The Salvation Army, Gracehaven Children's Home would like to cordially invite you to join us for a day of fun at our Carnival on 6 September 2008, Saturday, from 10am-6pm. This day has been set aside by the Home to raise funds for the children and young persons residing with us.
The proceeds from the Carnival's targeted amount of $150,000 will go into providing for their educational needs, social and rehabilitative programs.
Your support in every way would be most valuable to us. To join us in this partnership of care, you may support us in any of the following areas below:
1) Sponsorship in cash for the food and drinks for sale, logistical items such as power generators, tentage, fans, tables, games and food stalls, etc.
2) Purchase of carnival coupons. Each coupon is priced at $10 per piece, and it has 5 portions of $2, and a special redemption coupon for your free gift.
Tax exemption receipts can be issued for your donation upon request.
For any enquiries and donation in cash or kind, please feel free to contact our Program Co-ordinators,
- Ms. Goh Kailin at 64881531, email - goh_khai_ling@smm.salvationarmy.org
- Mr. Liu Minjie at 64881700, email - liu_min_jie@smm.salvationarmy.org
Saturday, August 09, 2008
Help the low income people
Dear Mr. Tan,
I see many poor people in Singapore. In your opinion, what is the best way to help them? In some countries, certain essential goods are subsidised, but they tend to be abused. Is there a better way to give the help, and prevent abuse?
REPLY
Here are some ways to help the low income people:
1. Pay them an adequate wage
2. Encourage them to save, and help them to get a higher return
3. Help them to avoid debts and paying high interest
4. Keep down the cost of essential goods (but not through a subsidy)
5. Help them to get access to eduation and health care, paid through taxation
I see many poor people in Singapore. In your opinion, what is the best way to help them? In some countries, certain essential goods are subsidised, but they tend to be abused. Is there a better way to give the help, and prevent abuse?
REPLY
Here are some ways to help the low income people:
1. Pay them an adequate wage
2. Encourage them to save, and help them to get a higher return
3. Help them to avoid debts and paying high interest
4. Keep down the cost of essential goods (but not through a subsidy)
5. Help them to get access to eduation and health care, paid through taxation
Friday, August 08, 2008
Transfer savings into CPF special account
Hi Mr. Tan,
I am contemplating transferring my CPF-OA funds over to CPF-SA to earn more interest.
However, I am concerned that if I transferred too much over, I may not have the minimum OA amount at retirement for withdrawal. Besides this, what other withdrawal restrictions is likely to happen for such a case of large OA-to-SA funds transfer?
REPLY
It is better to transfer to SA to earn higher interest rate. The SA can be withdrawn during your lifetime. If you have excess amount in SA over the minimum sum, the balance can be withdrawn at that time.
I am contemplating transferring my CPF-OA funds over to CPF-SA to earn more interest.
However, I am concerned that if I transferred too much over, I may not have the minimum OA amount at retirement for withdrawal. Besides this, what other withdrawal restrictions is likely to happen for such a case of large OA-to-SA funds transfer?
REPLY
It is better to transfer to SA to earn higher interest rate. The SA can be withdrawn during your lifetime. If you have excess amount in SA over the minimum sum, the balance can be withdrawn at that time.
Personal insurance
Dear Mr. Tan,
I read that it is important to get a H&S plan althought our employer do cover us ? Since we may not work for the same employer next time. Plus, a H&S plan is more important than a Critical Illness plan ?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
I read that it is important to get a H&S plan althought our employer do cover us ? Since we may not work for the same employer next time. Plus, a H&S plan is more important than a Critical Illness plan ?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
Agent prefer to sell ILP
A, an American living in Singapore, recently bought some properties and was looking for insurance. He turned to his friend, B, who works in the insurance industry, to help him out.
B recommended that A purchases term insurance, either level term or mortgage protection, as the insurance need was to just cover off the mortgages. B drafted a letter up on behalf of A, requesting term quotes to the top 10 insurance companies in Singapore.
A received quotes for unit linked investment plans from all the companies, and some companies stated they didn't sell term, or that they didn't know what "level term" was. A & B decided to follow up with company X, as they had the cheapest quote so far. They were told that "X doesn't offer level term", to which B replied "Yes you do, it's called x-Term". They requested that a senior agent come out and meet with them.
At the meeting, the agent pulled out his laptop and started to show ILP's. Again, A said that he is looking for term. The agent replied that term was not worth his time to do. This would have been the easiest sale in the world, as A was ready to sign on the dotted line right there, no hard sale to do, just fill out the paper work.
They also requested a meeting with company Y. They never showed up, and when they called, they said sorry and never arranged another meeting.
So, A & B decided to get some quotes from the USA, since he's American. The term quotes coming in from the USA, where about 50% cheaper than the quotes from Singapore. Even taking into account that they were for preferred underwriting, and underwriting tests are cheaper in the US, this is a large markup in Singapore. Particularly since Singapore mortality is better than the US!
So the morale of the tale, even if you want to buy term, it is very difficult to do.
B recommended that A purchases term insurance, either level term or mortgage protection, as the insurance need was to just cover off the mortgages. B drafted a letter up on behalf of A, requesting term quotes to the top 10 insurance companies in Singapore.
A received quotes for unit linked investment plans from all the companies, and some companies stated they didn't sell term, or that they didn't know what "level term" was. A & B decided to follow up with company X, as they had the cheapest quote so far. They were told that "X doesn't offer level term", to which B replied "Yes you do, it's called x-Term". They requested that a senior agent come out and meet with them.
At the meeting, the agent pulled out his laptop and started to show ILP's. Again, A said that he is looking for term. The agent replied that term was not worth his time to do. This would have been the easiest sale in the world, as A was ready to sign on the dotted line right there, no hard sale to do, just fill out the paper work.
They also requested a meeting with company Y. They never showed up, and when they called, they said sorry and never arranged another meeting.
So, A & B decided to get some quotes from the USA, since he's American. The term quotes coming in from the USA, where about 50% cheaper than the quotes from Singapore. Even taking into account that they were for preferred underwriting, and underwriting tests are cheaper in the US, this is a large markup in Singapore. Particularly since Singapore mortality is better than the US!
So the morale of the tale, even if you want to buy term, it is very difficult to do.
Joke: Hazel Wood
After going into Hazel Wood with his girl friend, Fred wrote below the sign which said "Hazel Wood" the words "But Janice wouldn't".
Auction Rate Securities
Citigroup sold auction rate securities to retail investors on the representation that these securities are "cash alternatives". It implies that they are liquid and can be converted to cash at any time. During the credit crisis, there is no liquidity for these securities.
The District Attorney office of New York took up a case on behalf of the retail investors. It negotiated a settlement that require Citigroup to buy back the securities from the retail investors and compensate those who have suffered a loss. Citigroup had to buy back USD $8 billion of these securities.
I wish that our similar action is taken in Singapore on behalf of retail investors that were misled into investing in structured financial products and life insurance products that offer poor value to the investors.
The District Attorney office of New York took up a case on behalf of the retail investors. It negotiated a settlement that require Citigroup to buy back the securities from the retail investors and compensate those who have suffered a loss. Citigroup had to buy back USD $8 billion of these securities.
I wish that our similar action is taken in Singapore on behalf of retail investors that were misled into investing in structured financial products and life insurance products that offer poor value to the investors.
Benefit illustration
Hi Mr. Tan,
I am 20 this year. I had just graduated from diploma and had just starting my first career. Being the breadwinner of the house, I think having a insurance/policy will be safer. I am currently thinking which type of policy should I take. However I am kind of confused. After reading through your website and blog, I get exposed to more information which I neglect previously. However there are still several question which i will like to clarify with you.
Is cash value equivalent to surrender value Where can I fine the cash value in my benefit illustration ? What is gross yield and net yield? Where can I find the gross yield and net yield in my benefit illustration ?
REPLY
Cash value is the same as surrender value. The gross yield is the yield that the insurance company expects to earn by investing your premium. This yield is not guaranteed. The net yield is the yield that you can earn (not guaranteed) after the charges have been deducted by the insurance company.
You should ask the insurance agent to show you these figures in the benefit illustration.
Due to the high charges, a life insurance policy gives a poor yield. It is better to buy a Term insurance and invest the difference in a low cost fund. This is explained in this FAQ:
http://www.tankinlian.com/faq/fptips.html
I am 20 this year. I had just graduated from diploma and had just starting my first career. Being the breadwinner of the house, I think having a insurance/policy will be safer. I am currently thinking which type of policy should I take. However I am kind of confused. After reading through your website and blog, I get exposed to more information which I neglect previously. However there are still several question which i will like to clarify with you.
Is cash value equivalent to surrender value Where can I fine the cash value in my benefit illustration ? What is gross yield and net yield? Where can I find the gross yield and net yield in my benefit illustration ?
REPLY
Cash value is the same as surrender value. The gross yield is the yield that the insurance company expects to earn by investing your premium. This yield is not guaranteed. The net yield is the yield that you can earn (not guaranteed) after the charges have been deducted by the insurance company.
You should ask the insurance agent to show you these figures in the benefit illustration.
Due to the high charges, a life insurance policy gives a poor yield. It is better to buy a Term insurance and invest the difference in a low cost fund. This is explained in this FAQ:
http://www.tankinlian.com/faq/fptips.html
Thursday, August 07, 2008
Insurance for a child
Dear Mr. Tan
I would appreciate if you could advise me on what insurance package/company should I take up for my new born son. I'm overwhelmed by the different insurance packages and companies in the market.
REPLY
Read this FAQ
http://www.tankinlian.com/faq/childlife.html
I would appreciate if you could advise me on what insurance package/company should I take up for my new born son. I'm overwhelmed by the different insurance packages and companies in the market.
REPLY
Read this FAQ
http://www.tankinlian.com/faq/childlife.html
Joke: The wife wanted to tell it herself
The posh dinner party has been a great success until, over coffee, one of the guest decided to tell a detailed blue joke.
The host was appalled, "This is an outrageious joke. How do you tell this story before my wife!"
The guest replied, "I's sorry. I did not know that you wife wanted to tell this joke herself.
The host was appalled, "This is an outrageious joke. How do you tell this story before my wife!"
The guest replied, "I's sorry. I did not know that you wife wanted to tell this joke herself.
Business ethics
I write about honesty and business ethics in this article:
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-16764
posted in
www.theonline.citizen.com
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-16764
posted in
www.theonline.citizen.com
Profiteering
Source: Wikipedia
Profiteering is a pejorative term for the act of making a profit by methods considered unethical. Business owners may be accused of profiteering when they raise prices during an emergency (especially a war). The term is also applied to businesses that play on political corruption to obtain government contracts.
Some types of profiteering are illegal, such as price fixing syndicates and other anti-competitive behaviour, for example on fuel subsidies (see British Airways price-fixing allegations), or restricted by industry codes of conduct such as aggressive marketing of products in the third world such as baby milk (see Nestlé boycott).
Profiteering is a pejorative term for the act of making a profit by methods considered unethical. Business owners may be accused of profiteering when they raise prices during an emergency (especially a war). The term is also applied to businesses that play on political corruption to obtain government contracts.
Some types of profiteering are illegal, such as price fixing syndicates and other anti-competitive behaviour, for example on fuel subsidies (see British Airways price-fixing allegations), or restricted by industry codes of conduct such as aggressive marketing of products in the third world such as baby milk (see Nestlé boycott).
Overcharging
Source: Wikipedia
Overcharge is an economic term that refers to the difference between an observed market price and a price that would have been observed in the absence of collusion. The latter is often called a "but-for price" or a competitive "benchmark price".
When collusion is not in use, such as by privately-owned businesses, overcharge is considered as a markup of the observed market price for the sole profit of the business and in some states is considered illegal, similar to profiteering and price gouging.
An overcharge may be expressed as a mark-up on the benchmark price, or it may be divided by the observed market price. When the benchmark price is equal to the marginal cost of production, as it is in perfect competition, then ratio of the overcharge to market price is the Lerner Index of market power.
When the overcharge is multiplied by the quantity purchased, it becomes the monetary injury or damages incurred by a buyer of goods sold by a cartel.
Overcharge is an economic term that refers to the difference between an observed market price and a price that would have been observed in the absence of collusion. The latter is often called a "but-for price" or a competitive "benchmark price".
When collusion is not in use, such as by privately-owned businesses, overcharge is considered as a markup of the observed market price for the sole profit of the business and in some states is considered illegal, similar to profiteering and price gouging.
An overcharge may be expressed as a mark-up on the benchmark price, or it may be divided by the observed market price. When the benchmark price is equal to the marginal cost of production, as it is in perfect competition, then ratio of the overcharge to market price is the Lerner Index of market power.
When the overcharge is multiplied by the quantity purchased, it becomes the monetary injury or damages incurred by a buyer of goods sold by a cartel.
Touting
Source: Wikipedia
In British English, a tout is any person who solicits business or employment in an importune manner (generally equivalent to a solicitor in American English).
A ticket tout is someone who engages in ticket resale for more than the face value of the ticket. In recent years some British ticket touts have moved into Internet ticket fraud.
According to the American Bar Association, touting is where a person advertises, promotes, or otherwise describes a security for sale without disclosing that the person is being paid to do so.
An example would be a person who frequents heavily touristed areas and presents himself as a tour guide (particularly towards those who do not speak the local language), but operates in on behalf of local bars, restaurant or hotels, being paid to direct tourists towards certain establishments.
In a similar fashion a tout could be someone who, acting upon his own initiative, loads or unloads the baggage from a bus, then demands payment for his services from the passengers.
In gambling parlance, a tout is a person who sells sports betting information to bettors.
In British English, a tout is any person who solicits business or employment in an importune manner (generally equivalent to a solicitor in American English).
A ticket tout is someone who engages in ticket resale for more than the face value of the ticket. In recent years some British ticket touts have moved into Internet ticket fraud.
According to the American Bar Association, touting is where a person advertises, promotes, or otherwise describes a security for sale without disclosing that the person is being paid to do so.
An example would be a person who frequents heavily touristed areas and presents himself as a tour guide (particularly towards those who do not speak the local language), but operates in on behalf of local bars, restaurant or hotels, being paid to direct tourists towards certain establishments.
