Commodity prices are already at a high level. Some people think that they will go higher due to shortages, high demand, etc. But, there is a risk that it is already over-priced.
In the past, some stock, commodity and property prices have gone beyond their realistic level due to speculative reasons. Remember the dotcom days? When the bubble burst, the investors make a big loss.
I would like to seek your advice on commodity investment during this period. I have bought X commodity fund a few months ago and my gain is around 5%, after paying the 5% sales charge to the bank.
Should I sell off this fund? Should I set a profit target or should I continue monitoring the commodity market and sell it once the commodities prices starts going down?
REPLY
I am not familiar with the timing of commodity prices. I cannot advise you on this matter.
Commodity prices are already at a high level. Some people think that they will go higher due to shortages, high demand, etc. But, there is a risk that it is already over-priced.
In the past, some stock, commodity and property prices have gone beyond their realistic level due to speculative reasons. Remember the dotcom days? When the bubble burst, the investors make a big loss.
Forced to buy other insurance products
Dear Mr. Tan Kin Lian,
I was motivated to write to you as you seem to speak up if an insurance company is doing things that are unfair to their consumers.
My insurance company X recently sent a letter as follows, "We will not renew your Workmen Compensation because you do not have any property insurances with us. If you are interested in insuring other commercial insurance products with us, we will be very willing to assist you."
I called the representative who said that X has decided to stop providing the Workmen Compensation as a standalone product, unless we also buy another commercial property insurance e.g. shop fire or theft. The company was not making money from the Workmen's Compensation, and require a second product as a bundle.
I was very upset as this seems to me that X is trying to force us to buy another product (fire/ theft), knowing full well we are required by law to buy the first product (workmen compensation). The representative said that other insurance companies had adopted this practice as well.
I cannot accept this unfair and unethical practice, especially if the industry players have ganged up to change this.
I wanted to find out if MOM and MAS are aware of and condone this practice. I was directed by a FiDREC officer to call an officer in MAS. The officer insisted that this was just a "bad commercial decision" and MAS cannot interfere.
I find it disappointing that MAS as a regulatory organisation is apparently helpless against bad industry practices. It seems that insurance companies are at liberty to do as they wish. Is there any authority for me to complain to, who will look into this matter?
REPLY
I am sorry that you were not given a satisfactory answer by X, FiDREC or MAS. Do you like to bring this matter up to the newspaper? Maybe, a journalist will be happy to write this story.
In USA, for the classes of insurance that are made compulsory (e.g. motor and worker compensation), the regulator set up a "residual market". Any consumer who is not able to get insurance from the private insurance market can approach the "residual market" to get insurance.
I think that the "residual market" is a better approach, compared to the practice of requiring the consumer to buy another insurance product that may be unnecessary. I hope that MAS will look into this matter.
I was motivated to write to you as you seem to speak up if an insurance company is doing things that are unfair to their consumers.
My insurance company X recently sent a letter as follows, "We will not renew your Workmen Compensation because you do not have any property insurances with us. If you are interested in insuring other commercial insurance products with us, we will be very willing to assist you."
I called the representative who said that X has decided to stop providing the Workmen Compensation as a standalone product, unless we also buy another commercial property insurance e.g. shop fire or theft. The company was not making money from the Workmen's Compensation, and require a second product as a bundle.
I was very upset as this seems to me that X is trying to force us to buy another product (fire/ theft), knowing full well we are required by law to buy the first product (workmen compensation). The representative said that other insurance companies had adopted this practice as well.
I cannot accept this unfair and unethical practice, especially if the industry players have ganged up to change this.
I wanted to find out if MOM and MAS are aware of and condone this practice. I was directed by a FiDREC officer to call an officer in MAS. The officer insisted that this was just a "bad commercial decision" and MAS cannot interfere.
I find it disappointing that MAS as a regulatory organisation is apparently helpless against bad industry practices. It seems that insurance companies are at liberty to do as they wish. Is there any authority for me to complain to, who will look into this matter?
REPLY
I am sorry that you were not given a satisfactory answer by X, FiDREC or MAS. Do you like to bring this matter up to the newspaper? Maybe, a journalist will be happy to write this story.
In USA, for the classes of insurance that are made compulsory (e.g. motor and worker compensation), the regulator set up a "residual market". Any consumer who is not able to get insurance from the private insurance market can approach the "residual market" to get insurance.
I think that the "residual market" is a better approach, compared to the practice of requiring the consumer to buy another insurance product that may be unnecessary. I hope that MAS will look into this matter.
Bad claim service
Dear Mr Tan,
We are having some problem with X. They have proceeded with the 3rd party claim without our nowledge. We are concerned as it will affect our 50% NCD.
Based on our conversation with the claim officer, they said that the claim was $1,700 ($1,400 for repair, $300 for loss of use) which is ridicoulously high for a minor accident. We requested for the official quotation which has not been provided up to now. In fact we are willing to settle out of our own pocket but was initially advise to wait for IDAC report.
How many days does the 3rd party claim? How long does the repair takes? Why is X so generous in the settlement? I asked these questions through the telephone and have not obtained an answer.
Whose interest is X protecting? By paying a higher claim, they will increase our premium.
Out of our frustration, I told the staff that we might not even consider to continue with X. Not surprisingly she reply "Go Ahead!".
I hope that you will advise other motorist to be aware of such situations. A reputable insurance company may not able to protect your interest but take the opportunity to make more "business" out of someone instead.
May I request what is the procedures X takes on a 3rd party claim? Are they allowed to act without the policyholders acknowledge.
REPLY
I am sending your e-mail to the service quality manager of X. I hope that she will reply to you.
We are having some problem with X. They have proceeded with the 3rd party claim without our nowledge. We are concerned as it will affect our 50% NCD.
Based on our conversation with the claim officer, they said that the claim was $1,700 ($1,400 for repair, $300 for loss of use) which is ridicoulously high for a minor accident. We requested for the official quotation which has not been provided up to now. In fact we are willing to settle out of our own pocket but was initially advise to wait for IDAC report.
How many days does the 3rd party claim? How long does the repair takes? Why is X so generous in the settlement? I asked these questions through the telephone and have not obtained an answer.
Whose interest is X protecting? By paying a higher claim, they will increase our premium.
Out of our frustration, I told the staff that we might not even consider to continue with X. Not surprisingly she reply "Go Ahead!".
I hope that you will advise other motorist to be aware of such situations. A reputable insurance company may not able to protect your interest but take the opportunity to make more "business" out of someone instead.
May I request what is the procedures X takes on a 3rd party claim? Are they allowed to act without the policyholders acknowledge.
REPLY
I am sending your e-mail to the service quality manager of X. I hope that she will reply to you.
Waiting for the time to buy a property
Mr. Tan,
We just sold our house prior coming to Singapore. We are renting, while waiting for the right time to buy. We have some money in foreign bank (which gives 3.5% fixed deposit) and another 90K sitting in the saving account with almost no interest. I saw the ad in the newspaper from X about emerging market notes, that lock $ 20,000 for 5 years, with 3.3% p.a and give fixed deposit of 2.65%. Do you think this is a good idea? What about unit trust? Which product do you recommend?
After reading some of your articles, I trust you better than agent selling me their products.
REPLY
I am not familiar with this product from X. Normally, I avoid structured products, for the reasons given in this FAQ:
http://www.tankinlian.com/faq/sinvest.html
You can read this FAQ on investment for the long term:
http://www.tankinlian.com/faq/savings.html
For short term investments, you should accept the current low rate of return.
We just sold our house prior coming to Singapore. We are renting, while waiting for the right time to buy. We have some money in foreign bank (which gives 3.5% fixed deposit) and another 90K sitting in the saving account with almost no interest. I saw the ad in the newspaper from X about emerging market notes, that lock $ 20,000 for 5 years, with 3.3% p.a and give fixed deposit of 2.65%. Do you think this is a good idea? What about unit trust? Which product do you recommend?
After reading some of your articles, I trust you better than agent selling me their products.
REPLY
I am not familiar with this product from X. Normally, I avoid structured products, for the reasons given in this FAQ:
http://www.tankinlian.com/faq/sinvest.html
You can read this FAQ on investment for the long term:
http://www.tankinlian.com/faq/savings.html
For short term investments, you should accept the current low rate of return.
Harrassed over an old case
Hi Mr. Tan
Would be very appreciative if you could advise on the following matter, please.
My wife was involved in a minor accident where her car grazed a pedestrain who was not paying attention when he stepped off the sidewalk at the roundabout a few years ago. My insurer X assessed and accepted that my wife was not at fault (I have on hand various correspondences) and I have been enjoying 50% NCD plus additional NCD protection premium all these past years.
Almost 3 years later, we received a letter from thier lawyer which brusquely requested my wife to go for an interview with the lawyer and bringing all the necessary documents, police reports, pictures etc. These were already provided to X for their assessment earlier. The lawyer warned that failure to comply or cooperate would entitle X to repudiate liability against my wife, leaving my wife personally liable to any damages and costs which may be obtained against her.
Is this the norm for X or their lawyer to go after the policy holder years after they have assessed the policy holder to be not af fault and closed the case?
REPLY
I suggest that you meet with the lawyer and ask this question to the lawyer.
If you feel that you have been unfairly inconvenienced, you can send your feedback to the top management. In the worse case, you can lodge a complain with Fidrec.
http://www.fidrec.com.sg/website/faq.html
Generally, the insurance company should look after the interest of the policyholder and should not give unnecessary trouble and inconvenience to the policyholder.
Would be very appreciative if you could advise on the following matter, please.
My wife was involved in a minor accident where her car grazed a pedestrain who was not paying attention when he stepped off the sidewalk at the roundabout a few years ago. My insurer X assessed and accepted that my wife was not at fault (I have on hand various correspondences) and I have been enjoying 50% NCD plus additional NCD protection premium all these past years.
Almost 3 years later, we received a letter from thier lawyer which brusquely requested my wife to go for an interview with the lawyer and bringing all the necessary documents, police reports, pictures etc. These were already provided to X for their assessment earlier. The lawyer warned that failure to comply or cooperate would entitle X to repudiate liability against my wife, leaving my wife personally liable to any damages and costs which may be obtained against her.
Is this the norm for X or their lawyer to go after the policy holder years after they have assessed the policy holder to be not af fault and closed the case?
REPLY
I suggest that you meet with the lawyer and ask this question to the lawyer.
If you feel that you have been unfairly inconvenienced, you can send your feedback to the top management. In the worse case, you can lodge a complain with Fidrec.
http://www.fidrec.com.sg/website/faq.html
Generally, the insurance company should look after the interest of the policyholder and should not give unnecessary trouble and inconvenience to the policyholder.
Collective Protest - Update 25 May 2007
I just returned from a two day visit to Jogjakarata. I cleared through my mail on the Collective Protest. I now have 537 signatures.
It is short of my target of 1,000 signatures, but has passed the half way mark. I wish to thank policyholders who have made the effort to collect the signatures and send them to me.
If you wish to send more signature, you can continue to do so. You can mail to me, or send it to kinlian@gmail.com.
You can get the Collective Protest from from:
http://www.tankinlian.com/faq/collectiveprotest.html
It is short of my target of 1,000 signatures, but has passed the half way mark. I wish to thank policyholders who have made the effort to collect the signatures and send them to me.
If you wish to send more signature, you can continue to do so. You can mail to me, or send it to kinlian@gmail.com.
You can get the Collective Protest from from:
http://www.tankinlian.com/faq/collectiveprotest.html
Prefer the old bonus distribution
Dear Mr. Tan
I support the Collective Protest against the restructure of bonus, however it is too late to mail you the form, hopes this helps.
Just few weeks ago newspaper was still advertising about the high return NTUC Income payout in the past few years, I was then seriously considering new policy for both my daughters. It is surprise to know that the bonus policy can change overnight. I sincerely hope that Income can revert back to its old bonus distribution policy.
REPLY
You can still mail the signature form to me. I will use it for a future occasion.
I support the Collective Protest against the restructure of bonus, however it is too late to mail you the form, hopes this helps.
Just few weeks ago newspaper was still advertising about the high return NTUC Income payout in the past few years, I was then seriously considering new policy for both my daughters. It is surprise to know that the bonus policy can change overnight. I sincerely hope that Income can revert back to its old bonus distribution policy.
REPLY
You can still mail the signature form to me. I will use it for a future occasion.
Friday, May 23, 2008
Collective Protest - Action
If you wish to participate in the Collective Protest against the restructure of bonus, please click on this page:
http://www.tankinlian.com/faq/collectiveprotest.html
You have to print the letter and signature form. Please collect as many signatures as possible. Mail it to my address shown in the instruction page, to reach me before 25 May 2008.
http://www.tankinlian.com/faq/collectiveprotest.html
You have to print the letter and signature form. Please collect as many signatures as possible. Mail it to my address shown in the instruction page, to reach me before 25 May 2008.
Make it easy to pay by bank transfer
Mr. Tan,
When I get my invoices processed, my Accounts department will start processing if I provide an email copy in advance. They still need an original (i.e. signed) invoice before releasing the cheque. I think that this is required as an audit trail.
A direct debit payment (DDA) has to be done through banks. I understand that it is a hassle to arrange with the bank such a payment mode. I think that there are extra charges or delays. For one-time payments, perhaps it's much easier to pay by cheque.
REPLY
We are caught in the old ways of making payments, due to various reasons. Mostly, it is the reluctance to try a new way.
Many people continue to write cheques and mail them. The receipients have to open the envelope and visit the bank to deposit the payment into their account.
In many other "advanced" countries such as Cjhina, the payee instructs the bank to make the transfer to the payor. The bank gives detailed information to the payor about the payment - sufficient for audit trail, etc
I hope that employees of commercial organisations or banks reading my blog will ring this matter up to their bosses.
When I get my invoices processed, my Accounts department will start processing if I provide an email copy in advance. They still need an original (i.e. signed) invoice before releasing the cheque. I think that this is required as an audit trail.
A direct debit payment (DDA) has to be done through banks. I understand that it is a hassle to arrange with the bank such a payment mode. I think that there are extra charges or delays. For one-time payments, perhaps it's much easier to pay by cheque.
REPLY
We are caught in the old ways of making payments, due to various reasons. Mostly, it is the reluctance to try a new way.
Many people continue to write cheques and mail them. The receipients have to open the envelope and visit the bank to deposit the payment into their account.
In many other "advanced" countries such as Cjhina, the payee instructs the bank to make the transfer to the payor. The bank gives detailed information to the payor about the payment - sufficient for audit trail, etc
I hope that employees of commercial organisations or banks reading my blog will ring this matter up to their bosses.
Thursday, May 22, 2008
Low transaction cost
I have a good arrangement with my remisier. He sends a few documents to me daily to keep me updated on the major investment opportunities. If I need information on any company, I send an e-mail to him. He forward it to the research department and give me the information within one day.
I pay 0.3% for each transaction. If it involves $10,000, the brokerage is $30. He keeps about 40% of this fee, i.e. $12. If the trade is $50,000, he earns $60. He also takes care of the paperwork involved in the trade. Although the cost is low, my remisier can look forward to a few trades in each month from each active client.
I hope, one day, that insurance sales can be made as efficient and low cost as trading of shares.
I pay 0.3% for each transaction. If it involves $10,000, the brokerage is $30. He keeps about 40% of this fee, i.e. $12. If the trade is $50,000, he earns $60. He also takes care of the paperwork involved in the trade. Although the cost is low, my remisier can look forward to a few trades in each month from each active client.
I hope, one day, that insurance sales can be made as efficient and low cost as trading of shares.
Contact NTUC Income
Dear Mr. Tan
I tried to email my NTUC Income agent regarding to my living policies cash value. However, she has not replied to my mail for a long time. Then I tried to write to xxxxx@income.com.sg, Again, there is no reply. What other email address can I write to for a reply?
REPLY
You can try the service quality officer, sq@income.com.sg
I tried to email my NTUC Income agent regarding to my living policies cash value. However, she has not replied to my mail for a long time. Then I tried to write to xxxxx@income.com.sg, Again, there is no reply. What other email address can I write to for a reply?
REPLY
You can try the service quality officer, sq@income.com.sg
Benefit Illustration
Dear Mr. Tan,
I am given a benefit illustration for a life insurance product. It seems to be quite detailed, long and complicated. Do you have any tips on the important things to watch out for?
REPLY
You should ask the agent to explain the key points to you. You can ask the questions contained in this FAQ:
http://www.tankinlian.com/faq/right.html
Make sure that the agent explain the answers clearly. Do not be shy to ask for clarification, if the point is not clear to you. It is the agent's duty to provide clear explanation.
I am given a benefit illustration for a life insurance product. It seems to be quite detailed, long and complicated. Do you have any tips on the important things to watch out for?
REPLY
You should ask the agent to explain the key points to you. You can ask the questions contained in this FAQ:
http://www.tankinlian.com/faq/right.html
Make sure that the agent explain the answers clearly. Do not be shy to ask for clarification, if the point is not clear to you. It is the agent's duty to provide clear explanation.
True cost of life insurance
Dear Mr. Tan
I read several comments in your blog. They seem to suggest that there is such a thing as a high cost life insurance policy, and a low cost policy. How can a consumer tell the difference?
REPLY
You can read this FAQ:
http://www.tankinlian.com/faq/true.html
It explains the true cost of a life insurance policy, as reflected in the reduction in the yield that can be earned from the life fund.
I read several comments in your blog. They seem to suggest that there is such a thing as a high cost life insurance policy, and a low cost policy. How can a consumer tell the difference?
REPLY
You can read this FAQ:
http://www.tankinlian.com/faq/true.html
It explains the true cost of a life insurance policy, as reflected in the reduction in the yield that can be earned from the life fund.
Tunis, Tunisia
What is the difference between Tunis and Tunisia?
Tunis is the capital of Tunisia, a country in North Africa. It is a small country situated between Libya and Algeria. I will be visiting Tunis in June. It will be my first trip to the continent of Africa.
A few countries have a name ending with "sia", e.g. Malaysia, Indonesia, Tunisia, Rhodesia (now Zimbabwe) and Polynesia.
Tunis is the capital of Tunisia, a country in North Africa. It is a small country situated between Libya and Algeria. I will be visiting Tunis in June. It will be my first trip to the continent of Africa.
A few countries have a name ending with "sia", e.g. Malaysia, Indonesia, Tunisia, Rhodesia (now Zimbabwe) and Polynesia.
Wednesday, May 21, 2008
Wealth Accumulator
Dear Mr. Tan
Someone told me that you recommended a product called the "Wealth Accumulator". Can you explain the features of this product, and why it is good?
REPLY
This product is just a concept at this time. It has no front-end load and a low annual fee. It is like an indexed fund. I hope to get a new life insurance company to offer this product in the near future.