In a similar fashion a tout could be someone who, acting upon his own initiative, loads or unloads the baggage from a bus, then demands payment for his services from the passengers.
In gambling parlance, a tout is a person who sells sports betting information to bettors.
Illegal to tout and overcharge
I read a newspaper report that taxis now put up a sign "It is illegal for electronic stores and tailors to tout and overcharge".
What is touting? Are financial products being marketing at MRT stations considered as touting?
What is over-charging? Many financial products have excessive charges that give poor value to consumers.
Will it be illegal for financial institutions (i.e banks and insurance companies) to tout and over-charge for their financial products?
Why only go after electronic stores and tailors, when the overcharging in financial products is 10 times or more?
What is touting? Are financial products being marketing at MRT stations considered as touting?
What is over-charging? Many financial products have excessive charges that give poor value to consumers.
Will it be illegal for financial institutions (i.e banks and insurance companies) to tout and over-charge for their financial products?
Why only go after electronic stores and tailors, when the overcharging in financial products is 10 times or more?
Investing in Foreign Currency
A few readers have asked my views about investing in AUD due to its recent drop. It is difficult to make a judgement on the trend, due to its volatiity. Even foreign currency traders find it difficult.
Here are some general tips about investing in foreign currencies:
http://www.tankinlian.com/faq/foreign.html
Here are some general tips about investing in foreign currencies:
http://www.tankinlian.com/faq/foreign.html
Wednesday, August 06, 2008
Premium buses
Some people are willing to pay a higher fare to get a better seat in an airplane. They are called first class and business class. We can have the same arrangement for a bus.
Read more about this concept in:
www.singaporepublictransport.blogspot.com
Read more about this concept in:
www.singaporepublictransport.blogspot.com
Joke: Passed by the manager
Notice in a foreign hotel: The water in this hotel is hygienic. It has been passed by the manager.
Freely negotiated fees
To: Consumer Association
The Competition Competition has mandated that fees should be freely negotiable. The apply this requirement to doctors and property agents.
The Commission think that this is to the benefit of consumers. It is likely to work the other way. If fees are freely negotiated, and the standard and scope of service is not clearly defined, consumers can be put to a disadvantage. The industry players (i.e. doctors and property agents) are more knowledgeable about the playing field and will be able get away with higher charges, as consumers are not aware about the market.
A better approach is for the Commission to get the industry association to define a few standard services and require the providers to advertise their fees for these services.
I hope that the Consumer Association can look into this matter.
The Competition Competition has mandated that fees should be freely negotiable. The apply this requirement to doctors and property agents.
The Commission think that this is to the benefit of consumers. It is likely to work the other way. If fees are freely negotiated, and the standard and scope of service is not clearly defined, consumers can be put to a disadvantage. The industry players (i.e. doctors and property agents) are more knowledgeable about the playing field and will be able get away with higher charges, as consumers are not aware about the market.
A better approach is for the Commission to get the industry association to define a few standard services and require the providers to advertise their fees for these services.
I hope that the Consumer Association can look into this matter.
Tuesday, August 05, 2008
Taxi without driver
Imagine that you can board a taxi that is driven automatically (i.e. without a driver) and take you quickly to your destination, without any traffic congestion.
This is called a PRT. Read about this concept in
www.singaporepublictransport.blogspot.com
This is called a PRT. Read about this concept in
www.singaporepublictransport.blogspot.com
Joke: Black or white
The American from Alabama was in a coffee shop of an expensive hotel in London.
Waiter: How do you like your coffee
American: I like it like my woman, strong and sweet.
Waiter: Black or white?
Waiter: How do you like your coffee
American: I like it like my woman, strong and sweet.
Waiter: Black or white?
Personal Accident Insurance
Hi Mr. Tan
I currently have SAFRA Essential Term (http://www.income.com.sg/insurance/safraterm/ ) and SAFRA Living Care ( http://www.income.com.sg/insurance/safracare/ ) policies.
Effectively, the two policies cover Death, TPD, the 30 major CI, and hospitalization.
In addition, as a employee of my company, I am covered for basic medical expenses incurred for seeing a doctor.
I have an agent from NTUC trying to sell me personal accident insurance. In your opinion, is there any further benefit to me for taking this up?
REPLY
A personal accident policy is low cost and is useful to supplement the cover under your life policies. If the total sum assured under your life policies is not adequate, you can buy a personal accident policy to supplement the coverage. The annual premium to cover $100,000 should be less than $80 for most occupations.
I currently have SAFRA Essential Term (http://www.income.com.sg/insurance/safraterm/ ) and SAFRA Living Care ( http://www.income.com.sg/insurance/safracare/ ) policies.
Effectively, the two policies cover Death, TPD, the 30 major CI, and hospitalization.
In addition, as a employee of my company, I am covered for basic medical expenses incurred for seeing a doctor.
I have an agent from NTUC trying to sell me personal accident insurance. In your opinion, is there any further benefit to me for taking this up?
REPLY
A personal accident policy is low cost and is useful to supplement the cover under your life policies. If the total sum assured under your life policies is not adequate, you can buy a personal accident policy to supplement the coverage. The annual premium to cover $100,000 should be less than $80 for most occupations.
Monday, August 04, 2008
Key man insurance
Dear Mr. Tan,
My friend bought a Prulink product for himself many years back. The company paid the premium. He is the one of two directors and shareholders of this company. This insurance is purchased under the keyman policy. He is the insured person and the company is named as the owner of the policy.
Unfortunately, my friend met with an accident and is paralysed. The insurance paid out S$800,000. Cheque was issued to the company.
Should this money belong to the company or should it be paid to the insuree? Can this money be held at the company since it was paid by the company and was purhcased as a key-man policy? Or, can this money be construed as gratitous payment to be paid to the family member immediately?
REPLY
It depends on the agreement between your friend and the company. If the company took the policy and pays the premium, the company is the owner. The compnay has an insurable interest in the key man of the company, as the disability of the keyman can cause some loss of profit to the company.
If the company has an agreement with the keyman to pay the proceeds to the keyman or his family, then the payment should be made according to this agreement.
My friend bought a Prulink product for himself many years back. The company paid the premium. He is the one of two directors and shareholders of this company. This insurance is purchased under the keyman policy. He is the insured person and the company is named as the owner of the policy.
Unfortunately, my friend met with an accident and is paralysed. The insurance paid out S$800,000. Cheque was issued to the company.
Should this money belong to the company or should it be paid to the insuree? Can this money be held at the company since it was paid by the company and was purhcased as a key-man policy? Or, can this money be construed as gratitous payment to be paid to the family member immediately?
REPLY
It depends on the agreement between your friend and the company. If the company took the policy and pays the premium, the company is the owner. The compnay has an insurable interest in the key man of the company, as the disability of the keyman can cause some loss of profit to the company.
If the company has an agreement with the keyman to pay the proceeds to the keyman or his family, then the payment should be made according to this agreement.
Rights Issue
Dear Mr. Tan
I would like to seek your invaluable adivce on the upcoming rights issue offered by X. Do you think it is a good investment? What actually is a rights issue?
REPLY
If a company wishes to raise additional capital, it offers a rights issue to its existing shareholders. The price is usually lower than the current market price of the shares.
Let me give an example. A company has 10 million shares. It is now trading at $3. The company needs raise an additional $10 million in capital. It decides to issue 5 million shares at $2 to the existing shareholders. Each shareholder is allowed to buy 1 share for every 2 shares that they now own.
Many shareholders will take up the new shares because it is offered at a price ($2) lower than the current market price ($3). After the rights issue have been completed, the share price may drop below $3 due to the dilution of new shares issued at $2.
If the shareholder does not wish to invest in the new shares, the shareholder can sell the rights in the market. The value of the rights depend on supply and demand and is likely to be around $0.30.
I am not able to give an specific comment about the rights issue of X.
I would like to seek your invaluable adivce on the upcoming rights issue offered by X. Do you think it is a good investment? What actually is a rights issue?
REPLY
If a company wishes to raise additional capital, it offers a rights issue to its existing shareholders. The price is usually lower than the current market price of the shares.
Let me give an example. A company has 10 million shares. It is now trading at $3. The company needs raise an additional $10 million in capital. It decides to issue 5 million shares at $2 to the existing shareholders. Each shareholder is allowed to buy 1 share for every 2 shares that they now own.
Many shareholders will take up the new shares because it is offered at a price ($2) lower than the current market price ($3). After the rights issue have been completed, the share price may drop below $3 due to the dilution of new shares issued at $2.
If the shareholder does not wish to invest in the new shares, the shareholder can sell the rights in the market. The value of the rights depend on supply and demand and is likely to be around $0.30.
I am not able to give an specific comment about the rights issue of X.
Joke: Ring bell with elbow
A: Would you like to come to my house-warming party on Saturday?
B: Where is it
A: 6 Chestnut Drive. Please ring the bell with your elbow.
B: Why can't I ring with my finger?
A: You're not coming empty handed, are you?
B: Where is it
A: 6 Chestnut Drive. Please ring the bell with your elbow.
B: Why can't I ring with my finger?
A: You're not coming empty handed, are you?
Double coverage under Medishield and private Shield
Dear Mr. Tan
Being a old timer with Income, I know that you are always helping the policy holders with your valuable knowledge. I have a problem now and hope that you could give me your advice.
I switched from CPF MediShield to IncomeShield Plan B in year 2002 with the payment deducted from my MediSave account annually.
In Year 2007 I subscribed to Enhanced IncomeShield Rider on top of the IncomeShield Plan B. The Rider's was cash payment as required. In view of saving the MediSave account fund with better interest rate, I changed the payment mode for my IncomeShield to cash payment as well in September 2007. As I was not free to make payment on the due date and Income had comfirmed via email that the payment due date has 30 days' grace period as usual. Hence, I made the payment about 1 or 2 weeks later.
To my surprise, when I got my CPF Statement of Account, I realised that my MediShield had reactivated with the deduction of MediShield payment from my Medisave account. I queried CPF on this and was told that this is the usual practice that when the payment was not made on the due date for IncomeShield the MediShield would be reactivated.
I wish to have your advice of whether this is double insured and whether there is any benefits of more coverage when I make a claim or this is totally overlapping of the same coverage. I heard that now CPF's MediShield has better coverage than other similar plans, hence I don't know whether I should terminate which one to save my unnecessary additional payment.
Could I appeal to Income for the reimbursement of the IncomeShield payment for not informing me this consequences which result to my additional incurred cost.
REPLY
You can ask NTUC Income to help you to sort out this problem. You should NOT pay two premiums for the same coverage. NTUC Income should have notified CPF that you are covered under Incomeshield (by cash) and prevent the re-activation of Medishield.
If this is not possible, you should ask NTUC Income to refund your premium for Incomeshield, in full. It is all right to be insured on Medishield only.
All the best.
Being a old timer with Income, I know that you are always helping the policy holders with your valuable knowledge. I have a problem now and hope that you could give me your advice.
I switched from CPF MediShield to IncomeShield Plan B in year 2002 with the payment deducted from my MediSave account annually.
In Year 2007 I subscribed to Enhanced IncomeShield Rider on top of the IncomeShield Plan B. The Rider's was cash payment as required. In view of saving the MediSave account fund with better interest rate, I changed the payment mode for my IncomeShield to cash payment as well in September 2007. As I was not free to make payment on the due date and Income had comfirmed via email that the payment due date has 30 days' grace period as usual. Hence, I made the payment about 1 or 2 weeks later.
To my surprise, when I got my CPF Statement of Account, I realised that my MediShield had reactivated with the deduction of MediShield payment from my Medisave account. I queried CPF on this and was told that this is the usual practice that when the payment was not made on the due date for IncomeShield the MediShield would be reactivated.
I wish to have your advice of whether this is double insured and whether there is any benefits of more coverage when I make a claim or this is totally overlapping of the same coverage. I heard that now CPF's MediShield has better coverage than other similar plans, hence I don't know whether I should terminate which one to save my unnecessary additional payment.
Could I appeal to Income for the reimbursement of the IncomeShield payment for not informing me this consequences which result to my additional incurred cost.
REPLY
You can ask NTUC Income to help you to sort out this problem. You should NOT pay two premiums for the same coverage. NTUC Income should have notified CPF that you are covered under Incomeshield (by cash) and prevent the re-activation of Medishield.
If this is not possible, you should ask NTUC Income to refund your premium for Incomeshield, in full. It is all right to be insured on Medishield only.
All the best.
Vitamin Account
My friend invested SGD 40,000 in a Vitamin Account offered by a bank. This is a structured product. The total payout for the past 3 years is 4.1%. The current value is 89.5%. The investor lost 6.4% for the past 3 years. During this time, the stockmarket showed a positive gain.
Lesson: Avoid all types of structured product, even if it is capital guaranteed. They are likely to give a poor yield if you keep it to maturity (5 years). If you terminate it before maturity, you are likely to suffer a loss.
Read this FAQ:
http://www.tankinlian.com/faq/sinvest.html
Lesson: Avoid all types of structured product, even if it is capital guaranteed. They are likely to give a poor yield if you keep it to maturity (5 years). If you terminate it before maturity, you are likely to suffer a loss.
Read this FAQ:
http://www.tankinlian.com/faq/sinvest.html
Cyber Defamation Law
South Korea plans to introduce a Cyber Defamation Law to regulate Internet freedom.
The new law is intended to deal with harmful Internet messages and to improve security and stem false information. It will bring the online medium in line with its tradtional counterparts.
Some measures being proposed are:
1. Suspend sites that go beyond limits
2. Require people posting their comments to use their real names
I believe that these measures are necessary. I have always used my personal name, in posting views on the Internet.
The new law is intended to deal with harmful Internet messages and to improve security and stem false information. It will bring the online medium in line with its tradtional counterparts.
Some measures being proposed are:
1. Suspend sites that go beyond limits
2. Require people posting their comments to use their real names
I believe that these measures are necessary. I have always used my personal name, in posting views on the Internet.
Financial advice
My blog aims to educate the public about financial matters.
I do not give specific advice to any person. If you want advice, you have to find a financial adviser.