You can read more about this product here:
http://www.tankinlian.com/faq/low.html
In the meantime, if you wish to find a low cost investment fund, you can consider any of the following:
http://www.tankinlian.com/faq/lowcost.html
Someone told me that you recommended a product called the "Wealth Accumulator". Can you explain the features of this product, and why it is good?
REPLY
This product is just a concept at this time. It has no front-end load and a low annual fee. It is like an indexed fund. I hope to get a new life insurance company to offer this product in the near future.
You can read more about this product here:
http://www.tankinlian.com/faq/low.html
In the meantime, if you wish to find a low cost investment fund, you can consider any of the following:
http://www.tankinlian.com/faq/lowcost.html
Wigan
Football fans will remember that Wigan FC played the last game of the Premier League against Manchester United. That game decided MU to be the champion of the League.
My first encounter with Wigan was about 25 years ago. I was in a train which stopped at Wigan Wallgate. I found the name Wigan to be strange, and Wallgate to be strange also. I mentioned this to my English friend. He laughed and told me that the town of Wigan actually had two train stations, called Wigan Wallgate and Wigan North Western. He told this joke.
An Indian immigration worked in Wigan for many years. He received a telegram asking him to return to India, as his mother was very sick.
We went to the train station in Wigan and asked for a train ticket to take him to Bombay, India. Nobody at the station had every heard of Bombay or India. They sent him by train to London.
Nobody in London heard of Bombay or India either. So, they sent him to Paris. He finally arrived in India after much difficulty. He stayed in Bombay for some time until after his mother passed away. Now it is time for him to return to England.
He went to the train station in Bombay and asked for a ticket to Wigan. The clerk replied immediately, "Yes, sir. Do you want to be at Wigan Wallgate or Wigan North-western?"
Where is the joke? During the days of the British Empire, nobody in England has heard of any place outside of England. Everybody in the British Empire knows all the train stations in England!
My first encounter with Wigan was about 25 years ago. I was in a train which stopped at Wigan Wallgate. I found the name Wigan to be strange, and Wallgate to be strange also. I mentioned this to my English friend. He laughed and told me that the town of Wigan actually had two train stations, called Wigan Wallgate and Wigan North Western. He told this joke.
An Indian immigration worked in Wigan for many years. He received a telegram asking him to return to India, as his mother was very sick.
We went to the train station in Wigan and asked for a train ticket to take him to Bombay, India. Nobody at the station had every heard of Bombay or India. They sent him by train to London.
Nobody in London heard of Bombay or India either. So, they sent him to Paris. He finally arrived in India after much difficulty. He stayed in Bombay for some time until after his mother passed away. Now it is time for him to return to England.
He went to the train station in Bombay and asked for a ticket to Wigan. The clerk replied immediately, "Yes, sir. Do you want to be at Wigan Wallgate or Wigan North-western?"
Where is the joke? During the days of the British Empire, nobody in England has heard of any place outside of England. Everybody in the British Empire knows all the train stations in England!
Pay and Performance of Leaders
Someone asked my views on this topic a few weeks ago. I posted my views in this blog. I have since written an expended version, which will appear in http://www.theonlinecitizen.com/ later today under a new title.
MAS Guidelines on Fair Dealing Outcome
I have submitted my views to MAS on their consultation paper on "fair dealing outcome" to consumers.
MAS wants to make the management and board of financial institution responsible to achieve this outcome. The key points of my paper are:
1. The management and board of financial institutions have the goal of making the most profit for shareholders. It is difficult for them to be responsible for "fair dealing outcome" for consumers. There is a conflict of interest.
2. "Fair dealing outcome" has to be defined more clearly. It should be defined as a product that have fair (not excessive) charges and give good value to consumers.
3. For complicated financial products, the regulator must ask two independent financial experts to study and give their views. The vews of the experts should be posted in a website to guide consumers.
I quote the example of new drugs. The regulator tests and approves the new drugs before they are sold to the public. They do not expect the consumers to do their own testing. Financial products should go through the same test.
MAS wants to make the management and board of financial institution responsible to achieve this outcome. The key points of my paper are:
1. The management and board of financial institutions have the goal of making the most profit for shareholders. It is difficult for them to be responsible for "fair dealing outcome" for consumers. There is a conflict of interest.
2. "Fair dealing outcome" has to be defined more clearly. It should be defined as a product that have fair (not excessive) charges and give good value to consumers.
3. For complicated financial products, the regulator must ask two independent financial experts to study and give their views. The vews of the experts should be posted in a website to guide consumers.
I quote the example of new drugs. The regulator tests and approves the new drugs before they are sold to the public. They do not expect the consumers to do their own testing. Financial products should go through the same test.
Annual and Terminal Bonuses
Dear Mr. Tan,
I wish to share my views on this matter. Please post it in your blog.
1) Does terminal bonus smooth returns for policyholders?
Policyholders who have the rotten luck of dying, surrendering (due to unemployment/financial hardships), or whose policy matures (to pay for their children's university education) when the investment markets are doing badly, will see low returns on their terminal bonus policies - perhaps insufficient for their initial plan on how to use the maturity payout.
Policyholders who claims/surrenders/matures during good investment times will be paid the returns shown in the benefit illustration (ie around 3.5% to 4.5%).
But is this fair and equitable? Is this the intention of with-profits life insurance policies?
For reversionary bonus, the impact of investment market volatility on the claimants, surrenders, maturities are significantly reduced, since past bonuses are guaranteed and cuts in reversionary bonus affects all policyholders fairly.
Compare this to terminal bonus which affects only unfortunate claimants in bad investment cycles. Higher reversionary bonus payouts provide higher certainty for all policyholders.
2) Bonuses are not guaranteed anyway, so are they different products?
The provision of certainty and higher bonus-vesting (via high reversionary bonus) adds value to policyholders and is a very different product from the high terminal bonus version.
My friend gave me this analogy. If you ask your investment broker to buy a secure long-term government bond, but instead he gives you a well diversified unit-trust but giving you an excuse that you can expect higher returns, will you be happy with it?
A promise is a promise. Income has promised policyholders a design of high reversionary bonus (low terminal bonuse). Arguably, Income's management does not have the right to change to a low reversionary bonus design unilaterally. In the past, I have personally recommended Income's policies based on this high reversionary bonus design. The move to 'industry practice' is a significant drawback.
3) So what's the value-add of Terminal Bonus? Does it really give higher returns? Are terminal bonus less likely to be cut?
Using an insurance adviser's example, a return of 3.5% is about long-term bond gov rate. Old income policies also returns around the same rate.
Which is more valuable to policyholders, an uncertain return of 3.5% (based mostly on terminal bonus) or a more-certain return of 3.5% (based mostly on reversionary bonus)? Clearly, the reversionary bonus. Bear in mind that 3.5% is about the returns of very secure long-term government bonds anyway.
All else being equal, are policies with high terminal bonus less likely to suffer bonus cuts? Evidently no. Since during the last investment down cycle, industry players cut terminal bonus significantly as well.
4) What about solvency and investment allocation? Terminal bonus approach allows more allocations to high returns/risk assets right?
My recent statistics collated from the MAS website, shows industry players that uses terminal bonus approach have on average solvency ratio of 300%, equity investment ratio of 20%-30%. What level of solvency ratio is adequate? Is 300% too high?
Bearing in mind, MAS minimum is 120% at company level. Are these companies being too safe at the expense of policyholders? With such a comfortable buffer of 300% solvency ratio, shouldn't allocations to risky investments be higher?
Yew Ming
I wish to share my views on this matter. Please post it in your blog.
1) Does terminal bonus smooth returns for policyholders?
Policyholders who have the rotten luck of dying, surrendering (due to unemployment/financial hardships), or whose policy matures (to pay for their children's university education) when the investment markets are doing badly, will see low returns on their terminal bonus policies - perhaps insufficient for their initial plan on how to use the maturity payout.
Policyholders who claims/surrenders/matures during good investment times will be paid the returns shown in the benefit illustration (ie around 3.5% to 4.5%).
But is this fair and equitable? Is this the intention of with-profits life insurance policies?
For reversionary bonus, the impact of investment market volatility on the claimants, surrenders, maturities are significantly reduced, since past bonuses are guaranteed and cuts in reversionary bonus affects all policyholders fairly.
Compare this to terminal bonus which affects only unfortunate claimants in bad investment cycles. Higher reversionary bonus payouts provide higher certainty for all policyholders.
2) Bonuses are not guaranteed anyway, so are they different products?
The provision of certainty and higher bonus-vesting (via high reversionary bonus) adds value to policyholders and is a very different product from the high terminal bonus version.
My friend gave me this analogy. If you ask your investment broker to buy a secure long-term government bond, but instead he gives you a well diversified unit-trust but giving you an excuse that you can expect higher returns, will you be happy with it?
A promise is a promise. Income has promised policyholders a design of high reversionary bonus (low terminal bonuse). Arguably, Income's management does not have the right to change to a low reversionary bonus design unilaterally. In the past, I have personally recommended Income's policies based on this high reversionary bonus design. The move to 'industry practice' is a significant drawback.
3) So what's the value-add of Terminal Bonus? Does it really give higher returns? Are terminal bonus less likely to be cut?
Using an insurance adviser's example, a return of 3.5% is about long-term bond gov rate. Old income policies also returns around the same rate.
Which is more valuable to policyholders, an uncertain return of 3.5% (based mostly on terminal bonus) or a more-certain return of 3.5% (based mostly on reversionary bonus)? Clearly, the reversionary bonus. Bear in mind that 3.5% is about the returns of very secure long-term government bonds anyway.
All else being equal, are policies with high terminal bonus less likely to suffer bonus cuts? Evidently no. Since during the last investment down cycle, industry players cut terminal bonus significantly as well.
4) What about solvency and investment allocation? Terminal bonus approach allows more allocations to high returns/risk assets right?
My recent statistics collated from the MAS website, shows industry players that uses terminal bonus approach have on average solvency ratio of 300%, equity investment ratio of 20%-30%. What level of solvency ratio is adequate? Is 300% too high?
Bearing in mind, MAS minimum is 120% at company level. Are these companies being too safe at the expense of policyholders? With such a comfortable buffer of 300% solvency ratio, shouldn't allocations to risky investments be higher?
Yew Ming
Land Banking
Dear Sir,
I wish to hear your opinion about land banking opporunity through X as follow:
> audited track records 29 yrs
> no clients losing money
> audited by Y
REPLY
I do not like this investment product. There is no liquid market. You can put your money in, but you have to wait a long time before you can find someone to buy the investment from you. I have been approached many times to invest in the product, but I always declined.
You can search my blog for my past postings on this type of investment. Type "land banking" and click on Search Blog.
I wish to hear your opinion about land banking opporunity through X as follow:
> audited track records 29 yrs
> no clients losing money
> audited by Y
REPLY
I do not like this investment product. There is no liquid market. You can put your money in, but you have to wait a long time before you can find someone to buy the investment from you. I have been approached many times to invest in the product, but I always declined.
You can search my blog for my past postings on this type of investment. Type "land banking" and click on Search Blog.
Tuesday, May 20, 2008
Uncertain yield
A policyholder sent to me a whole life policy (premiums payable for 10 years) taken for a child age 19, covering a sum assured of $50,000.
The yield for the first 10 years is negative. The yield becomes positive over the subsequent 20 years due to the non-guaranteed special bonus. If the special bonus is reduced, the yield will fall accordingly. The yield on this policy is uncertain.
Total Cash Value Yield
Premium Gtd N-Gtd Total p.a.
10 yr $15,980 $14,050 $1,523 $15,573 -0.5%
20 yr $15,980 $18,400 $6,887 $25,287 2.2%
30 yr $15,980 $23,700 $15,723 $39,423 3.0%
The yield for the first 10 years is negative. The yield becomes positive over the subsequent 20 years due to the non-guaranteed special bonus. If the special bonus is reduced, the yield will fall accordingly. The yield on this policy is uncertain.
Revolution in financial advisory industry
Mr. Tan,
I'm an ardent follower of your blog since it was launched. It has been delightful gaining insight into your views on investment and insurance.
I just read your entry on the fee based approach. For me, that is a very viable alternative for both clients and advisors which I whole-heartedly endorse. I, too, believe "Buy Term, Invest the Rest" is a mantra that give the best value to most clients.
However, most financial advisory firms do not advocate this. It might be attributed to :-
1) Infrastructure. The two investment platform, iFast and Navigator, available do not carry low-cost funds especially index funds or index ETFs.
2) Business sustainability. The current business model of the firms are meant to maximize shareholder value.
3) The Advisors. Advisors are commissioned based and as such, it's human instinct to "milk" as much as possible, considering that the amount of time expended in travelling and prospecting need to be justified.
With your approach of clients visiting the "clinic", I am sure that advisors will be more willing to jump onto the bandwagon and hopefully, lead to a revolution in the financial advisory industry.
W
I'm an ardent follower of your blog since it was launched. It has been delightful gaining insight into your views on investment and insurance.
I just read your entry on the fee based approach. For me, that is a very viable alternative for both clients and advisors which I whole-heartedly endorse. I, too, believe "Buy Term, Invest the Rest" is a mantra that give the best value to most clients.
However, most financial advisory firms do not advocate this. It might be attributed to :-
1) Infrastructure. The two investment platform, iFast and Navigator, available do not carry low-cost funds especially index funds or index ETFs.
2) Business sustainability. The current business model of the firms are meant to maximize shareholder value.
3) The Advisors. Advisors are commissioned based and as such, it's human instinct to "milk" as much as possible, considering that the amount of time expended in travelling and prospecting need to be justified.
With your approach of clients visiting the "clinic", I am sure that advisors will be more willing to jump onto the bandwagon and hopefully, lead to a revolution in the financial advisory industry.
W
Monday, May 19, 2008
Invest your SRS savings
Hi Mr. Tan,
Let me say thank you for your blog which has been educational. I hope more people will read it and hopefully learn to be slightly more financially savvy in their personal financial planning / management.
I believed that ultimately knowledge and education is the best way the customer can be protected. The rules and regulation set by the authorities such as MAS are also important steps that served to protect customer's interest.
In view of Income proposed restructuring of its bonus, which effectively reduce the yearly vested annual bonus significantly in favour of non-vested terminal/special bonus, I think that parking SRS money in Growth policies for long-term is no longer an attractive option.
For you personally, where would you park your yearly SRS contribution, given the current situation, assuming that you are taking an investment time-frame of 15 to 20 years?
REPLY
In the past, I have invested my SRS in the Growth Policy (i.e. single premium endowment). I will keep this policy, as NTUC Income has assured the policyholders that the total bonus payout on maturity will not be reduced by the restructuring of the bonus. The reduction in annual bonus will be compensated by an increase in the special (terminal) bonus.
Today, if I wish to invest my SRS contribution for next 15 to 20 years, I would chose an investment fund. This is explained here:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
Let me say thank you for your blog which has been educational. I hope more people will read it and hopefully learn to be slightly more financially savvy in their personal financial planning / management.
I believed that ultimately knowledge and education is the best way the customer can be protected. The rules and regulation set by the authorities such as MAS are also important steps that served to protect customer's interest.
In view of Income proposed restructuring of its bonus, which effectively reduce the yearly vested annual bonus significantly in favour of non-vested terminal/special bonus, I think that parking SRS money in Growth policies for long-term is no longer an attractive option.
For you personally, where would you park your yearly SRS contribution, given the current situation, assuming that you are taking an investment time-frame of 15 to 20 years?
REPLY
In the past, I have invested my SRS in the Growth Policy (i.e. single premium endowment). I will keep this policy, as NTUC Income has assured the policyholders that the total bonus payout on maturity will not be reduced by the restructuring of the bonus. The reduction in annual bonus will be compensated by an increase in the special (terminal) bonus.
Today, if I wish to invest my SRS contribution for next 15 to 20 years, I would chose an investment fund. This is explained here:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
Welfare in Singapore
Should the Singapore Government spend more on welfare?
Read my views in:
http://theonlinecitizen.com/2008/05/the-anorexic-state/#comments
Read my views in:
http://theonlinecitizen.com/2008/05/the-anorexic-state/#comments
Cost of travelling - taxi and car
The petrol consumption on my Toyota Camry is 24 cents per kilometer. If I travel by taxi, the fare is 60 cents p kilometer (off-peak) and 80 cents (peak hours). So, taxi cost 3 to 4 times of driving. In both cases, I have to pay the ERP charges. I save on parking charges when I take a taxi.
Conclusion? Take the MRT!
Conclusion? Take the MRT!
Advice backed by proper research
A person by the name of "June" attacked me in http://www.theonlinecitizen.com/. "She" said that the views posted by Mr. Tan Kin Lian in his blog and website are not backed by proper research.
It is easy for "June" to discredit me, while under the cloak of anonymity. I do not know if "she" is a real person and what is her background.
I invite my visitors to read the FAQs posted here:
www.tankinlian.com/faq
You can take my advice, if they are relevant to you. You can ignore them, if they are not relevant or not backed by "proper research".
You can judge if the financial adviser is making a recommendation that is backed by "proper research" or "selective research" and is beneficial to you. Be sure that you understand the adviser. If the adviser does not explain clearly to you, do not trust the adviser.
Ask the simple and relevant questions, including those set out in this FAQ:
http://www.tankinlian.com/faq/right.html
It is easy for "June" to discredit me, while under the cloak of anonymity. I do not know if "she" is a real person and what is her background.
I invite my visitors to read the FAQs posted here:
www.tankinlian.com/faq
You can take my advice, if they are relevant to you. You can ignore them, if they are not relevant or not backed by "proper research".
You can judge if the financial adviser is making a recommendation that is backed by "proper research" or "selective research" and is beneficial to you. Be sure that you understand the adviser. If the adviser does not explain clearly to you, do not trust the adviser.
Ask the simple and relevant questions, including those set out in this FAQ:
http://www.tankinlian.com/faq/right.html
Understanding the Benefit Illustration
Someone posted a comment in http://www.theonlinecitizen.com/ as follows,
"Mr. Tan suggested that the public should look at the Effect of Deduction and Distribution Cost" in the Benefit Illustration. What is the point of these information, when consumers do not understand what they mean?"
I agree with this comment.
The regulator required the financial institution to disclose these key information. The financial institutions found a way to provide these information buried in 10 pages or more, of other details. The consumers are lost.
The financial advisers have the responsibility to explain the relevant points to the consumer. I suspect that they will skip these sensitive areas. Even if the consumer ask, the adviser could find a way to confuse the consumer and side-track this issue.