You can get information on the list of FAs regulated by MAS by visiting the MAS website at http://www.mas.gov.sg/. under "Financial Institutions Directory".
Here is the specific list:
http://www.mas.gov.sg/fi_directory/index.html
I do not give specific advice to any person. If you want advice, you have to find a financial adviser.
You can get information on the list of FAs regulated by MAS by visiting the MAS website at http://www.mas.gov.sg/. under "Financial Institutions Directory".
Here is the specific list:
http://www.mas.gov.sg/fi_directory/index.html
What is a financial planner?
Q4: Does MAS regulate all financial planners? What is the difference between a financial planner and a financial adviser?
A: MAS regulates firms and persons that give advice on investment products to consumers. MAS does not regulate tax and estate planning activities.
Under the FAA, only firms licensed as a FA and firms that are exempt FAs can use the term "financial adviser". This helps you identify whether you are receiving financial advice from an entity regulated by MAS. MAS does not restrict the use of titles such as "financial planner", "financial analyst" or "financial consultant". You should be aware that persons who use such titles may or may not be regulated by MAS. You can get information on the list of FAs regulated by MAS by visiting the MAS website at www.mas.gov.sg. under "Financial Institutions Directory".
This advice, and other useful tips, can be found in this webpage:
http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
A: MAS regulates firms and persons that give advice on investment products to consumers. MAS does not regulate tax and estate planning activities.
Under the FAA, only firms licensed as a FA and firms that are exempt FAs can use the term "financial adviser". This helps you identify whether you are receiving financial advice from an entity regulated by MAS. MAS does not restrict the use of titles such as "financial planner", "financial analyst" or "financial consultant". You should be aware that persons who use such titles may or may not be regulated by MAS. You can get information on the list of FAs regulated by MAS by visiting the MAS website at www.mas.gov.sg. under "Financial Institutions Directory".
This advice, and other useful tips, can be found in this webpage:
http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
Sunday, August 03, 2008
Comparing yields on policies taken from two insurers
Dear Mr. Tan
I wish to seek your advice as to whether I am getting a fair share of the maturity sums I obtained from two policies maturing with two different companies.
For a 25 year term endowment policy with sum assured of $15,000 with AIA, I was paid the maturity sum of $30,271.95 which was $5,233.05 short of the projected amount in their original quotation when the policy was first taken up in 1983. On my appeal, they paid a further $2,469.63 making it a total of $32,741.58.
As for the NTUC Income Education Policy with a sum assured of $10,000 for a 20 year term, I was paid the maturity sum of $19,432.50 which was $2,137.50 short of the projected amount in their original quotation first taken up in 1988.
I have appealed to NTUC Income to pay the sum as projected originally but they have rejected this. They did not exercise understanding and flexibility as did AIA.
What I cannot understand is its agents have been telling Singaporeans that they charge lower premium and makes higher payout mainly becaused NTUC Income is a co-operative as against commercial Insurance companies like AIA, Prudential and Great Eastern. Instead, I now find AIA to be more compassionate, understanding and flexible while NTUC Income does not even bother to consider my appeal.
I seek your kind understanding and assistance on this matter. Hope you can advise whether what NTUC Income claims about giving me a better yield as compared to AIA is true.
REPLY
The yield on the AIA policy is 4.69% p.a. (25 years) and the yield on the Income policy s 5.44% (20 years). The yield from Income is better than AIA, although the policy was taken for a shorter period. In both cases, the yield has been satisfactory, as you get more thn 4.5% p.a.
AIA
25 year policy,
Premium: $57 monthly
Maturity benefit: $32,742
Yield 4.69% p.a.
Income
20 year polcy
Premium: $44.30
Maturity benefit: $19433
Yield 5.44% p.a.
I wish to seek your advice as to whether I am getting a fair share of the maturity sums I obtained from two policies maturing with two different companies.
For a 25 year term endowment policy with sum assured of $15,000 with AIA, I was paid the maturity sum of $30,271.95 which was $5,233.05 short of the projected amount in their original quotation when the policy was first taken up in 1983. On my appeal, they paid a further $2,469.63 making it a total of $32,741.58.
As for the NTUC Income Education Policy with a sum assured of $10,000 for a 20 year term, I was paid the maturity sum of $19,432.50 which was $2,137.50 short of the projected amount in their original quotation first taken up in 1988.
I have appealed to NTUC Income to pay the sum as projected originally but they have rejected this. They did not exercise understanding and flexibility as did AIA.
What I cannot understand is its agents have been telling Singaporeans that they charge lower premium and makes higher payout mainly becaused NTUC Income is a co-operative as against commercial Insurance companies like AIA, Prudential and Great Eastern. Instead, I now find AIA to be more compassionate, understanding and flexible while NTUC Income does not even bother to consider my appeal.
I seek your kind understanding and assistance on this matter. Hope you can advise whether what NTUC Income claims about giving me a better yield as compared to AIA is true.
REPLY
The yield on the AIA policy is 4.69% p.a. (25 years) and the yield on the Income policy s 5.44% (20 years). The yield from Income is better than AIA, although the policy was taken for a shorter period. In both cases, the yield has been satisfactory, as you get more thn 4.5% p.a.
AIA
25 year policy,
Premium: $57 monthly
Maturity benefit: $32,742
Yield 4.69% p.a.
Income
20 year polcy
Premium: $44.30
Maturity benefit: $19433
Yield 5.44% p.a.
Joke: Record your gossip
Frank Smith bought his wife an answerphone. His wife recorded this message, "This is the Smith residence. Unfortunately, Mrs. Smith is out, but you can leave a message. Please start your rumour or gossip after the tone. "
Change in business culture of banks
Dear Mr. Tan,
I witnessed the changes in the banking industry first hand. When I joined a bank in 1989, bankers were well regarded even though our salaries were not as high as today. Integrity was the most important quality, as we are given the responsibility to look after depositors' money.
Banking is a business where the product is easy to sell, as we are giving out money and many people need a loan from the bank. Bankers must put the depositors' interest above sales.
The bank will assess your character and your technical skill sets. Once you are selected to join the bank, it is a privilege. If you are selected to be a credit manager you have arrived as the bank has empowered you to give loans. You have a long term career with the bank.
Foreign exchange dealers were there to support the lending business and not there to gamble or speculate on the bank's balance sheet.
Investment bankers are not allowed to take in public deposits. They start with a clean page every day. In essence, they were brokers, they have to hustle to make a living. No qualms about misleading investors. However they were highly paid but they put their money back into the firm as they were partnerships. That acts as a check to their excesses.
Later when they became listed companies, they took even more risk with other peoples money. Inevitably, all the commercial bankers wanted to be investment bankers as they are so well paid.
Allowing commercial banks to become investment banks is a recipe for disaster, as they have the balance sheet and public deposits to gamble with and have access to a large retail franchise to exploit. I never thought I will live to see the day when banks are selling their credit cards in Raffles Place like tourist touts. We sink to a new low when we out sourced it to a third party.
Where is the bank culture now ? Greed is acceptable. Well paid, short term careers is the order of the day because someone else can pick up your mess. Any way you are paid more than if you have worked longer with the institution.
I witnessed the changes in the banking industry first hand. When I joined a bank in 1989, bankers were well regarded even though our salaries were not as high as today. Integrity was the most important quality, as we are given the responsibility to look after depositors' money.
Banking is a business where the product is easy to sell, as we are giving out money and many people need a loan from the bank. Bankers must put the depositors' interest above sales.
The bank will assess your character and your technical skill sets. Once you are selected to join the bank, it is a privilege. If you are selected to be a credit manager you have arrived as the bank has empowered you to give loans. You have a long term career with the bank.
Foreign exchange dealers were there to support the lending business and not there to gamble or speculate on the bank's balance sheet.
Investment bankers are not allowed to take in public deposits. They start with a clean page every day. In essence, they were brokers, they have to hustle to make a living. No qualms about misleading investors. However they were highly paid but they put their money back into the firm as they were partnerships. That acts as a check to their excesses.
Later when they became listed companies, they took even more risk with other peoples money. Inevitably, all the commercial bankers wanted to be investment bankers as they are so well paid.
Allowing commercial banks to become investment banks is a recipe for disaster, as they have the balance sheet and public deposits to gamble with and have access to a large retail franchise to exploit. I never thought I will live to see the day when banks are selling their credit cards in Raffles Place like tourist touts. We sink to a new low when we out sourced it to a third party.
Where is the bank culture now ? Greed is acceptable. Well paid, short term careers is the order of the day because someone else can pick up your mess. Any way you are paid more than if you have worked longer with the institution.
Continue life policy after migration?
Hi Mr. Tan,
My mother is a big fan of your blog and she's been nudging me to seek your advice on my NTUC Income Life Policy Insurance.
I would be going to look for work in Sydney and looking to stay there. Should I terminate my policy and get back my money? Should I continue feeding this policy?
REPLY
In the globalised world, it is quite easy to continue your existing policy in Singapore, even if you live overseas.
You should decide on your existing life policy based on the future yield. Generally, I advise a person to continue an existing life policy, as they have already incurred the upfront charges. Going forward, the policy should be able to give a fairly satisfactory return.
You can ask your insurer to quote you the cash value now and in 5 years time for you to make a decision.
Read this FAQ:
http://www.tankinlian.com/faq/exist.html
For your future financial planning, you should read this FAQ: http://www.tankinlian.com/faq/fptips.html
All the best.
My mother is a big fan of your blog and she's been nudging me to seek your advice on my NTUC Income Life Policy Insurance.
I would be going to look for work in Sydney and looking to stay there. Should I terminate my policy and get back my money? Should I continue feeding this policy?
REPLY
In the globalised world, it is quite easy to continue your existing policy in Singapore, even if you live overseas.
You should decide on your existing life policy based on the future yield. Generally, I advise a person to continue an existing life policy, as they have already incurred the upfront charges. Going forward, the policy should be able to give a fairly satisfactory return.
You can ask your insurer to quote you the cash value now and in 5 years time for you to make a decision.
Read this FAQ:
http://www.tankinlian.com/faq/exist.html
For your future financial planning, you should read this FAQ: http://www.tankinlian.com/faq/fptips.html
All the best.
Saturday, August 02, 2008
Can newspapers be trusted ?
In the past, newspapers could be trusted to tell the truth. They were objective in their reporting and were not driven by commercial consideration.
This laudable practice has changed in recent years. It is now quite common for newspapers to print articles that give a favorable slant to their big advertisers.
At one time, these articles were printed under the headline "Advertorial". This was intended to warn the readers that the article was contributed by the advertiser and that the newspaper did not verify the statements in the article.
Nowadays, the label of "advertorial" has disappeared. Some journalists are engaged to write a story for a big advertiser. The article has to be approved by the advertiser, in return for a big advertising budget.
This is how some newspapers get advertising revenue to cover the large expenses and to make good profits for their shareholders. This is necessary for the commercial success of the newspaper, and is now more important than independent and honest reporting.
This laudable practice has changed in recent years. It is now quite common for newspapers to print articles that give a favorable slant to their big advertisers.
At one time, these articles were printed under the headline "Advertorial". This was intended to warn the readers that the article was contributed by the advertiser and that the newspaper did not verify the statements in the article.
Nowadays, the label of "advertorial" has disappeared. Some journalists are engaged to write a story for a big advertiser. The article has to be approved by the advertiser, in return for a big advertising budget.
This is how some newspapers get advertising revenue to cover the large expenses and to make good profits for their shareholders. This is necessary for the commercial success of the newspaper, and is now more important than independent and honest reporting.
Logic9 (Sudoku)
I am surprised that Logic9 on my website is one of the most frequently visited. It rank second to my FAQs.
http://www.tankinlian.com/logic9/
There are many other websites offering Sudoku puzzles, but it seems that my website has some attractive features. They are:
1. Can play online
2. Easy to play
3. Can play 4 levels
4. Option to choose flowers and letters, instead of numbers.
I shall be updating the website to have more puzzles.
Enjoy.
http://www.tankinlian.com/logic9/
There are many other websites offering Sudoku puzzles, but it seems that my website has some attractive features. They are:
1. Can play online
2. Easy to play
3. Can play 4 levels
4. Option to choose flowers and letters, instead of numbers.
I shall be updating the website to have more puzzles.
Enjoy.
Joke: race horse telephoned
John had a restless night and keep on calling "Eva, darling" in his sleep. His wife Joan asked him who Eva is.
John replied that she was his favourite race horse. His wife accepted the explanation.
On returning home, he found his wife furious. He asked why. She replied "Your race horse telephoned today".
John replied that she was his favourite race horse. His wife accepted the explanation.
On returning home, he found his wife furious. He asked why. She replied "Your race horse telephoned today".
Advice on Financial Planning
Hi Kin Lian,
I have read your articles in your website and found that they were very informative and also gave us very good advices.
I would to find out do you provide financial planning for us. If you do, I would like to seek your advice.
REPLY
I do not give specific financial planning advice. You can read the FAQs in my website and decide for yourself.
Read the FAQ on "Financial Planning for the Young". It tells you how much to set aside for your retirement and how to invest in a low cost fund. You can read the FAQ on "Personal Insurance" to decide on the type of low cost insurance that you need.
I have read your articles in your website and found that they were very informative and also gave us very good advices.
I would to find out do you provide financial planning for us. If you do, I would like to seek your advice.
REPLY
I do not give specific financial planning advice. You can read the FAQs in my website and decide for yourself.
Read the FAQ on "Financial Planning for the Young". It tells you how much to set aside for your retirement and how to invest in a low cost fund. You can read the FAQ on "Personal Insurance" to decide on the type of low cost insurance that you need.
Land Banking Scam
Hi Mr. Tan,
I've just read your blog on land banking scam and though I would share a email that I sent to ST a while back when they had a relatively positive article on land banking back in 2007. I feel ST has not been as investigative as they should have been and many times, have articles that doesn't give a complete picture of investments , almost to the extend that it would appear they dare not provide any additional information or view other that so called "experts" with vested interests.