I suggest that the regulaor should carry out a survey (say with 50 consumers who have recently bought a life insurance product) and ask the following questions:
1. Have you been told about the Effect of Deduction and the Distribution Cost?
2. Did the adviser explain these terms to you clearly, before you buy the product?
3. Now that you are aware about these items, do you feel that you have made the correct decision in buying the product?
"Mr. Tan suggested that the public should look at the Effect of Deduction and Distribution Cost" in the Benefit Illustration. What is the point of these information, when consumers do not understand what they mean?"
I agree with this comment.
The regulator required the financial institution to disclose these key information. The financial institutions found a way to provide these information buried in 10 pages or more, of other details. The consumers are lost.
The financial advisers have the responsibility to explain the relevant points to the consumer. I suspect that they will skip these sensitive areas. Even if the consumer ask, the adviser could find a way to confuse the consumer and side-track this issue.
I suggest that the regulaor should carry out a survey (say with 50 consumers who have recently bought a life insurance product) and ask the following questions:
1. Have you been told about the Effect of Deduction and the Distribution Cost?
2. Did the adviser explain these terms to you clearly, before you buy the product?
3. Now that you are aware about these items, do you feel that you have made the correct decision in buying the product?
Wasteful way to make a payment
An organisation wanted to pay me $400 to give a talk. I asked them to credit the payment directly into my bank account.
This is what actually happened.
1. I was asked to send a signed invoice by mail. They do not accept an invoice by e-mail.
2. I had to provide a photocopy of my bank statement for them to verify my bank account.
3. Three weeks later, they send a cheque to me by mail (in spite of verifying my bank account).
4. I have to mail the cheque to my bank to credit the payment.
The practice of this organisation is quite common in Singapore. They have still not woke up to the new world. They are still stuck to the old bureaucratic way of making payment by cheque.
My friend in China was surprised at our outdated practice in Singapore. Cheques are almost unheard of in China. All payments are made through bank transfer.
Wake up, Singapore. The world has changed. Why are we still using outmoded and expensive methods to make a simple payment?
I hope that people reading my blog will give the following suggestions to their bosses. You can take this suggestion as your own, and earn some merits:
1. Organisations can make payments directly to bank accounts
2. Banks can encourage and educate their business clients to adopt this new method
3. MAS and IDA can encourage the business community to adopt the more efficient methods.
This is what actually happened.
1. I was asked to send a signed invoice by mail. They do not accept an invoice by e-mail.
2. I had to provide a photocopy of my bank statement for them to verify my bank account.
3. Three weeks later, they send a cheque to me by mail (in spite of verifying my bank account).
4. I have to mail the cheque to my bank to credit the payment.
The practice of this organisation is quite common in Singapore. They have still not woke up to the new world. They are still stuck to the old bureaucratic way of making payment by cheque.
My friend in China was surprised at our outdated practice in Singapore. Cheques are almost unheard of in China. All payments are made through bank transfer.
Wake up, Singapore. The world has changed. Why are we still using outmoded and expensive methods to make a simple payment?
I hope that people reading my blog will give the following suggestions to their bosses. You can take this suggestion as your own, and earn some merits:
1. Organisations can make payments directly to bank accounts
2. Banks can encourage and educate their business clients to adopt this new method
3. MAS and IDA can encourage the business community to adopt the more efficient methods.
Financial advice for a young person
Hi Mr Tan,
Your website has certainly been extremely important in my understanding of today's financial products and situation.
I have just graduated and will be starting work soon. I carried out some research on how I should diversify my savings into investment and insurance. Through your guidance, I decided to do them separately.
A financial adviser tried to promote the following product:
Riders attached with this plan:
1) Disability Linked
2) Waiver of Contribution (TPD or Critical Illness)
3) Critical Illness link benefit
For all 3 riders: Sum assured is $150,000. Regular Contribution: $250 and about $22 being contributed to payment of insurance
Bid offer spread: 5%
Top up Minimum S$500, at no additional charge
Partial withdrawal allowed (minimum of S$250 per withdrawal)
Unit allocation (as percentage of premiums paid)
Year 1: 13%
Year 2: 40%
Year 3: 45%
Year 4 to 6: 100%
Year 7 to 9: 103%
Year 10 onwards: 105%
Is this investment-linked plan advantageous to me? I have my doubts over the low percentage of premium going into the investments.
Secondly, at my age, what kind of insurance should I actually consider? Is it all right to purchase term insurance.
Thirdly, I have considered embarking on a monthly investment plan on unit trusts with the intention of starting my investments early, not trying to time the market and at the same time accumulating my savings for future investments. I would like to seek your advice on whether this is feasible.
REPLY
Do not invest in this high cost product. 200% of your annual premium is taken away during the first three years.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
This product appears to give you allocation of 105% from year 10. After discounting the spread of 5%, you are actually investing at the net asset value. A honest adviser will tell you the truth. A dishonest adviser will mislead you into thinking that you are getting 5% more.
Here is my suggestion for investing your monthly savings:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/savings.html
Your website has certainly been extremely important in my understanding of today's financial products and situation.
I have just graduated and will be starting work soon. I carried out some research on how I should diversify my savings into investment and insurance. Through your guidance, I decided to do them separately.
A financial adviser tried to promote the following product:
Riders attached with this plan:
1) Disability Linked
2) Waiver of Contribution (TPD or Critical Illness)
3) Critical Illness link benefit
For all 3 riders: Sum assured is $150,000. Regular Contribution: $250 and about $22 being contributed to payment of insurance
Bid offer spread: 5%
Top up Minimum S$500, at no additional charge
Partial withdrawal allowed (minimum of S$250 per withdrawal)
Unit allocation (as percentage of premiums paid)
Year 1: 13%
Year 2: 40%
Year 3: 45%
Year 4 to 6: 100%
Year 7 to 9: 103%
Year 10 onwards: 105%
Is this investment-linked plan advantageous to me? I have my doubts over the low percentage of premium going into the investments.
Secondly, at my age, what kind of insurance should I actually consider? Is it all right to purchase term insurance.
Thirdly, I have considered embarking on a monthly investment plan on unit trusts with the intention of starting my investments early, not trying to time the market and at the same time accumulating my savings for future investments. I would like to seek your advice on whether this is feasible.
REPLY
Do not invest in this high cost product. 200% of your annual premium is taken away during the first three years.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
This product appears to give you allocation of 105% from year 10. After discounting the spread of 5%, you are actually investing at the net asset value. A honest adviser will tell you the truth. A dishonest adviser will mislead you into thinking that you are getting 5% more.
Here is my suggestion for investing your monthly savings:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/savings.html
Existing Life Insurance Policies
A commentor agreed that it is better to "Buy Term and invest the Difference". He asked, "What should the policyholder do, with the high cost life insurance policies purchased in the past?" Many people are caught in this situation.
My advice is given in these FAQs. Read them:
http://www.tankinlian.com/faq/existinglife.html
http://www.tankinlian.com/faq/benchmark.html
Generally, I advise people to keep the existing policies, as they have already incurred the high front-end charges. But, if the continuing charges remain too high, they should terminate the policies and invest differently.
For younger people, I strongly advise them to follow the advice given in this FAQ:
http://www.tankinlian.com/faq/savings.html
After you have read and understood the FAQ, it is all right for you to talk to a financial or insurance adviser. The adviser will be able to help you to find a low cost option. Some of the advisers do look after the interests of their clients. You can help them to help you, by being educated about the options available to you.
My advice is given in these FAQs. Read them:
http://www.tankinlian.com/faq/existinglife.html
http://www.tankinlian.com/faq/benchmark.html
Generally, I advise people to keep the existing policies, as they have already incurred the high front-end charges. But, if the continuing charges remain too high, they should terminate the policies and invest differently.
For younger people, I strongly advise them to follow the advice given in this FAQ:
http://www.tankinlian.com/faq/savings.html
After you have read and understood the FAQ, it is all right for you to talk to a financial or insurance adviser. The adviser will be able to help you to find a low cost option. Some of the advisers do look after the interests of their clients. You can help them to help you, by being educated about the options available to you.
Sunday, May 18, 2008
Petrol Consumption - Toyota Camry
During the past 11 days, my Toyota Camry travelled 473 km, consuming 52.91 litres, or 8.9 km per litre. The price is $2.136 per litre. The petrol consumption is 24 cents per kilometer - consistent with my previous record. I spent $107 for 11 days. My petrol consumption is almost $300 per month. It is high.
Write to ask NTUC Income
Hi Mr. Tan,
I have several Growth policies (single premium) and a Living policy. Are these policies much affected by the bonus resturcturing?
REPLY
I suggest that you write to ask NTUC Income. They should have informed you by now.
If your policies are taken during the last 15 years, and I suspect that your Growth policy falls in this category, it is affected by the bonus restructuring. My Growth policy is in this category.-
I have several Growth policies (single premium) and a Living policy. Are these policies much affected by the bonus resturcturing?
REPLY
I suggest that you write to ask NTUC Income. They should have informed you by now.
If your policies are taken during the last 15 years, and I suspect that your Growth policy falls in this category, it is affected by the bonus restructuring. My Growth policy is in this category.-
Mortgage Insurance
Dear Mr Tan,
We are planning to apply for Bank Home Loan (both my wife and I are PRs) and would like to know about Home Loan insurance. We already have term insurance including critical illness policy, hospitalisation insurance.
Should we buy Home Loan insurance? I know some banks already included in their home loan product. Can we opt-out and choose separate Home Loan insurance? What are the best low cost insurance for Home Loan in the market?