LETTER TO STRAITS TIMES JOURNALIST
I wonder if you have done a proper investigation into the whole land banking issues, especially about companies like X since there has been numerous discussion about scams by them in the internet ? A simple search on the internet will throw up lots of information about such scams and how these scams works even if the titles or funds are put into escrow until the sales completed.
Your article by not addressing such issues does a great dis-service to the general public. I hope that ST will follow up with the investigative style that expose the previous NKF and that that has made us Singaporean proud of ST.
http://mywealthplanner.wordpress.com/2006/10/28/profitable-plots-investing-in-land-banks-1/
While I have tried to put reply to this article in the forum, I feels that this is insufficient for those readers that do not make use of the internet as much.
I would appreciate if yourself or your editor could look into this and do a proper follow up articles. And in view of the large amount of money changing hand just because of a simple article like this . I've also got calls from various companies trying to sell the land banks ideas and doing some "talks" over this weekend and having read your articles, I'm wondering if the timing of these calls is co-incident or deliberately timed to be after your article.
I've just read your blog on land banking scam and though I would share a email that I sent to ST a while back when they had a relatively positive article on land banking back in 2007. I feel ST has not been as investigative as they should have been and many times, have articles that doesn't give a complete picture of investments , almost to the extend that it would appear they dare not provide any additional information or view other that so called "experts" with vested interests.
LETTER TO STRAITS TIMES JOURNALIST
I wonder if you have done a proper investigation into the whole land banking issues, especially about companies like X since there has been numerous discussion about scams by them in the internet ? A simple search on the internet will throw up lots of information about such scams and how these scams works even if the titles or funds are put into escrow until the sales completed.
Your article by not addressing such issues does a great dis-service to the general public. I hope that ST will follow up with the investigative style that expose the previous NKF and that that has made us Singaporean proud of ST.
http://mywealthplanner.wordpress.com/2006/10/28/profitable-plots-investing-in-land-banks-1/
While I have tried to put reply to this article in the forum, I feels that this is insufficient for those readers that do not make use of the internet as much.
I would appreciate if yourself or your editor could look into this and do a proper follow up articles. And in view of the large amount of money changing hand just because of a simple article like this . I've also got calls from various companies trying to sell the land banks ideas and doing some "talks" over this weekend and having read your articles, I'm wondering if the timing of these calls is co-incident or deliberately timed to be after your article.
Friday, August 01, 2008
Exessive exposure?
In portfolio management, it is important to spread the investments and avoid having large stakes in certain investment. This is called concentration risk.
A stake of more than 5% is considered high. A better level should be not more than 3%.
I am somewhat surprised to read a report in Bloomberg about the following investments:
> GIC invested $18 billion in UBS and Citibank, representing 6% of its portfolio of $300 billion
> Temasek invested $5 billion in Merill Lynch, represented 5% of its portfolio of $100 billion.
Perhaps the total portfolio managed by GIC and Temasek is more than the amounts indicated. If not, the above investments would be considered as excessive.
A stake of more than 5% is considered high. A better level should be not more than 3%.
I am somewhat surprised to read a report in Bloomberg about the following investments:
> GIC invested $18 billion in UBS and Citibank, representing 6% of its portfolio of $300 billion
> Temasek invested $5 billion in Merill Lynch, represented 5% of its portfolio of $100 billion.
Perhaps the total portfolio managed by GIC and Temasek is more than the amounts indicated. If not, the above investments would be considered as excessive.
Joke: Temperamental
Tom: Ther's one word that describes my wife: temperamental.
John: In what way?
Tom: She's fifty percent temper, and fifty percent mental.
John: In what way?
Tom: She's fifty percent temper, and fifty percent mental.
Buy ID7 from Business Center
Dear Mr Tan,
I am a recent graduate and have been in the job market for about a year now. I would like to thank you for your advise with regards to insurance and fianncial planning which have been very insightful. I have had many friends over the past year who have tried to sell me ILPs from the various insurance agencies. Your blog has truly been a good guide in making the right decisions.
I am interested in the flexilink plan and ID7 plan from NTUC. Could you please refer me to NTUC Income agents who are still willing to offer these plans? I had written directly to the NTUC business centre with regards to my interest in ID7, but I had not received any reply from them.
Your advise is much appreciated.
REPLY
I suggest that you visit the business center and talk to a salaried consultant. You should insist on ID7. Do not allow them to sell you another product.
I am a recent graduate and have been in the job market for about a year now. I would like to thank you for your advise with regards to insurance and fianncial planning which have been very insightful. I have had many friends over the past year who have tried to sell me ILPs from the various insurance agencies. Your blog has truly been a good guide in making the right decisions.
I am interested in the flexilink plan and ID7 plan from NTUC. Could you please refer me to NTUC Income agents who are still willing to offer these plans? I had written directly to the NTUC business centre with regards to my interest in ID7, but I had not received any reply from them.
Your advise is much appreciated.
REPLY
I suggest that you visit the business center and talk to a salaried consultant. You should insist on ID7. Do not allow them to sell you another product.
Investing in the stock market
Hi Mr. Tan,
I have limited savings every month ($100 to $200) but I want to invest in the stock market. Is it advisable to invest thru poems share builders plan ? Details at http://www.poems.com.sg/FinancialServices/sbpintrod.asp?value=sbp
REPLY
You can invest through POEMS.
It is better to invest in a well diversified fund, i.e. the STI ETF.
Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
I have limited savings every month ($100 to $200) but I want to invest in the stock market. Is it advisable to invest thru poems share builders plan ? Details at http://www.poems.com.sg/FinancialServices/sbpintrod.asp?value=sbp
REPLY
You can invest through POEMS.
It is better to invest in a well diversified fund, i.e. the STI ETF.
Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
Thursday, July 31, 2008
Arguments against a Minimum Wage Policy
The following arguments have been advanced against a "minimum wage policy" in Singapore:
1. Our business will be uncompetitive and will move to other countries
2. This policy is difficult to enforce, specially for small businesses
3. Our locals will be costly and lose jobs to foreign workers in Singapore
4. This policy is against free market principles.
5. The low wage workers are entitled to Workfare supplements
6. It will increase unemployment
Do you agree with these arguments? Are there reasons to support a minimum wage policy?
1. Our business will be uncompetitive and will move to other countries
2. This policy is difficult to enforce, specially for small businesses
3. Our locals will be costly and lose jobs to foreign workers in Singapore
4. This policy is against free market principles.
5. The low wage workers are entitled to Workfare supplements
6. It will increase unemployment
Do you agree with these arguments? Are there reasons to support a minimum wage policy?
Joke: A present from the wife
A: Where did you get this nice suit?
B: It was a present from my wife. I came home unexpectedly early from the office the other evening, and there it was - hanging over the back of a chair in the bedroom.
B: It was a present from my wife. I came home unexpectedly early from the office the other evening, and there it was - hanging over the back of a chair in the bedroom.
Dual Currency Investment
A consumer was persuaded by the bank to invest in a linked-currency product, or also called a dual currency investment. It is explained in this FAQ:
http://www.tankinlian.com/faq/duali.html
He asked me to explain why this product is to the disdvantage of the consumer.
The actual product is quite complex, so it is not easy to understand, and not easy to explain. It involves the use of spot rate and target rate, and the practice or terminology may differ from one bank to another.
I will give a simplified example. Suppose you have SGD 100,000. If you keep it on 1 month deposit, you can earn interest rate of 1.2% p.a. If you buy a AUD-linked product, you may earn say interest at 6% p.a. The difference of 4.8% in interest rate will give you 0.4% for one month.
Suppose that there is a 50% chance that AUD will appreciate by 1% in a month, and 50% chance that it will depreciate by 1%.
If AUD appreciates by 1%, you will not get this gain as you have already been paid the additional 0.4% interest. If AUD depreciates by 1%, you have suffered a loss of 0.6% (after deducting the additional interest of 0.4%).
Why face the risk of losing 0.6%, when your gain is only 0.4% with similar probability?
In real life, there is a risk of making a larger loss of more than 1%. The currency could depreciate by 5% in a month. You will suffer the risk of this large loss, without the benefit of a similar gain, as your actual gain is capped at 0.4%.
The bank officer tells you, "If AUD drops, you can keep AUD and wait for it to recover." This is a misleading advice. You have actually suffered a loss and if you keep it longer, you suffer the risk of a bigger loss.
Look at it from another angle. Due to the arrangement, you had to buy AUD at the earlier price when you could buy it 1 month later at 1% less. So, you have suffered a loss of 1% on AUD and after deducting the 0.4% additional interest, the net loss is 0.6%.
Conclusion: The terms of the dual currency investment are set by the bank in their favor. These terms are usually unfavorable to the consumer. It is best to avoid this type of structured product, as they are structured to your disadvantage.
http://www.tankinlian.com/faq/duali.html
He asked me to explain why this product is to the disdvantage of the consumer.
The actual product is quite complex, so it is not easy to understand, and not easy to explain. It involves the use of spot rate and target rate, and the practice or terminology may differ from one bank to another.
I will give a simplified example. Suppose you have SGD 100,000. If you keep it on 1 month deposit, you can earn interest rate of 1.2% p.a. If you buy a AUD-linked product, you may earn say interest at 6% p.a. The difference of 4.8% in interest rate will give you 0.4% for one month.
Suppose that there is a 50% chance that AUD will appreciate by 1% in a month, and 50% chance that it will depreciate by 1%.
If AUD appreciates by 1%, you will not get this gain as you have already been paid the additional 0.4% interest. If AUD depreciates by 1%, you have suffered a loss of 0.6% (after deducting the additional interest of 0.4%).
Why face the risk of losing 0.6%, when your gain is only 0.4% with similar probability?
In real life, there is a risk of making a larger loss of more than 1%. The currency could depreciate by 5% in a month. You will suffer the risk of this large loss, without the benefit of a similar gain, as your actual gain is capped at 0.4%.
The bank officer tells you, "If AUD drops, you can keep AUD and wait for it to recover." This is a misleading advice. You have actually suffered a loss and if you keep it longer, you suffer the risk of a bigger loss.
Look at it from another angle. Due to the arrangement, you had to buy AUD at the earlier price when you could buy it 1 month later at 1% less. So, you have suffered a loss of 1% on AUD and after deducting the 0.4% additional interest, the net loss is 0.6%.
Conclusion: The terms of the dual currency investment are set by the bank in their favor. These terms are usually unfavorable to the consumer. It is best to avoid this type of structured product, as they are structured to your disadvantage.
Wednesday, July 30, 2008
Avoid Dual Currency Investments
Hi Mr. Tan,
I refer to your FAQ on dual currency investment. I'm also being asked by my bank to invest in such type of investment - SGD/AUD.
I'm really waiting for the AUD to drop (or SGD to improve), to transfer my funds from SGD to AUD and send it to Australia. The bank said, since you're waiting, why not invest in this product.
My question after reading your example is, when would I stand to lose (you mentioned if the currency is converted to the linked currency). I don't quite understand when I would make a loss (my risk).
I understand that I can earn the interest if the SGD rate drops; I understand that I can earn if the AUD rate improves and my currency is converted at the agreed target rate. Either way, it's just whether I earn more or earn less, but I'm still earning, right?
Please give an example if it helps better explain how I will lose on my initial investment?
REPLY
I advise people to avoid the linked currency products. My reasons are set out here: http://www.tankinlian.com/faq/duali.html
I refer to your FAQ on dual currency investment. I'm also being asked by my bank to invest in such type of investment - SGD/AUD.
I'm really waiting for the AUD to drop (or SGD to improve), to transfer my funds from SGD to AUD and send it to Australia. The bank said, since you're waiting, why not invest in this product.
My question after reading your example is, when would I stand to lose (you mentioned if the currency is converted to the linked currency). I don't quite understand when I would make a loss (my risk).
I understand that I can earn the interest if the SGD rate drops; I understand that I can earn if the AUD rate improves and my currency is converted at the agreed target rate. Either way, it's just whether I earn more or earn less, but I'm still earning, right?
Please give an example if it helps better explain how I will lose on my initial investment?
REPLY
I advise people to avoid the linked currency products. My reasons are set out here: http://www.tankinlian.com/faq/duali.html
What the Financial Adviser is expected to do
Q7: What can I expect a FA representative to do when he recommends an investment product to me?
A: A FA representative must take all reasonable steps to:
1. Determine your investment objectives, risk tolerance, financial situation and investment experience;
2. Ensure that the product he recommends is suitable for you, taking into account the information you gave; and
3. Explain to you why the product he is recommending is suitable for you.
You should provide complete and accurate information to ensure that the FA representative is able to recommend a suitable product for you.
This advice, and other useful tips, can be found in this webpage:http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
A: A FA representative must take all reasonable steps to:
1. Determine your investment objectives, risk tolerance, financial situation and investment experience;
2. Ensure that the product he recommends is suitable for you, taking into account the information you gave; and
3. Explain to you why the product he is recommending is suitable for you.
You should provide complete and accurate information to ensure that the FA representative is able to recommend a suitable product for you.
This advice, and other useful tips, can be found in this webpage:http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
Unit trusts and ILP
Dear Mr. Tan,
I am trying to find a suitable investment product. I go to a bank, it sells me unit trusts. I go to an insurance company, it sells me ILPs. Can't insurance companies sell units and bank sell ILPs as well?
REPLY
Banks already sell ILP for insurance companies. These products have the same high charges and give poor value to customers.
Insurance companies do not sell unit trusts. They prefer to sell ILPs which allow them to pay high commissIon to their agent and earn a high profit margin.
I am trying to find a suitable investment product. I go to a bank, it sells me unit trusts. I go to an insurance company, it sells me ILPs. Can't insurance companies sell units and bank sell ILPs as well?
REPLY
Banks already sell ILP for insurance companies. These products have the same high charges and give poor value to customers.
Insurance companies do not sell unit trusts. They prefer to sell ILPs which allow them to pay high commissIon to their agent and earn a high profit margin.
Joke: A keen fisherman
I was watching a funeral the other day and upon the coffin lay a fishing rod, a reel and a fishing basket. I said to the fellow next to me: "He must have been a very keen fisherman?"
The man turned to me and said: "He still is. He's going straight to a fishing match after they've burried his wife."