REPLY
You can buy a Mortgage Insurance. You need to provide the following:
Amount of mortgage loan
Duration of repayment
Interest rate on theloan
Ages of the insured persons, e.g. you and your spouse
You can call a few insurance companies and ask them to give you a quote. You can select the company that respond to you (indicate that they give good service) and give you the best terms. Ask about the annual premium and the number of years paid. You can also opt to pay a single premium.
The telephone numbers of the insurance companies are shown here:
http://www.tankinlian.com/faq/termd.html
We are planning to apply for Bank Home Loan (both my wife and I are PRs) and would like to know about Home Loan insurance. We already have term insurance including critical illness policy, hospitalisation insurance.
Should we buy Home Loan insurance? I know some banks already included in their home loan product. Can we opt-out and choose separate Home Loan insurance? What are the best low cost insurance for Home Loan in the market?
REPLY
You can buy a Mortgage Insurance. You need to provide the following:
Amount of mortgage loan
Duration of repayment
Interest rate on theloan
Ages of the insured persons, e.g. you and your spouse
You can call a few insurance companies and ask them to give you a quote. You can select the company that respond to you (indicate that they give good service) and give you the best terms. Ask about the annual premium and the number of years paid. You can also opt to pay a single premium.
The telephone numbers of the insurance companies are shown here:
http://www.tankinlian.com/faq/termd.html
Effect of Deduction
A policyholder sent to me a whole life policy (premiums payable for 10 years) taken for a child age 19, covering a sum assured of $50,000.
The Effect of Deduction is as follows:
After paying the premium for 10 years, the cash value is still less than the premiums paid. The effect of deduction is about $5,830, This is the money that could have been earned by investing the premiums.
The effect of deduction over 30 years is about $20,132. If the parent had bought a level term assurance for the child for 30 years, the total premiums plus interest would be about $3,500. This is cheaper than the $20,132 (i.e. "effect of deduction") charged under the life insurance policy.
Read this FAQ:
http://www.tankinlian.com/faq/benchmark.html
The Effect of Deduction is as follows:
Total Cash Value Effect of
Premium Gtd N-Gtd Total Deduction
10 yr $15,980 $14,050 $1,523 $15,573 $5,830
20 yr $15,980 $18,400 $6,887 $25,287 $10,416
30 yr $15,980 $23,700 $15,723 $39,423 $20,132
After paying the premium for 10 years, the cash value is still less than the premiums paid. The effect of deduction is about $5,830, This is the money that could have been earned by investing the premiums.
The effect of deduction over 30 years is about $20,132. If the parent had bought a level term assurance for the child for 30 years, the total premiums plus interest would be about $3,500. This is cheaper than the $20,132 (i.e. "effect of deduction") charged under the life insurance policy.
Read this FAQ:
http://www.tankinlian.com/faq/benchmark.html
Vivolife (premiums payable for 10 years)
Dear Mr Tan,
My posting on theonlinecitizen gave an example of a Vivolife policy, where premium is payable for 10 yrs (not 20 yrs as mentioned by you) but the coverage is for whole life.
Here are the details you requested:
Age 30 male (non-smoker).
Premium for a $100,000 Vivolife-10 yr premium term. Premium is $4251.75 a yr.
Total premium paid for 10 yrs is $42518. The cash value continues to grow even though premium is stopped.
At age 60 (that is, after the policy is inforce for 30 yrs), the cash value is $99306. If the policyholder surrenders the policy, he gets $99,306 (capital gain of $56788). Using a financial calculator, the yield is 4%p.a. This is similar to the coupon rate of long term government bonds.
Where can you find a zero coupon bond that allows you to pay in installments (instead of upfront) and yet offers you insurance coverage, as well as the flexibility to cash out and get a FULL refund + interests?
My investment savvy clients are familiar with asset allocation and they prefer to include Vivolife in part of their bond portfolio.
They classify Vivolife as an appreciating asset and Term policy is an expense. My clients are covered with both term and whole life policies.
Catherine Choong
REPLY
Dear Catherine
I calculate the yield on this policy, kept for 30 years, to be about 3.5% p.a. (and not 4%).
Can you give the following figures from your Benefit Illustration, i.e. total premiums paid, cash value (guaranteed, non guaranteed), effect of deduction for 10, 20, and 30 years.
I understand that a large portion of the yield at the end of 30 years depends on non-gauranteed terminal bonuses. There is a high degree of uncertainty, as the terminal bonuses could be removed during bad years (and this has happened with other insurance companies). I suspect also, that the yields during the earlier durations could be negative.
If the policyholder invest the premium in an investment fund to earn a net yield of 4.5% p.a. the total amount at the end of 30 years is $132,000 (i.e. 33% higher than $99,306). As he is investing for 30 years, he can choose a higher risk profile and invest in equities. If he earns a net yield of 6%, he will get $191,000 at the end of 30 years.
The cost of providing the insurance protection has to be paid out of the savings, so the estimated return in 30 years could be lower than the gross figures of $132,000 and $191,000 by 10% to 15% (my estimate, depending on the cost of the protection).
If the policyholder choose an investment fund, there is flexibility to continue the saving beyond 10 years, instead of having to buy another high cost product. He can also discontinue saving for some years, without suffering any penalty.
In spite of my comments, I recognise that the non-savvy policyholders may find the packaging of Vivolife to be more suitable to their needs. A good adviser will present both options for the customer to choose.
My posting on theonlinecitizen gave an example of a Vivolife policy, where premium is payable for 10 yrs (not 20 yrs as mentioned by you) but the coverage is for whole life.
Here are the details you requested:
Age 30 male (non-smoker).
Premium for a $100,000 Vivolife-10 yr premium term. Premium is $4251.75 a yr.
Total premium paid for 10 yrs is $42518. The cash value continues to grow even though premium is stopped.
At age 60 (that is, after the policy is inforce for 30 yrs), the cash value is $99306. If the policyholder surrenders the policy, he gets $99,306 (capital gain of $56788). Using a financial calculator, the yield is 4%p.a. This is similar to the coupon rate of long term government bonds.
Where can you find a zero coupon bond that allows you to pay in installments (instead of upfront) and yet offers you insurance coverage, as well as the flexibility to cash out and get a FULL refund + interests?
My investment savvy clients are familiar with asset allocation and they prefer to include Vivolife in part of their bond portfolio.
They classify Vivolife as an appreciating asset and Term policy is an expense. My clients are covered with both term and whole life policies.
Catherine Choong
REPLY
Dear Catherine
I calculate the yield on this policy, kept for 30 years, to be about 3.5% p.a. (and not 4%).
Can you give the following figures from your Benefit Illustration, i.e. total premiums paid, cash value (guaranteed, non guaranteed), effect of deduction for 10, 20, and 30 years.
I understand that a large portion of the yield at the end of 30 years depends on non-gauranteed terminal bonuses. There is a high degree of uncertainty, as the terminal bonuses could be removed during bad years (and this has happened with other insurance companies). I suspect also, that the yields during the earlier durations could be negative.
If the policyholder invest the premium in an investment fund to earn a net yield of 4.5% p.a. the total amount at the end of 30 years is $132,000 (i.e. 33% higher than $99,306). As he is investing for 30 years, he can choose a higher risk profile and invest in equities. If he earns a net yield of 6%, he will get $191,000 at the end of 30 years.
The cost of providing the insurance protection has to be paid out of the savings, so the estimated return in 30 years could be lower than the gross figures of $132,000 and $191,000 by 10% to 15% (my estimate, depending on the cost of the protection).
If the policyholder choose an investment fund, there is flexibility to continue the saving beyond 10 years, instead of having to buy another high cost product. He can also discontinue saving for some years, without suffering any penalty.
In spite of my comments, I recognise that the non-savvy policyholders may find the packaging of Vivolife to be more suitable to their needs. A good adviser will present both options for the customer to choose.
Saturday, May 17, 2008
Due diligence on Credit Cards
tatos@irc.rizon.net said...
In the age, actually one have to actually watch out for 'Card Tricks', affectionately known at 'clauses that specifically' protect the Credit Card Companies' interests, in general.
No Joke - I mean No Joke. I have friends who incur a lot of debts just by little overdrafting and letting the mini-debt grow and grow.
This doesn't come at a surprise to anybody, but most money lenders do not have your best interests at heart. Some even send out 'misleading' marketing information as lure. Even the most reputable credit card issues bombard customers with 'benefits' that are specially designed to 'pad' fees and interest payments. Cash Advances and convenience checks don't come cheap, just read about the new Hybrid Cards in Singapore, and one can imagine a consequences of mis-using it, like overdrafting a 'debit card'.
There are some common 'ouchies' that could happen if you own a credit card.
1) Magical Appearing Annual Fee. You signed up for a card with no Annual fee. Then out of the sudden, you find one, some lenders start charging annual feel who pay their bills off every month - Its best to cancel the card AS SOON AS POSSIBLE.
2) Sliding Credit Line. Another inethical but not uncommon practice to entice a customer to use a cash advance check or skip-a-month payment offer and then lower their credit limit. The maxed-out customer is then charged an additional fee for being above it. Or just simply lower customer's credit limit once they reach it - It depends on how disciplined you are with your card, you might not have to worry as much as the other fellow if you are really concious about debt payments.
3) Mysterious Fees. You may not have to pay a charge to get a cash advance. But most banks charges hefty transaction fees, which can easily go around 2% of the total amount and no less than $10. Also watch out for calling the toll-free number to check your balance and penalty fees for ACCOUNT INACTIVITY. (Don't forget about the credit card buried at the bottom of your wallet!)