The man turned to me and said: "He still is. He's going straight to a fishing match after they've burried his wife."
Tuesday, July 29, 2008
Avoid participating policies
Dear Mr. Tan,
I have several policies with X. I received a letter showing a cut in the bonus rates, to be compensated by higher rates of special bonus. But the rates of the special bonus for my different policies are quite different. How do I know if I am getting a fair rate of bonus?
REPLY
I am also quite confused with the different rates of bonus on my policies. More importantly, I find that my participating polices have still not reached the breakeven point after being in force for more than 10 years. I suspect that they have not distributed a fair rate of bonus, in spite of the attractive yield earned on the fund over the past ten years. I have raised this matter with X, but they keep giving me unsatisfactory replies.
My advice to the public is: Never invest in any participating life policy, including whole life policies where the premiums is paid for10 or 20 years. Here are the reasons:
1. The distribution cost is high and can take away up to 2 years of your savings. That is a lot of money to be given away.
2. You will not get a fair rate of return, as the insurance company will pay bonus that are far less than what the investments actually earned
Another actuary, who knows what is going on, told me that he avoids participating policies for the same reason. He will only buy Term insurance. He prefers to invest his savings in unit trusts, as the charges are lower and are transparent.
I have several policies with X. I received a letter showing a cut in the bonus rates, to be compensated by higher rates of special bonus. But the rates of the special bonus for my different policies are quite different. How do I know if I am getting a fair rate of bonus?
REPLY
I am also quite confused with the different rates of bonus on my policies. More importantly, I find that my participating polices have still not reached the breakeven point after being in force for more than 10 years. I suspect that they have not distributed a fair rate of bonus, in spite of the attractive yield earned on the fund over the past ten years. I have raised this matter with X, but they keep giving me unsatisfactory replies.
My advice to the public is: Never invest in any participating life policy, including whole life policies where the premiums is paid for10 or 20 years. Here are the reasons:
1. The distribution cost is high and can take away up to 2 years of your savings. That is a lot of money to be given away.
2. You will not get a fair rate of return, as the insurance company will pay bonus that are far less than what the investments actually earned
Another actuary, who knows what is going on, told me that he avoids participating policies for the same reason. He will only buy Term insurance. He prefers to invest his savings in unit trusts, as the charges are lower and are transparent.
Personal Automated Transport
Do you like a new type of transport that operates like a taxi, at low cost and does not need a driver? Read about it in:
www.singaporepublictransport.blogspot.com
www.singaporepublictransport.blogspot.com
Difference between two statements
What is the difference between these two statements:
statement 1
sum of liability in respect of each policy of the participating fund - $X
statement 2
total liability in respect of all the policies in the participating fund - $X
statement 1
sum of liability in respect of each policy of the participating fund - $X
statement 2
total liability in respect of all the policies in the participating fund - $X
Definition of integrity
Source: Wikipedia
In discussions on behavior and morality, one view of the property of integrity sees it as the virtue of basing actions on an internally-consistent framework of principles. This scenario may emphasize depth of principles and adherence of each level to the next. One can describe a person as having integrity to the extent that everything that that person does derives from the same core set of values. While those values may change, their consistency with each other and with the person's actions determine the person's degree of integrity.
Some commentators stress the idea of integrity as personal honesty: acting according to one's beliefs and values at all times. Speaking about integrity can emphasize the "wholeness" or "intactness" of a moral stance or attitude (harking back wittingly or unwittingly to the etymological parallels of the word in the Latin intactus, meaning "untouched"). Relevant views of wholeness may also emphasize commitment and authenticity. Structural integrity in engineering derives from this concept.
Some regard integrity as a virtue in that they see accountability and moral responsibility as necessary tools for maintaining consistency between one's actions and one's principles, methods and measures, especially when an expected result appears incongruent with observed outcome.
In discussions on behavior and morality, one view of the property of integrity sees it as the virtue of basing actions on an internally-consistent framework of principles. This scenario may emphasize depth of principles and adherence of each level to the next. One can describe a person as having integrity to the extent that everything that that person does derives from the same core set of values. While those values may change, their consistency with each other and with the person's actions determine the person's degree of integrity.
Some commentators stress the idea of integrity as personal honesty: acting according to one's beliefs and values at all times. Speaking about integrity can emphasize the "wholeness" or "intactness" of a moral stance or attitude (harking back wittingly or unwittingly to the etymological parallels of the word in the Latin intactus, meaning "untouched"). Relevant views of wholeness may also emphasize commitment and authenticity. Structural integrity in engineering derives from this concept.
Some regard integrity as a virtue in that they see accountability and moral responsibility as necessary tools for maintaining consistency between one's actions and one's principles, methods and measures, especially when an expected result appears incongruent with observed outcome.
Investment charges
An anonymous reader wrote:
"I received this letter my company's 401K provider, It was supposed to convince me to sign up with AdviceTrack, and give them another half-percent of my retirement funds so that they could manage my investments for me.
The chart, however, isn't very convincing. If I continue to manage my funds myself, I end up with $76,564 a year. If I let their experts manage my funds for me, I get a whopping $67,619 - or, $9,000 less. Glad I'm not an expert."
http://thedailywtf.com/Articles/The-Investment-Experts.aspx
Lesson: This anonymous reader did read and understand the brochure, which gave honest information. He decided to invest on his own. Many people may not be aware about the charges and sign up to use the advertised service.
The same situation applies to many people who buy high cost life insurance and structured financial products.
"I received this letter my company's 401K provider, It was supposed to convince me to sign up with AdviceTrack, and give them another half-percent of my retirement funds so that they could manage my investments for me.
The chart, however, isn't very convincing. If I continue to manage my funds myself, I end up with $76,564 a year. If I let their experts manage my funds for me, I get a whopping $67,619 - or, $9,000 less. Glad I'm not an expert."
http://thedailywtf.com/Articles/The-Investment-Experts.aspx
Lesson: This anonymous reader did read and understand the brochure, which gave honest information. He decided to invest on his own. Many people may not be aware about the charges and sign up to use the advertised service.
The same situation applies to many people who buy high cost life insurance and structured financial products.
Liability and cash value
The MAS website contains the annual return submitted by insurance companies. Row 5 of Annex 1 K – Policy Liability of Participating Fund reported a figure as “sum of liability in respect of each policy of the participating fund”.
From the description, I presume that this total figure is obtained by adding up the individual figures applicable to each participating policy. I hope that this statement means what it says.
You can write to your insurance company to ask for:
1. the individual liability for each of your participating policies
2. the cash value for the same policy
3. the difference between these two figures
For example, if the liability for the policy is $30,000 and the cash value is $25,000, is it fair for the insurance company to keep $5,000 as additional profit, when they have already deducted their expenses, mortality charges and profit over the years, in arriving at the liability of $30,000. Are policyholders being cheated?
If a customer has $30,000 in the bank and the bank report it as the liabilty to the company, the bank is required to pay out the full amount to the customer on withdrawal. I believe that the same principle should apply to an insurance company.
Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board(IASB). The following is a quotation from IFRS Framework:
> A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits/
Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU.
From the description, I presume that this total figure is obtained by adding up the individual figures applicable to each participating policy. I hope that this statement means what it says.
You can write to your insurance company to ask for:
1. the individual liability for each of your participating policies
2. the cash value for the same policy
3. the difference between these two figures
For example, if the liability for the policy is $30,000 and the cash value is $25,000, is it fair for the insurance company to keep $5,000 as additional profit, when they have already deducted their expenses, mortality charges and profit over the years, in arriving at the liability of $30,000. Are policyholders being cheated?
If a customer has $30,000 in the bank and the bank report it as the liabilty to the company, the bank is required to pay out the full amount to the customer on withdrawal. I believe that the same principle should apply to an insurance company.
Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board(IASB). The following is a quotation from IFRS Framework:
> A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits/
Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU.
Joke: a committee
The last time I sat on a committee, we were presented with a plan which had two alternatives. We therefore narrowed it down to eighteen possibilities for further discusison.
Monday, July 28, 2008
Land banking
A friend told this story to me.
Singaporeans love land. They have seen the price of land increase from $3 psf to $300 psf over the past 50 years. As they missed this wonderful investment, they are ready to jump at similar opportunities beyond Singapore.
Some entrepreneurs found a way to meet this demand. They choose a familiar city in Canada or USA. They are able to buy a big plot of land far away from the city, at a very low price. They divide the land into plots of marketable size and mark up the price by 10 times or more.
They employ a marketing company to sell these plots to Singaporeans. The marketing company can a large commission, maybe 30% or more, from the sale price. Many consultants love to sell this product and earn big commissions.
There is no way that the investor will know that the land is in the wilderness, with no road access, or facilities like power or water. They do not know the real value of the land, except the promise of the marketer that no investor had sold the land at a loss. (Actually, there is no transaction at all, as there is no investor willing to buy the plot from the original investor).
What is this investment called? It is called "land banking".
Singaporeans love land. They have seen the price of land increase from $3 psf to $300 psf over the past 50 years. As they missed this wonderful investment, they are ready to jump at similar opportunities beyond Singapore.
Some entrepreneurs found a way to meet this demand. They choose a familiar city in Canada or USA. They are able to buy a big plot of land far away from the city, at a very low price. They divide the land into plots of marketable size and mark up the price by 10 times or more.
They employ a marketing company to sell these plots to Singaporeans. The marketing company can a large commission, maybe 30% or more, from the sale price. Many consultants love to sell this product and earn big commissions.
There is no way that the investor will know that the land is in the wilderness, with no road access, or facilities like power or water. They do not know the real value of the land, except the promise of the marketer that no investor had sold the land at a loss. (Actually, there is no transaction at all, as there is no investor willing to buy the plot from the original investor).
What is this investment called? It is called "land banking".
National Day 2008
National Day is approaching. We celebrate National Day on 9 August. I will be joining my friend for a visit to an orphanage.
What does the 5 stars of our national flag mean to Singaporeans? You can read their views in:
www.theonlinecitizen.com. You can also give your views.
What does the 5 stars of our national flag mean to Singaporeans? You can read their views in:
www.theonlinecitizen.com. You can also give your views.
Dealing with a Financial Adviser - what to look out for
(5) Be careful of verbal promises and guarantees of high returns. Never rely on verbal promises from your FA or its representative. Anything that sounds too good to be true probably is. Make sure that you understand what is guaranteed and what is not, and insist on written confirmation from your FA on any guaranteed returns or benefits.
This advice, and other useful tips, can be found in this webpage:
http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
This advice, and other useful tips, can be found in this webpage:
http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
Financial advisers
COMMENT POSTED IN MY BLOG
Seriously in Singapore, we do not need so many Financial Agents, we only need 1 Independent Financial Agent (IFA) per 1,000 population. If Singapore have a population of 4.6 million, then we only need 4,600 qualified IFAs. However, if I am not wrong, the number we have is a five-figure. Anyone can tell us how many Financial Agents in Singapore?
In Singapore, we have 1.6 doctors, 0.3 dentists and 4.8 nurses/midwives per 1,000 population, but the number of Financial Agents in Singapore is more than these numbers combined.
Not everyone need them, those first timers in Financial Planning, and those with a high net worth asset may need them.After going through Financial Planning with a IFA and also going through a good Financial education, many of us should be able to handle our own Financial status ourselves.
The government should make "Personal and Family Financial Planning" as a module compulsory for all Final year ITE, Polytechnic and University students, and also those going to ORD from their National Service. They have to pass a written and practical test. These are the people who need such education the most. Another module that I suggest that must be made compulsory and they have to pass a written and practical test is "Relationship, Marriage and Family Planning" :-)
Yong Kiat
Seriously in Singapore, we do not need so many Financial Agents, we only need 1 Independent Financial Agent (IFA) per 1,000 population. If Singapore have a population of 4.6 million, then we only need 4,600 qualified IFAs. However, if I am not wrong, the number we have is a five-figure. Anyone can tell us how many Financial Agents in Singapore?
In Singapore, we have 1.6 doctors, 0.3 dentists and 4.8 nurses/midwives per 1,000 population, but the number of Financial Agents in Singapore is more than these numbers combined.
Not everyone need them, those first timers in Financial Planning, and those with a high net worth asset may need them.After going through Financial Planning with a IFA and also going through a good Financial education, many of us should be able to handle our own Financial status ourselves.
The government should make "Personal and Family Financial Planning" as a module compulsory for all Final year ITE, Polytechnic and University students, and also those going to ORD from their National Service. They have to pass a written and practical test. These are the people who need such education the most. Another module that I suggest that must be made compulsory and they have to pass a written and practical test is "Relationship, Marriage and Family Planning" :-)
Yong Kiat
Joke: I remain
A landlord wrote to one of his tenants, asking him if he wished to renew the lease of the premises he was occupying. He received this brief answer: "Dear Sir, I remain, Yours faithfully."
Sunday, July 27, 2008
Accounting liability
A life insurance company has to file an annual report that shows the total of the "liability" on each individual policy. I believe that they pay a cash value that is much lower than the reported "liability". Is this fair? What does "liability" really mean?
-----------------------------------------------------
In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
> They embody a duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services or other yielding of economic benefits, at a specified or determinable date, on occurrence of a specified event, or on demand;
> The duty or responsibility obligates the entity leaving it little or no discretion to avoid it; and,
> The transaction or event obligating the entity has already occurred.
Liabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations. An equitable obligation is a duty based on ethical or moral considerations. A constructive obligation is an obligation that can be inferred from a set of facts in a particular situation as opposed to a contractually based obligation.
Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board(IASB). The following is a quotation from IFRS Framework:
> A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits
Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU.
-----------------------------------------------------
In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
> They embody a duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services or other yielding of economic benefits, at a specified or determinable date, on occurrence of a specified event, or on demand;
> The duty or responsibility obligates the entity leaving it little or no discretion to avoid it; and,
> The transaction or event obligating the entity has already occurred.
Liabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations. An equitable obligation is a duty based on ethical or moral considerations. A constructive obligation is an obligation that can be inferred from a set of facts in a particular situation as opposed to a contractually based obligation.
Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board(IASB). The following is a quotation from IFRS Framework:
> A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits
Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU.