4) The Disappearing Grace Period. Watch out for lenders who pull the grace period out from under you. Remember, if your grace period is eliminated, you'll accrue interest from the day you make a purchase. And the only way to avoid this charge would be to pay your bill before you even receive it. This is the most horrible act I've heard, but it yet happened to Singapoeans, I think.
5) Credit Report Blunders - These do happen in real life. But with little diligence on your part, such inaccuracies can be looked into, updated and even removed from your account relatively quickly. If you are sure thats an Error (by keeping records of copies of your purchases, checks and past billing statements) and they still wouldn't bulge in helping you, try finding any authority to investigate your claim AS SOON AS POSSIBLE.
Not that Credit Cards are bad, its just require a little more due diligence prior getting a card and maintaining that card for your own conveniences and benefits, like actually assist in your budgeting by posting monthly statement print statements, etc. While also bolster your image in the eyes of another lender, especially if you consider using credit to establish a firm borrowing history, if you are going to apply for a large line of credit, like mortage or car loan, but overall it depends on one's disciplined to use it responsibly, and productively.
And remember, if you are going to cancel a card, it is best to contact though the Hotline AS SOON AS POSSIBLE and CLOSE THE ACCOUNT rather than going though other means (waiting for them to close the account for you), for this may help to reserve your Credit Score (if such a thing exist).
In the age, actually one have to actually watch out for 'Card Tricks', affectionately known at 'clauses that specifically' protect the Credit Card Companies' interests, in general.
No Joke - I mean No Joke. I have friends who incur a lot of debts just by little overdrafting and letting the mini-debt grow and grow.
This doesn't come at a surprise to anybody, but most money lenders do not have your best interests at heart. Some even send out 'misleading' marketing information as lure. Even the most reputable credit card issues bombard customers with 'benefits' that are specially designed to 'pad' fees and interest payments. Cash Advances and convenience checks don't come cheap, just read about the new Hybrid Cards in Singapore, and one can imagine a consequences of mis-using it, like overdrafting a 'debit card'.
There are some common 'ouchies' that could happen if you own a credit card.
1) Magical Appearing Annual Fee. You signed up for a card with no Annual fee. Then out of the sudden, you find one, some lenders start charging annual feel who pay their bills off every month - Its best to cancel the card AS SOON AS POSSIBLE.
2) Sliding Credit Line. Another inethical but not uncommon practice to entice a customer to use a cash advance check or skip-a-month payment offer and then lower their credit limit. The maxed-out customer is then charged an additional fee for being above it. Or just simply lower customer's credit limit once they reach it - It depends on how disciplined you are with your card, you might not have to worry as much as the other fellow if you are really concious about debt payments.
3) Mysterious Fees. You may not have to pay a charge to get a cash advance. But most banks charges hefty transaction fees, which can easily go around 2% of the total amount and no less than $10. Also watch out for calling the toll-free number to check your balance and penalty fees for ACCOUNT INACTIVITY. (Don't forget about the credit card buried at the bottom of your wallet!)
4) The Disappearing Grace Period. Watch out for lenders who pull the grace period out from under you. Remember, if your grace period is eliminated, you'll accrue interest from the day you make a purchase. And the only way to avoid this charge would be to pay your bill before you even receive it. This is the most horrible act I've heard, but it yet happened to Singapoeans, I think.
5) Credit Report Blunders - These do happen in real life. But with little diligence on your part, such inaccuracies can be looked into, updated and even removed from your account relatively quickly. If you are sure thats an Error (by keeping records of copies of your purchases, checks and past billing statements) and they still wouldn't bulge in helping you, try finding any authority to investigate your claim AS SOON AS POSSIBLE.
Not that Credit Cards are bad, its just require a little more due diligence prior getting a card and maintaining that card for your own conveniences and benefits, like actually assist in your budgeting by posting monthly statement print statements, etc. While also bolster your image in the eyes of another lender, especially if you consider using credit to establish a firm borrowing history, if you are going to apply for a large line of credit, like mortage or car loan, but overall it depends on one's disciplined to use it responsibly, and productively.
And remember, if you are going to cancel a card, it is best to contact though the Hotline AS SOON AS POSSIBLE and CLOSE THE ACCOUNT rather than going though other means (waiting for them to close the account for you), for this may help to reserve your Credit Score (if such a thing exist).
More trains for commuters
I congratulate SMRT and the Land Transport Authority for introducing more train services to meet the higher demand for public transport. This will reduce the over-crowding and waiting time, and make the journey more pleasant.
I hope that LTA will allow SMRT to introduce more feeder services to bring commuters to the train station. This allows a more integrated service. The feeder services will be easier for commuters to use. I hope that these new feeder services do not make many long loops within the area that they serve.
SBS Transit can continue to provide a competitive service to provide point-to-point journeys.
I hope that LTA officials reading this blog can pass my congratulation and suggestion to your bosses.
I hope that LTA will allow SMRT to introduce more feeder services to bring commuters to the train station. This allows a more integrated service. The feeder services will be easier for commuters to use. I hope that these new feeder services do not make many long loops within the area that they serve.
SBS Transit can continue to provide a competitive service to provide point-to-point journeys.
I hope that LTA officials reading this blog can pass my congratulation and suggestion to your bosses.
Return on Vivolife policies
Catherine Choong posted a detailed posting on Vivolife (i.e. whole life policy with premiums paid for 20 years) in The Online Citizen. She pointed out several benefits of the policy, (which I accept). The main drawback of the policy, in my view, is the somewhat low return to the policyholder at the end of 20 years.
A few weeks ago, a policyholder asked my advice on three Vivolife policies that he bought for his family. I calculated the return on the policies as follows:
The total premium paid for 20 years is shown in (2). If the premium is invested to earn a net yield of 4.5%, the accumulated amount is shown in (3). The expected gain is shown in (4). The cash value of the policy (based on a gross yield of 5.25%) is shown in (5). The gain in cash value is shown in (6).
Assuming a gross yield of 5.25%, the Vivolife policies took away between 58% to 69% of the expected gain, leaving 31% to 42% of the gain to the policyholder. If the gross yield is lower, the value to the policyholder will be even lower.
If the policyholder buy the insurance cover separately, the cost of the cover is likely to be not more than 20% of the expected gain (just my guess). A good adviser will be able to calculate this alternative cost for the customer to make an informed choice.
If these examples do not reflect a true picture of the return on the Vivolife policy, I hope that Caterine Choong will send some other examples to me. I shall be happy to post them here.
Note: I believe that the Vivolife gives better values compared to similar products in the market (although I do not have concrete evidence on this point).
A few weeks ago, a policyholder asked my advice on three Vivolife policies that he bought for his family. I calculated the return on the policies as follows:
1. 2. 3. 4. 5. 6. 7. 8.
Policy Premium Accum Expected Cash Value Gain % Taken
20 yrs @4.5% gain 20 yrs in CV away
Self $29,080 $47,666 $18,586 $34,907 $5,827 31% 69%
Wife $24,340 $39,890 $15,550 $29,478 $5,138 33% 67%
Son $23,420 $38,389 $15,969 $30,234 $6,814 42% 58%
The total premium paid for 20 years is shown in (2). If the premium is invested to earn a net yield of 4.5%, the accumulated amount is shown in (3). The expected gain is shown in (4). The cash value of the policy (based on a gross yield of 5.25%) is shown in (5). The gain in cash value is shown in (6).
Assuming a gross yield of 5.25%, the Vivolife policies took away between 58% to 69% of the expected gain, leaving 31% to 42% of the gain to the policyholder. If the gross yield is lower, the value to the policyholder will be even lower.
If the policyholder buy the insurance cover separately, the cost of the cover is likely to be not more than 20% of the expected gain (just my guess). A good adviser will be able to calculate this alternative cost for the customer to make an informed choice.
If these examples do not reflect a true picture of the return on the Vivolife policy, I hope that Caterine Choong will send some other examples to me. I shall be happy to post them here.
Note: I believe that the Vivolife gives better values compared to similar products in the market (although I do not have concrete evidence on this point).
Give good value products to the people who trust us
POSTED IN ONLINE CITIZEN
http://theonlinecitizen.com/2008/05/the-truth-about-life-insurance/#comment-7789
Dear Catherine Choong
You can read these FAQs to understand why I recommend buy term and invest the difference.
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/
Life insurance is important for a family,but it can be low cost insurance, covering death, accidents and critical illness. I invite readers to read my FAQ to make an informed choice.
http://www.tankinlian.com/faq/choice.html
The remaining savings, invested in a low cost fund, is likely to give an accumulated value that will be more than the face value of the policy at the end of 30 years. The policyholder does not need to die or suffer a critical illness to get this face value. The invested fund is likely to produce this sum.
http://www.tankinlian.com/faq/savings.html
A higher accumulated value in an investment fund (compared to a lower cash value in a life insurance policy) will give more money for the policyholder to spend during his or her retirement years. This is an important function of financial planning that is not well served by a life insurance policy, due to its high cost structure.
Although the return from an investment fund is subject to volatility, it is not a serious matter for a long term investor. This point is covered in my FAQ. A life insurance policy with a high terminal bonus, also provides uncertain cash value, and is less transparent.
The life insurance policy gives a poor return due to the "effect of deduction". This is the huge sum that is taken away from the policyholder to pay the marketing expenses and other charges.
My general analysis is on the life insurance products commonly sold in the market. I believe that the "effect of deduction", in the case of NTUC Income, are lower than the market. It is for you, as the adviser, to tell the policyholder about this lower effect of deduction and demonstrate the value of the Vivolife product.