High cost of advertising
I met a friend at a function. He told me that he had all his policies with Income previously. Recently, he decided to buy a life annuity from Great Eastern. He did not like what was happening in Income recently, with the high cost of advertising and the change in bonus structure.
I told him that Great Eastern may not offer a better deal, compared to Income. But, he was quite sure about his decision.
I told him that Great Eastern may not offer a better deal, compared to Income. But, he was quite sure about his decision.
Financial adviser wants to help people
Hi Mr Tan,
I just come accross your website, when I m doing my study for my Module 5 of CMFAS exam and try to look for more information regarding Insurance.
I wanted to become a Financial Advisor, because I thought it is a good prospect job as it can earn income and can help people or their family when they are sick or after they passed away.
I never come accross to become insurance agent, until I made a claim for for my surgery from private Medishield and found that insurance is quite good.
Furthermore, I have read thru Module 5 and Module 9, from what the text book write and information giving, it seem insurance company really help people to save and be prepared when they need protection.
From Module 5, found that MAS did stated in rules and regulations as well as guidelines for FA to follow. Well this is good, we really collect client's info, analysed, and recommend based on the clint's needs.
After reading your blog, and after knowing what is cost of distribution and effect of deduction, I started to doubt my decision.
I would like to ask some questions:
1) It is all high cost finance products is not good?
2) Do you think it is a good idea to do saving/invest thru Insurance?
Mr Tan, I will be very appreciate if you can give comments to my decision to become insurance agents or share your experieces with us or my fellows friends. I want to earn money but knowing that(君子爱财,取之有道) a person earn the money in proper manner. I want to help people and educate people how to save and get protection when they need (this is what I want too)
Lastly, the company which sending me to training is Y. I think there are many people like me who is thinking that agent can help people and earn money. But I hope you can explain to us the actual and the reality of this world and market and what are the ways is the correct, if we want to become insurance agent.
REPLY
If you sell insurance for Y, you can earn high commission, but your customers will get a poor yield.
I advise consumers to buy term insurance and invest in a low cost fund. They should avoid high cost insurance products, such as whole life, endowment and ILP.
Read the FAQs in my website,
www.tankinlian.com/faq
I just come accross your website, when I m doing my study for my Module 5 of CMFAS exam and try to look for more information regarding Insurance.
I wanted to become a Financial Advisor, because I thought it is a good prospect job as it can earn income and can help people or their family when they are sick or after they passed away.
I never come accross to become insurance agent, until I made a claim for for my surgery from private Medishield and found that insurance is quite good.
Furthermore, I have read thru Module 5 and Module 9, from what the text book write and information giving, it seem insurance company really help people to save and be prepared when they need protection.
From Module 5, found that MAS did stated in rules and regulations as well as guidelines for FA to follow. Well this is good, we really collect client's info, analysed, and recommend based on the clint's needs.
After reading your blog, and after knowing what is cost of distribution and effect of deduction, I started to doubt my decision.
I would like to ask some questions:
1) It is all high cost finance products is not good?
2) Do you think it is a good idea to do saving/invest thru Insurance?
Mr Tan, I will be very appreciate if you can give comments to my decision to become insurance agents or share your experieces with us or my fellows friends. I want to earn money but knowing that(君子爱财,取之有道) a person earn the money in proper manner. I want to help people and educate people how to save and get protection when they need (this is what I want too)
Lastly, the company which sending me to training is Y. I think there are many people like me who is thinking that agent can help people and earn money. But I hope you can explain to us the actual and the reality of this world and market and what are the ways is the correct, if we want to become insurance agent.
REPLY
If you sell insurance for Y, you can earn high commission, but your customers will get a poor yield.
I advise consumers to buy term insurance and invest in a low cost fund. They should avoid high cost insurance products, such as whole life, endowment and ILP.
Read the FAQs in my website,
www.tankinlian.com/faq
Saturday, July 26, 2008
Joke: Count the legs
"I bet you don't know how many sheep ther are in this field?" said the English farmer to the Irish visitor.
"The Irishman glanced around the field and then replied, "Three hundred and eighty six."
The farmer was astonished. "That's incredible! You're perfectly right. How did you manage it?"
"Oh, it was quite simple," said the Irishman. "I just counted the number of legs and divided by four."
"The Irishman glanced around the field and then replied, "Three hundred and eighty six."
The farmer was astonished. "That's incredible! You're perfectly right. How did you manage it?"
"Oh, it was quite simple," said the Irishman. "I just counted the number of legs and divided by four."
High charges for ILP products
Which insurance companies have the highest charges for ILP products?
You can find the study in Dr. Money's website:
http://www.askdrmoney.com/Ins_ILP_RP.htm
You can find the study in Dr. Money's website:
http://www.askdrmoney.com/Ins_ILP_RP.htm
Life annuity with capital protection
Dear Mr. Tan,
I have just turned 55 and my wife will be, at the end of the year. We are interested to take up annuity policy with capital protection of $150,000 each. What are the monthly payouts like? Please provide details for both genders for payouts from 55 and 62.
REPLY
You can read this FAQ to understand the annuity, so that you can make the right decision:
http://www.tankinlian.com/faq/life.html
You can contact the insurance companies directly and ask them to quote to you. Their telephone numbers are available from this webpage:
http://www.tankinlian.com/faq/termd.html
I have just turned 55 and my wife will be, at the end of the year. We are interested to take up annuity policy with capital protection of $150,000 each. What are the monthly payouts like? Please provide details for both genders for payouts from 55 and 62.
REPLY
You can read this FAQ to understand the annuity, so that you can make the right decision:
http://www.tankinlian.com/faq/life.html
You can contact the insurance companies directly and ask them to quote to you. Their telephone numbers are available from this webpage:
http://www.tankinlian.com/faq/termd.html
Difficult to time the market
Hi Mr. Tan,
In view of the market volatility, I have been advised by my financial adviser to switch to commodity related fund (Pru Global Basics ). I invest in a wrap account and am entitled to free switching. I am not sure if i have made the right decision because the value of this fund keep dropping. I hope you could enlighten me.
REPLY
I am not able to advice on selecting the right market sector at any point of time. I normally advise people to invest in a well diversified fund comprising of all market sectors and to invest for the long term.
Read my FAQ at www.tankinlian.com/faq "Investing your savings".
In view of the market volatility, I have been advised by my financial adviser to switch to commodity related fund (Pru Global Basics ). I invest in a wrap account and am entitled to free switching. I am not sure if i have made the right decision because the value of this fund keep dropping. I hope you could enlighten me.
REPLY
I am not able to advice on selecting the right market sector at any point of time. I normally advise people to invest in a well diversified fund comprising of all market sectors and to invest for the long term.
Read my FAQ at www.tankinlian.com/faq "Investing your savings".
Improve public transport in Singapore
Read the suggestions here and give your views:
http://theonlinecitizen.com/2008/07/an-express-alternative/
http://singaporepublictransport.blogspot.com/
http://theonlinecitizen.com/2008/07/an-express-alternative/
http://singaporepublictransport.blogspot.com/
Did you buy a high cost ILP?
A few months ago, a university student showed me a benefit illustration for an investment linked policy that was being proposed to him. He was still studying and had no source of income. His mother wanted to buy the policy for him. He asked my advice.
The benefit illustration contained 24 pages of details. It is incomprehensible to most people, unless it is "explained" by the adviser. The student was clearly confused.
Here are the key figures. The monthly premium is $200 (which would represent 10% of the income of a graduate who started to work).
At the end of 42 years, when he reached age 65, the total premiums paid would have been $50,400 and the non-guaranteed surrender value would have been $53,900 (if the life fund earned 5% p.a.) or $185,900 (if the life fund earned 9% p.a.). The next column showed the effect of deduction to be $341,915.
What is this effect of deduction, and why is this figure so big?
Hidden on one of the 24 pages are the following explanation:
The deduction relate to all the charges taken from the policy. These include distribution costs, expenses, mortality and morbidity costs, surrender penalty, expected transfers to shareholders and expected tax payments. The figures illustrated relate to the effect of deductions based on the projected investment rate of return of 9% p.a.
Wow! This means that if the Life Fund was able to earn 9% p.a., the insurance company would take away $341,915 and leave the policyholder with a cash value at 65 of only $185,900. The policyholder would get only 35% of the total (which includes the savings). The insurance company and the adviser would get most of the remainder.
If the Life Fund earned only 5% p.a. , the insurance company would have taken away nearly all of the investment return and give back only the savings (in deflated dollars) to the the policyholder.
How many people have bought this type of policy at these astronomical charges? Maybe 1 million Singaporeans? How many each year? Maybe, 100,000 people?
Are you one of these people? Check your benefit illustration. Ask your insurance adviser (who was supposed to take care of your interest and explain this fact to you at the time of sale). Ask your insurance company. If you feel that you have been shortchanged, and was not properly advised at the time of the sale, you should lodge a complaint with the regulator (i.e. MAS).
I hope that the regulator will put a stop to these type of high and excessive charges, which is unfair to unsuspecting consumers. The adviser is likely to avoid mentioning this high charges to the consumer.
The benefit illustration contained 24 pages of details. It is incomprehensible to most people, unless it is "explained" by the adviser. The student was clearly confused.
Here are the key figures. The monthly premium is $200 (which would represent 10% of the income of a graduate who started to work).
At the end of 42 years, when he reached age 65, the total premiums paid would have been $50,400 and the non-guaranteed surrender value would have been $53,900 (if the life fund earned 5% p.a.) or $185,900 (if the life fund earned 9% p.a.). The next column showed the effect of deduction to be $341,915.
What is this effect of deduction, and why is this figure so big?
Hidden on one of the 24 pages are the following explanation:
The deduction relate to all the charges taken from the policy. These include distribution costs, expenses, mortality and morbidity costs, surrender penalty, expected transfers to shareholders and expected tax payments. The figures illustrated relate to the effect of deductions based on the projected investment rate of return of 9% p.a.
Wow! This means that if the Life Fund was able to earn 9% p.a., the insurance company would take away $341,915 and leave the policyholder with a cash value at 65 of only $185,900. The policyholder would get only 35% of the total (which includes the savings). The insurance company and the adviser would get most of the remainder.
If the Life Fund earned only 5% p.a. , the insurance company would have taken away nearly all of the investment return and give back only the savings (in deflated dollars) to the the policyholder.
How many people have bought this type of policy at these astronomical charges? Maybe 1 million Singaporeans? How many each year? Maybe, 100,000 people?
Are you one of these people? Check your benefit illustration. Ask your insurance adviser (who was supposed to take care of your interest and explain this fact to you at the time of sale). Ask your insurance company. If you feel that you have been shortchanged, and was not properly advised at the time of the sale, you should lodge a complaint with the regulator (i.e. MAS).
I hope that the regulator will put a stop to these type of high and excessive charges, which is unfair to unsuspecting consumers. The adviser is likely to avoid mentioning this high charges to the consumer.
Joke: A lawyer sleep in the barn
A Jew, a Hindu, and a lawyer were traveling from Chicago to Los Angeles when their car broke down late one night in Kansas. They walked to the nearest farm house and explained their situation to the farmer who answered the door.
"Ya'll be welcome to spend the night here if you want", the farmer said. "The only problem is I only have room for two. One of you will have to sleep in the barn."
"I will," exclaimed the Jew, and with that the men went to retire. A short time later came a knock at the door. It was the Jew.
"I'm sorry", the Jew said, "but I can't sleep in the barn. There's a pig in there, and my religion forbids me to sleep in the same room as a pig."
"Then I will go sleep in the barn" exclaimed the Hindu, and once more the men went to retire. Soon there came another knock at the door. It was the Hindu.
"I am very sorry", the Hindu said, "but I cannot sleep in the barn either. There is a cow in there, and my religion forbids me to sleep in the same room as a cow."
"Oh, for gosh sakes!", the lawyer cried. I'll go sleep in the damn barn!" and once again the men went to retire.
A few minutes later there came yet another knock at the door. It was the cow and the pig...
Raymond T
"Ya'll be welcome to spend the night here if you want", the farmer said. "The only problem is I only have room for two. One of you will have to sleep in the barn."
"I will," exclaimed the Jew, and with that the men went to retire. A short time later came a knock at the door. It was the Jew.
"I'm sorry", the Jew said, "but I can't sleep in the barn. There's a pig in there, and my religion forbids me to sleep in the same room as a pig."
"Then I will go sleep in the barn" exclaimed the Hindu, and once more the men went to retire. Soon there came another knock at the door. It was the Hindu.
"I am very sorry", the Hindu said, "but I cannot sleep in the barn either. There is a cow in there, and my religion forbids me to sleep in the same room as a cow."
"Oh, for gosh sakes!", the lawyer cried. I'll go sleep in the damn barn!" and once again the men went to retire.
A few minutes later there came yet another knock at the door. It was the cow and the pig...
Raymond T
Friday, July 25, 2008
Low return for 10 years
Dear Mr. Tan
I bought a Pru-link Assurance Account policy with sum assured of $120,000, crisis cover (critical illness) of $60,000, and a disability provider of just $6,000. I pay a yearly premium $3,800.
The policy started in Jan 1999 and the current surrender value is just $20,170/-
I would like to know what I should do with this policy since it is not excatly making good money. The surrender policy is much lesser than the total premiums paid to date which the policy is coming close to its 10th year.
REPLY
You can ask the insurance company to give you a projection for the next 5 years, say up to the 15th year, based on 5% and 7% gross investment yield, and deducting the charges. You may get a better idea about whether to continue or stop the policy.
I bought a Pru-link Assurance Account policy with sum assured of $120,000, crisis cover (critical illness) of $60,000, and a disability provider of just $6,000. I pay a yearly premium $3,800.
The policy started in Jan 1999 and the current surrender value is just $20,170/-
I would like to know what I should do with this policy since it is not excatly making good money. The surrender policy is much lesser than the total premiums paid to date which the policy is coming close to its 10th year.
REPLY
You can ask the insurance company to give you a projection for the next 5 years, say up to the 15th year, based on 5% and 7% gross investment yield, and deducting the charges. You may get a better idea about whether to continue or stop the policy.
4 months to settle a claim
Dear Income
I am delighted to receive the claims discharge voucher and cheque. I am extremely thankful for my resolved dispute, but, regrettedly my problem was only solved after I see the MP and approached Mr Tan Kin Lian. Why can't X solve my problem 4 months ago in a friendly manner? I want to be a kind and friendly person, why must he force me to be a typical complainingly Singaporean?
In April 2008, after calling the hotline, X got back to me and said confidently "I have checked the claims. EVERYTHING IS CORRECT". He probably thought I am a fool and he can bluff me by telling me that. I then sent him all the proofs of my claim dispute, but he played pattern to me for the past 4 months by telling me:
"Still processing"
"Waiting for hospital to resubmit claims"
"still processing"
"Finalising"
"still doing"
"Waiting for officer in charge to finalise claims" (i said "huh? i thought u r the officer in charge?")
Recently X told me that the officer in charge is Y, another person. I got her contact and called her, but over the phone she did not know my case. Hence the past 4months basically nothing was done, except X's smoking words. I am very sure X "played pingpong" and push the whole matter to another junior officer after failing to smoke me and shake me away for 4months.
Last week Y promised that she will settle by this week. Indeed she has delivered her promise - I have received the discharge voucher and cheque.
I am sure Y put in lots of hard work to speed up my claims these past week. I sincerely thank her hardwork for expediting my case and solve it up. Now I neither need to go to independent parties nor publicise my dispute.
Y was friendly to hear my problems and ackowledge receipt of my documents sent to her. Unlike X who never email me at all ever since the start of this whole problem. Absolutely nothing!!! Does he knows how to use an email?
But now I am wondering does X ever exist at all or am I dreaming?
With sincere thanks for resolving dispute.
P
I am delighted to receive the claims discharge voucher and cheque. I am extremely thankful for my resolved dispute, but, regrettedly my problem was only solved after I see the MP and approached Mr Tan Kin Lian. Why can't X solve my problem 4 months ago in a friendly manner? I want to be a kind and friendly person, why must he force me to be a typical complainingly Singaporean?
In April 2008, after calling the hotline, X got back to me and said confidently "I have checked the claims. EVERYTHING IS CORRECT". He probably thought I am a fool and he can bluff me by telling me that. I then sent him all the proofs of my claim dispute, but he played pattern to me for the past 4 months by telling me:
"Still processing"
"Waiting for hospital to resubmit claims"
"still processing"
"Finalising"
"still doing"
"Waiting for officer in charge to finalise claims" (i said "huh? i thought u r the officer in charge?")
Recently X told me that the officer in charge is Y, another person. I got her contact and called her, but over the phone she did not know my case. Hence the past 4months basically nothing was done, except X's smoking words. I am very sure X "played pingpong" and push the whole matter to another junior officer after failing to smoke me and shake me away for 4months.
Last week Y promised that she will settle by this week. Indeed she has delivered her promise - I have received the discharge voucher and cheque.
I am sure Y put in lots of hard work to speed up my claims these past week. I sincerely thank her hardwork for expediting my case and solve it up. Now I neither need to go to independent parties nor publicise my dispute.
Y was friendly to hear my problems and ackowledge receipt of my documents sent to her. Unlike X who never email me at all ever since the start of this whole problem. Absolutely nothing!!! Does he knows how to use an email?
But now I am wondering does X ever exist at all or am I dreaming?
With sincere thanks for resolving dispute.
P
Become sales oriented and may tell lies
1. Why is NTUC offering this Capital Plus? A non-NTUC agent said that NTUC is trying to raise funds. I am afraid they will drag for a few months and the interest will become lower than 2%
Reply: I do not know the answer.
2. Is the Growth policy a safe product ? I read NTUC has been over declaring the bonus in the past years .
Reply: It should be quite safe.
3. I had a NTUC life policy for 5 years. The surrender value stated in BI is $2200, but when I surrendered it, it was $1900. I surrender the policy to change to a limited pay whole life like Vivolife.
Reply: It is better to keep the life policy. Do not surrender it to buy another life policy, as you will be incurring the upfront cost again.
4. I am afraid the same thing may happen to the Growth policy, i.e. overpromise, under deliver. I think without you, Ntuc income has changed to be more sales oriented and have more tendency to tell lies. Don't know whether they really want to help people?
Reply: I do not know the answer.
2. Is the Growth policy a safe product ? I read NTUC has been over declaring the bonus in the past years .
Reply: It should be quite safe.
3. I had a NTUC life policy for 5 years. The surrender value stated in BI is $2200, but when I surrendered it, it was $1900. I surrender the policy to change to a limited pay whole life like Vivolife.
Reply: It is better to keep the life policy. Do not surrender it to buy another life policy, as you will be incurring the upfront cost again.
4. I am afraid the same thing may happen to the Growth policy, i.e. overpromise, under deliver. I think without you, Ntuc income has changed to be more sales oriented and have more tendency to tell lies. Don't know whether they really want to help people?
How to get a good deal on life insurance
In this article, Dr. Money explains how to get a good deal on your life insurance policy:
http://newpaper.asia1.com.sg/columnists/story/0,4136,167015,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,167015,00.html
http://www.tankinlian.com/drmoney/
Minimum wage in USA
The US government has raised the nation's minimum wage to USD 6.55 per hour (SGD 9) as part of the Fair Minimum Wage Act of 2007. The previous revision was made in 1997. A final increase, scheduled for July 24, 2009, will raise the minimum wage to $7.25 per hour (SGD 10).
The government's efforts may not be enough to help struggling workers, according to labor-backed Economic Policy Institute (EPI). Even with the increase, the institute believes that a full-time, minimum-wage worker earns below the poverty line for a household of two.
Businesses are concerned that higher labor costs will make an already adverse enconomic environment even more difficult.
The government's efforts may not be enough to help struggling workers, according to labor-backed Economic Policy Institute (EPI). Even with the increase, the institute believes that a full-time, minimum-wage worker earns below the poverty line for a household of two.
Businesses are concerned that higher labor costs will make an already adverse enconomic environment even more difficult.
Financial Planning Tips
Read the relevant FAQ in:
http://tankinlian.com/faq/
This link is also provided in the right panel of this blog.
http://tankinlian.com/faq/
This link is also provided in the right panel of this blog.
Thursday, July 24, 2008
Get ready for the hard times
Dr. Money advised readers to get ready for the hard times. High inflation may be here to stay.
http://newpaper.asia1.com.sg/columnists/story/0,4136,165866,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,165866,00.html
http://www.tankinlian.com/drmoney/
Cheating
Cheating is an act of lying, deception, fraud, trickery, imposture, or imposition. Cheating characteristically is employed to create an unfair advantage, usually in one's own interest, and often at the expense of others. Cheating implies the breaking of rules. The term "cheating" is less applicable to the breaking of laws, as illegal activities are referred to by specific legal terminology such as fraud or corruption.
Unjustified increase in premium for motor insurance
Insurance companies have increased their premium rates by about 20% this year. Dr. Money said that the increase is not justified, as these companies have made a lot of profit from their investments. Here is his article:
http://newpaper.asia1.com.sg/columnists/story/0,4136,168843,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,168843,00.html
http://www.tankinlian.com/drmoney/
Wednesday, July 23, 2008
Invest in Foreign Currencies
Dr. Money gives some tips on how to invest in foreign currencies to get a higher return:
http://newpaper.asia1.com.sg/columnists/story/0,4136,166429,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,166429,00.html
http://www.tankinlian.com/drmoney/
Complain about a poor deal
An insurance agent in Indonesia sold a large investment-linked policy to a senior government official. The annual premium was SGD 15,000 a year. The policyholder was angry when he learned that 15% of the premium was deducted as first year charge. He was not told about this deduction by the agent. He lodged a complaint with the insurance company.
The insurance company was worried that this official could give a lot of problem. They asked the agent to accept a lower commission of, so that only 5% was deducted, allowing 95% of the premium to be credited to the policyholder's investment. The agent agreed. Although this deduction was probably mentioned in the benefit illustration, the policyholder was able to get this special treatment because of his high position.
Actually the deduction of 15% was quite reasonable. In Singapore, 80% of the first year's premium is deducted, leaving only 20% to be invested. Most policyholders were probably not aware about this high deduction. When they found out, they are probably to ashamed or reluctant to lodge a complaint.
The insurance company was worried that this official could give a lot of problem. They asked the agent to accept a lower commission of, so that only 5% was deducted, allowing 95% of the premium to be credited to the policyholder's investment. The agent agreed. Although this deduction was probably mentioned in the benefit illustration, the policyholder was able to get this special treatment because of his high position.
Actually the deduction of 15% was quite reasonable. In Singapore, 80% of the first year's premium is deducted, leaving only 20% to be invested. Most policyholders were probably not aware about this high deduction. When they found out, they are probably to ashamed or reluctant to lodge a complaint.
Policyholder given a misleading figure
A young man bought an investment linked policy with a saving of $200 a month. He was mistaken that the premium payable for 42 years was $33,600 when the actual premium was $100,800.
He realised that the policy did not give an attractive return. He sent this message to me:
"I think the figure I received were a bit misleading and I have asked and confirmed to the advisor. I have now terminated the ILP. I have paid S$6400 and will only get back around $3,100. I guess this is a lesson learned for me. Anyway, I hope that you will keep educating people from your blog and site so that the public will be more aware about their financial planning. "
He realised that the policy did not give an attractive return. He sent this message to me:
"I think the figure I received were a bit misleading and I have asked and confirmed to the advisor. I have now terminated the ILP. I have paid S$6400 and will only get back around $3,100. I guess this is a lesson learned for me. Anyway, I hope that you will keep educating people from your blog and site so that the public will be more aware about their financial planning. "
Unethical conduct of insurance agent
Hi Mr. Tan,
Last week, I went to an insurance company to terminate my regular investment link policy. It was only purchased last December and I had considered carefully about the huge financial loss that I will incurr upon closing it. I had decided to close it despite incurring huge losses as I feel that this is in my best interest that I do not have any dealing with this company anymore.
I put up a request through my agent to reduce my monthly premium as I found the premium rather heavy for me as im currently funding my own part time studies. This delay has been dragged for more than 2 months and despite assurance from my agent,i did not receive any official writing from the company either. He told me that his admin dept was having some problems and will take some time to process my application. But I did remember filling up a form when I met him earlier to reduce the premium,he did not give me a copy either, I found it strange that he did not gave me a copy of the application form. I didn't probe much as i trusted him but..
My agent called me up shortly after I terminated my polices, he was agitated and said that I was rash in my decision and did not respect him by informing him beforehand. He wants me to reinstate my policies as my withdraw will affect his promotion and he still assure me that he had submitted my application. I told him that it was taking too long to process my reduction of premium and I do not wish to carry on any dealing with his company anymore. I was disappointed.
I called up the insurance company to check this morning and found out that there was no record of any pending application form from my account to reduce any premiums for the past 4 months. I also asked if there was any manpower shortage for the processing dept for the past few months, the Customer Service officer replied 'No'. He has been lying to me all these while, I thought that he is a responsible agent and is sincere in helping clients to plan for their future. I try to help him initally by introducing my friends to him, lucky they did not buy from him else I will feel guilty.
I paid a total of $X and only got back less than 10%. Can I get his company to compensate me as this is largely due to their agent manipulation. Can I claim for personal disappointment? I also withdraw my CPF OA investment account with this company as I was ready annoyed with them, I lose about $X in total for this account.
Who can I seek to redress my grievences and personal damages? I want to teach this agent a lesson, can I file a complaint against him?
I have written an email to them last night asking them to explain why my application was not processed and asked them for an compensation as this incident was largely due to their incompetence and insincerity. They replied by saying that they will look into this matter and give me a reply soon.
Hope you can give me your advice on this as this is causing much inconvenience and frustation to me
REPLY
I suggest that you write a complaint to the Insurance Department of the Monetary Authority of Singapore. They have a section that is responsible for market conduct, which includes the conduct of insurance agents. MAS will bring this matter officially to the insurance company. Your complaint is likely to be acted on promptly.
Last week, I went to an insurance company to terminate my regular investment link policy. It was only purchased last December and I had considered carefully about the huge financial loss that I will incurr upon closing it. I had decided to close it despite incurring huge losses as I feel that this is in my best interest that I do not have any dealing with this company anymore.
I put up a request through my agent to reduce my monthly premium as I found the premium rather heavy for me as im currently funding my own part time studies. This delay has been dragged for more than 2 months and despite assurance from my agent,i did not receive any official writing from the company either. He told me that his admin dept was having some problems and will take some time to process my application. But I did remember filling up a form when I met him earlier to reduce the premium,he did not give me a copy either, I found it strange that he did not gave me a copy of the application form. I didn't probe much as i trusted him but..
My agent called me up shortly after I terminated my polices, he was agitated and said that I was rash in my decision and did not respect him by informing him beforehand. He wants me to reinstate my policies as my withdraw will affect his promotion and he still assure me that he had submitted my application. I told him that it was taking too long to process my reduction of premium and I do not wish to carry on any dealing with his company anymore. I was disappointed.
I called up the insurance company to check this morning and found out that there was no record of any pending application form from my account to reduce any premiums for the past 4 months. I also asked if there was any manpower shortage for the processing dept for the past few months, the Customer Service officer replied 'No'. He has been lying to me all these while, I thought that he is a responsible agent and is sincere in helping clients to plan for their future. I try to help him initally by introducing my friends to him, lucky they did not buy from him else I will feel guilty.
I paid a total of $X and only got back less than 10%. Can I get his company to compensate me as this is largely due to their agent manipulation. Can I claim for personal disappointment? I also withdraw my CPF OA investment account with this company as I was ready annoyed with them, I lose about $X in total for this account.
Who can I seek to redress my grievences and personal damages? I want to teach this agent a lesson, can I file a complaint against him?
I have written an email to them last night asking them to explain why my application was not processed and asked them for an compensation as this incident was largely due to their incompetence and insincerity. They replied by saying that they will look into this matter and give me a reply soon.