Someone showed me a benefit illustration for Vivolife. I was surprised that the cash value at the end of 20 years still showed a poor yield. I hope that this is an aberration, and that the yield for most other Vivolife products are better. Perhaps you can show some examples, illustrating the total premiums paid for 20 years, the cash value and the "effect of deduction" for the 20 years.
I have other point about an inflexible life insurance policy that forces the policyholder to continue paying the premiums and imposing a big penalty on early termination. This is not fair to the general public.
During the time that I headed NTUC Income, I declared high annual bonus and provided higher cash value (compared to the market), so that the policyholders who cannot continue the policy does not suffer a large penalty.
I believe that a flexible savings plan invested in a low cost fund is better for the policyholders in this modern time. Many of them are now investing in low cost unit trusts and mutual funds available from other platforms.
I hope that the life insurance industry and advisers can rise to the challenge to give good value products to the large number of people who entrust their future to us.
Tan Kin Lian
http://theonlinecitizen.com/2008/05/the-truth-about-life-insurance/#comment-7789
Dear Catherine Choong
You can read these FAQs to understand why I recommend buy term and invest the difference.
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/
Life insurance is important for a family,but it can be low cost insurance, covering death, accidents and critical illness. I invite readers to read my FAQ to make an informed choice.
http://www.tankinlian.com/faq/choice.html
The remaining savings, invested in a low cost fund, is likely to give an accumulated value that will be more than the face value of the policy at the end of 30 years. The policyholder does not need to die or suffer a critical illness to get this face value. The invested fund is likely to produce this sum.
http://www.tankinlian.com/faq/savings.html
A higher accumulated value in an investment fund (compared to a lower cash value in a life insurance policy) will give more money for the policyholder to spend during his or her retirement years. This is an important function of financial planning that is not well served by a life insurance policy, due to its high cost structure.
Although the return from an investment fund is subject to volatility, it is not a serious matter for a long term investor. This point is covered in my FAQ. A life insurance policy with a high terminal bonus, also provides uncertain cash value, and is less transparent.
The life insurance policy gives a poor return due to the "effect of deduction". This is the huge sum that is taken away from the policyholder to pay the marketing expenses and other charges.
My general analysis is on the life insurance products commonly sold in the market. I believe that the "effect of deduction", in the case of NTUC Income, are lower than the market. It is for you, as the adviser, to tell the policyholder about this lower effect of deduction and demonstrate the value of the Vivolife product.
Someone showed me a benefit illustration for Vivolife. I was surprised that the cash value at the end of 20 years still showed a poor yield. I hope that this is an aberration, and that the yield for most other Vivolife products are better. Perhaps you can show some examples, illustrating the total premiums paid for 20 years, the cash value and the "effect of deduction" for the 20 years.
I have other point about an inflexible life insurance policy that forces the policyholder to continue paying the premiums and imposing a big penalty on early termination. This is not fair to the general public.
During the time that I headed NTUC Income, I declared high annual bonus and provided higher cash value (compared to the market), so that the policyholders who cannot continue the policy does not suffer a large penalty.
I believe that a flexible savings plan invested in a low cost fund is better for the policyholders in this modern time. Many of them are now investing in low cost unit trusts and mutual funds available from other platforms.
I hope that the life insurance industry and advisers can rise to the challenge to give good value products to the large number of people who entrust their future to us.
Tan Kin Lian
Get a quote on your motor insurance
Dear Mr Tan,
1. In 2006 I bought my car insurance from company X and the premium is $4XX
And now i need to renew and the amount is $6XX, which is around $200 more. The
car is now older by two more years and the value is lower by maybe 30%, but the premium increased by 30%. I have 100% clean record for the passed 20 years. Should I still stay royal to this company?
I wonder why such a great increased just two years . Since my car value drop more than 25 to 30% why the premium increased?
REPLY
You should contact other insurance companies and ask for a quote. Read this FAQ
http://www.tankinlian.com/faq/motord.html
The premium on your car depends on the claim experience, and not on the value of the car. Last year, the claims increased significantly and most insurance companies made big losses. They have to increase the premium rate by more than 20% to catch up with the claims.
1. In 2006 I bought my car insurance from company X and the premium is $4XX
And now i need to renew and the amount is $6XX, which is around $200 more. The
car is now older by two more years and the value is lower by maybe 30%, but the premium increased by 30%. I have 100% clean record for the passed 20 years. Should I still stay royal to this company?
I wonder why such a great increased just two years . Since my car value drop more than 25 to 30% why the premium increased?
REPLY
You should contact other insurance companies and ask for a quote. Read this FAQ
http://www.tankinlian.com/faq/motord.html
The premium on your car depends on the claim experience, and not on the value of the car. Last year, the claims increased significantly and most insurance companies made big losses. They have to increase the premium rate by more than 20% to catch up with the claims.
Friday, May 16, 2008
Nominating a beneficiary
Dear Mr Tan
I am single and have no relatives. I went to an insurance company to change my beneficiary but was informed that I cannot nominate someone not related to me. Instead, I was asked to change my beneficiary to my estate and have to write a will. This brings about the following questions:
1. For people with no relatives, is it still necessary to have an insurance policy?
2. Does it mean I have no choice but to engage the services of a lawyer to draw up a will?
3. What is the cost involved to engage a lawyer to do a will.
REPLY
You can leave your policy money to your estate. If you do not have a will, it will be distributed according to the intestate law.
If you wish to write a will, you can use the will writing service provided by NTUC Income. You can get more details from Big Trumpet, www.bigtrumpet.com.sg
I am single and have no relatives. I went to an insurance company to change my beneficiary but was informed that I cannot nominate someone not related to me. Instead, I was asked to change my beneficiary to my estate and have to write a will. This brings about the following questions:
1. For people with no relatives, is it still necessary to have an insurance policy?
2. Does it mean I have no choice but to engage the services of a lawyer to draw up a will?
3. What is the cost involved to engage a lawyer to do a will.
REPLY
You can leave your policy money to your estate. If you do not have a will, it will be distributed according to the intestate law.
If you wish to write a will, you can use the will writing service provided by NTUC Income. You can get more details from Big Trumpet, www.bigtrumpet.com.sg
Collective Protest - Update 16 May
I received 54 signatures today, giving the cumulative total of 270 signatures. I am heartened that the forms contained more signatures. One policyholder collected 7 signatures on the same form, from several families.
Someone sent an e-mail to me yesterday, volunteering to collect signatures at MRT stations over the next two weekends. I advised him that this is not necessary. He should not collect signatures from strangers. I do not want to be accused of creating public disorder.
He was quite worried that I may fail to collect 1,000 signatures, as Singaporeans tend to be self centered. I asked him not to worry.
I have asked many policyholders, including those who submitted the signatures earlier, to get more signatures from their friends and colleagues. If we work together, we can achieve this target. You can also scan the signature form and send to me at kinlian@gmail.com.
Someone sent an e-mail to me yesterday, volunteering to collect signatures at MRT stations over the next two weekends. I advised him that this is not necessary. He should not collect signatures from strangers. I do not want to be accused of creating public disorder.
He was quite worried that I may fail to collect 1,000 signatures, as Singaporeans tend to be self centered. I asked him not to worry.
I have asked many policyholders, including those who submitted the signatures earlier, to get more signatures from their friends and colleagues. If we work together, we can achieve this target. You can also scan the signature form and send to me at kinlian@gmail.com.
ERP Charges
I try to avoid driving to work. I prefer to take the MRT. Sometimes I have to drive, due to the need to visit a few places.
There are some many gantries on many roads. Each time, I pass a gantry, there is a sum deducted from my cash card. I do not know what is the ERP charge. I only need how much cash remains on my cash card.
I suggest that the Land Transport Authority should display the charges on the gantry, next to the sign "ERP in Operation". At least the motorist will know what is the fee.
I understand that separate charges apply to different types of vehicles. Perhaps LTA only needs to display the charges for motor cars and motor cycles, as they are the most frequent road users. The charges for other types of vehicles can be set at a certain ratio to the charge for motor cars.
As the charges vary by time of day, it is only fair that the actual charges should be displayed. I hope that officials of the LTA are reading this blog.
There are some many gantries on many roads. Each time, I pass a gantry, there is a sum deducted from my cash card. I do not know what is the ERP charge. I only need how much cash remains on my cash card.
I suggest that the Land Transport Authority should display the charges on the gantry, next to the sign "ERP in Operation". At least the motorist will know what is the fee.
I understand that separate charges apply to different types of vehicles. Perhaps LTA only needs to display the charges for motor cars and motor cycles, as they are the most frequent road users. The charges for other types of vehicles can be set at a certain ratio to the charge for motor cars.
As the charges vary by time of day, it is only fair that the actual charges should be displayed. I hope that officials of the LTA are reading this blog.
I cancelled my credit card
Some banks and service providers seem to feel that it is their commercial right to impose hefty charges for late payment or other administrative oversight.
A few months ago, I received a letter from a credit card company informing me that the charge for late payment and for insufficient funds is in the order of $30 to $50. This is in addition to their interest of 2% per month. I was so angry that I called the hotline to cancel the credit card. The customer service officer was surprised at my action. He did not seem to understand why I reacted in that manner.
A few months ago, I received a letter from a credit card company informing me that the charge for late payment and for insufficient funds is in the order of $30 to $50. This is in addition to their interest of 2% per month. I was so angry that I called the hotline to cancel the credit card. The customer service officer was surprised at my action. He did not seem to understand why I reacted in that manner.
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