Hope you can give me your advice on this as this is causing much inconvenience and frustation to me
REPLY
I suggest that you write a complaint to the Insurance Department of the Monetary Authority of Singapore. They have a section that is responsible for market conduct, which includes the conduct of insurance agents. MAS will bring this matter officially to the insurance company. Your complaint is likely to be acted on promptly.
Tuesday, July 22, 2008
More uncertainty with private Shield
Dear Mr. Tan,
I understand from MOH website that "Since 1 July 2005, each of these Medisave-approved plans have been integrated with MediShield to form a single integrated plan."
I bought a private Shield plan in 2002. I think at that time, the insurer will cancel the CPF medishield for me. Since the medisave-approved plan has been integrated with medishield from 1 July 2005, does it mean I am covered under the private Shield while retaining the benefits of MediShield membership? Or only people who signed up after 1 July 2005 for the private shield plan will benefit from the changes on 1 July 2005.
If I am retaining the Medishield membership though I signed for a private shield plan in 2002, does the medical underwriting for this medishield component starts from 2002 after I signed up for the private Shield (which may include exclusions imposed by the private insurer) or does it starts from the first day I had my Medishield which is many years ago before 2002 which has no exclusion?
REPLY
When you bought the private Shield in 2002, you are subject to the underwriting requirements at that time. If you have any pre-existing conditions that are not disclosed, the insurer is likely to reject your claim. A few people have approaced me on the rejection of this claim under a private Shield plan.
The "integration" exerise is a private arrangement between the insurer and CPF. It does not have any bearing on the contract between you and your Shield insurer, regarding the disclosure and exclusion of pre-existing conditions.
This is my understanding of the likely practice. It is best that you confirm with your insurer on this matter.
ADDITIONAL NOTE:
I understand that some private Shield policy has a clause that read as follows: "For the avoidance of doubt, any Pre-existing illnesses, Diseases or Impairment that have been covered under Medishield shall continue to be covered under this Policy up to the Medishield policy limit .... etc."
If you have this clause, you will continue to be covered for the conditions previously covered under the Medishield policy.
I understand from MOH website that "Since 1 July 2005, each of these Medisave-approved plans have been integrated with MediShield to form a single integrated plan."
I bought a private Shield plan in 2002. I think at that time, the insurer will cancel the CPF medishield for me. Since the medisave-approved plan has been integrated with medishield from 1 July 2005, does it mean I am covered under the private Shield while retaining the benefits of MediShield membership? Or only people who signed up after 1 July 2005 for the private shield plan will benefit from the changes on 1 July 2005.
If I am retaining the Medishield membership though I signed for a private shield plan in 2002, does the medical underwriting for this medishield component starts from 2002 after I signed up for the private Shield (which may include exclusions imposed by the private insurer) or does it starts from the first day I had my Medishield which is many years ago before 2002 which has no exclusion?
REPLY
When you bought the private Shield in 2002, you are subject to the underwriting requirements at that time. If you have any pre-existing conditions that are not disclosed, the insurer is likely to reject your claim. A few people have approaced me on the rejection of this claim under a private Shield plan.
The "integration" exerise is a private arrangement between the insurer and CPF. It does not have any bearing on the contract between you and your Shield insurer, regarding the disclosure and exclusion of pre-existing conditions.
This is my understanding of the likely practice. It is best that you confirm with your insurer on this matter.
ADDITIONAL NOTE:
I understand that some private Shield policy has a clause that read as follows: "For the avoidance of doubt, any Pre-existing illnesses, Diseases or Impairment that have been covered under Medishield shall continue to be covered under this Policy up to the Medishield policy limit .... etc."
If you have this clause, you will continue to be covered for the conditions previously covered under the Medishield policy.
Low cost insurance and investment funds
I am now working as a consultant to a life insurance company in Singapore. It intends to launch low cost insurance and investment funds in early 2009.
Details of suitable products are set out in these FAQs:
http://www.tankinlian.com/faq/low.html
http://www.tankinlian.com/faq/btid.html
http://www.tankinlian.com/faq/termassurance.html
http://www.tankinlian.com/faq/finplan.html
http://www.tankinlian.com/faq/age65.html
Generally, my advice is:
1. Buy low cost term life and medical insurance to protect your earnings
2. Invest your savings in a low cost fund to get an attractive return
3. Avoid high cost and complicated financial products
4. Educate yourself to make the right choice
5. Buy directly, to avoid paying the high commission insurance agents
Details of suitable products are set out in these FAQs:
http://www.tankinlian.com/faq/low.html
http://www.tankinlian.com/faq/btid.html
http://www.tankinlian.com/faq/termassurance.html
http://www.tankinlian.com/faq/finplan.html
http://www.tankinlian.com/faq/age65.html
Generally, my advice is:
1. Buy low cost term life and medical insurance to protect your earnings
2. Invest your savings in a low cost fund to get an attractive return
3. Avoid high cost and complicated financial products
4. Educate yourself to make the right choice
5. Buy directly, to avoid paying the high commission insurance agents
Business ethics
We need strong business ethics, to operate business honestly and give fair value to consumers. I am speaking on this topic at a dinner of the alumni of an American university.
Here are some points contained in my speech:
In Ancient China, the “four categories of the people” was a hierarchic social class structure developed by scholars as far back as the late Zhou Dynasty (c. 1046–256 BCE). In descending order, these were the shi (gentry scholars), the nong (peasant farmers), the gong (artisans and craftsmen), and the shang (merchants and traders).
Why are the merchants and traders treated at the lowest rank?
The merchants, traders, and peddlers of goods were viewed by the scholarly elite as essential members of society, but were placed on the lowest of the four grades in the social hierarchy. The scholars in their writings denounced the merchant class as greedy and lacking moral character. Merchants were seen as somewhat parasitic to the needs of all other groups in society, since they used the goods that others produced and made their own profits from them. In essence, they were seen as business savvy, but not morally cultivated enough to be venerated representatives of Chinese culture.
I wonder if our business community of today fall into the same description of "greedy and lacking moral character?"
Here are some points contained in my speech:
In Ancient China, the “four categories of the people” was a hierarchic social class structure developed by scholars as far back as the late Zhou Dynasty (c. 1046–256 BCE). In descending order, these were the shi (gentry scholars), the nong (peasant farmers), the gong (artisans and craftsmen), and the shang (merchants and traders).
Why are the merchants and traders treated at the lowest rank?
The merchants, traders, and peddlers of goods were viewed by the scholarly elite as essential members of society, but were placed on the lowest of the four grades in the social hierarchy. The scholars in their writings denounced the merchant class as greedy and lacking moral character. Merchants were seen as somewhat parasitic to the needs of all other groups in society, since they used the goods that others produced and made their own profits from them. In essence, they were seen as business savvy, but not morally cultivated enough to be venerated representatives of Chinese culture.
I wonder if our business community of today fall into the same description of "greedy and lacking moral character?"
Identity card - lost & found
I lost my identity card last month. I applied for a new card, but was advised to wait for two weeks, in case the card was found.
After four weeks, I received a letter from the relevant department. Someone found my identity card and returned it to them. The letter asked me to collect the card from their office.
What a wonderful service!
After four weeks, I received a letter from the relevant department. Someone found my identity card and returned it to them. The letter asked me to collect the card from their office.
What a wonderful service!
Car insurance - where to get lower premium
Dr. Money wrote this article about car insurance:
http://newpaper.asia1.com.sg/columnists/story/0,4136,170194,00.html
You can find more articles from Dr. Money at:
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,170194,00.html
You can find more articles from Dr. Money at:
http://www.tankinlian.com/drmoney/
Monday, July 21, 2008
Non-disclosure and medical insurance
Someone asked me to explain about the impact of non-disclosure of pre-existing condition on medical insurance.
Under the contract, the insurance company has the right to reject a claim due to the non-disclosure of a pre-existing condition. They are likey to reject the claim, even if the non-disclosure was unintended, namely the policyholder was not aware about it.
What is pre-existing is also a matter of judgement. Most medical conditions can be traced to be pre-existing. For example, if the patient has a high cholesterol and does not disclose it, the insurance company may reject a claim that is related to this condition.
As a person grows older, most illnesses are likely to have some pre-existing connection. It is quite unfair for the insurance company to reject a claim on flimsy grounds. From my experience, many insurance companies in Singapore are quick quick to find a reason to reject a claim.
Hence, it is very important that you choose an insurance company that you can trust, and take act fairly in the interest of their policyholders. Unfortunately, many insurance companies are too driven by their profits and are willing to sacrifice the trust of their policyholders.
Consumer protection in Singapore is weak. Consumers are not willing to fight for their right in a court of law, as the legal cost is high.
Under the contract, the insurance company has the right to reject a claim due to the non-disclosure of a pre-existing condition. They are likey to reject the claim, even if the non-disclosure was unintended, namely the policyholder was not aware about it.
What is pre-existing is also a matter of judgement. Most medical conditions can be traced to be pre-existing. For example, if the patient has a high cholesterol and does not disclose it, the insurance company may reject a claim that is related to this condition.
As a person grows older, most illnesses are likely to have some pre-existing connection. It is quite unfair for the insurance company to reject a claim on flimsy grounds. From my experience, many insurance companies in Singapore are quick quick to find a reason to reject a claim.
Hence, it is very important that you choose an insurance company that you can trust, and take act fairly in the interest of their policyholders. Unfortunately, many insurance companies are too driven by their profits and are willing to sacrifice the trust of their policyholders.
Consumer protection in Singapore is weak. Consumers are not willing to fight for their right in a court of law, as the legal cost is high.
Poor cash value
I find the practice of life insurance companies in giving low cash values to be most unfair to policyholders.
Here is an example. The policyholder took an endowment policy 15 years ago, and paid an annual premium of $5,925. After 15 years, the cash value of $86,299 represents a yield of 0% on the premiums that have been invested.
The insurance company projected a maturity value of $166,622. This would give a yield of about 5% per annum for 18 years.
If the insurance company had indeed earned a net yield of 5% for the past 15 years, the "asset share" should have been $127,000. The payout of $86,299 represents a penalty of $40,000 from the "asset share".
How can the insurance company justify this large penalty on a customer who has entrusted the CPF savings for 15 years?
The policyholder, who has now retired, is forced to find the premium to pay for the next three years, to avoid this huge penalty.
I advise the policyholder to lodge a complaint with the Monetary Authority of Singaore on the poor cash value that is being offered by this life insurance company.
I advice the public to avoid all life insurance products that offer low cash value and project a large terminal bonus on maturity. If you are not able to pay the premium to the maturity date, a large part of your savings will be confiscated. Even if you continue to the maturity date, you can never be sure that the terminal bonus will be paid.
I hope that the Monetary Authority of Singapore will take action to enforce payment of cash value that is close to the "asset share" - a practie which has been adopted in Malaysia. Do not let the ordinary people be deprived of a fair return on their savings.
Here is an example. The policyholder took an endowment policy 15 years ago, and paid an annual premium of $5,925. After 15 years, the cash value of $86,299 represents a yield of 0% on the premiums that have been invested.
The insurance company projected a maturity value of $166,622. This would give a yield of about 5% per annum for 18 years.
If the insurance company had indeed earned a net yield of 5% for the past 15 years, the "asset share" should have been $127,000. The payout of $86,299 represents a penalty of $40,000 from the "asset share".
How can the insurance company justify this large penalty on a customer who has entrusted the CPF savings for 15 years?
The policyholder, who has now retired, is forced to find the premium to pay for the next three years, to avoid this huge penalty.
I advise the policyholder to lodge a complaint with the Monetary Authority of Singaore on the poor cash value that is being offered by this life insurance company.
I advice the public to avoid all life insurance products that offer low cash value and project a large terminal bonus on maturity. If you are not able to pay the premium to the maturity date, a large part of your savings will be confiscated. Even if you continue to the maturity date, you can never be sure that the terminal bonus will be paid.
I hope that the Monetary Authority of Singapore will take action to enforce payment of cash value that is close to the "asset share" - a practie which has been adopted in Malaysia. Do not let the ordinary people be deprived of a fair return on their savings.
Sunday, July 20, 2008
Many policyholders give up their whole life policies
COMMENT POSTED IN MY BLOG
Whole life product advocates and especially insurance agents argue that a whole life policy is useful during old age, a time when one is most likely to contract dread illnesses.
Apart from other economic reasons, I want to show that whole life policies are hardly kept beyond age 65. Why is it not kept beyond this age, the obvious reason is many don't believe that it is necessary and many believe in self insurance, a wise idea because liquidity at a time like this is more flexible and better choice.
What if you get and what if you don't get a disease , the probability seems 50/50 but I bet it is more than 80% chance you don't get. If you do, have an H&S is enough plus what you provided for in cash as self insurance will adequately address this problem.
Maintaining a whole life policy at this age is expensive and a waste of money and self insurance is a better option.
Therefore the case for a whole life policy is weak and you are better off if you have a term insurance plus investment with better return. The chances of having a better life and retirement are best via "buy term and invest the rest".
I want to show you statistics from MAS website to corroborate my argument and my findings. If you look at the life insurance persistency from 2001 to 2007 you see a pattern. You see high decline immediately in first 2 years and henceforth persistency declines at a rate of about 4%. This pattern is seen in all the last 5 years.
If I extrapolate the rate of decline to next 20 to 30 years I can see that only about about 10% or less of life policies will in force.
Assuming a 30 year old man buys a policy, by the time he is 60 or 65, he would have terminated or surrendered his policy. This phenomenon is supported by another statistics, the surrender statistics and it has been a whopping high of about 65% compared to maturity of about 35%. In other words a lot of people surrendered their policies earlier.
What do these figures tell you? Very few kept their policies beyond 65 years old. Why buy whole life insurance if you don't keep till old age? Let me tell you, it is burdensome; cash return too low.
I have done another research earlier and posted somewhere on death claim. I found no claim beyond the magical age 65, not that no one died or no one got dread disease but no one or very few kept whole life insurance beyond this age.
Death claim median age is 45 and average claimed amount is only a miserable $45K and the highest of $200k was from a term insurance.
Conclusion: insurance is most needed during time when your responsibility is the highest and you should have enough to address the needs at that point in time. Term is the best instrument, cheap and efficient.
Do not believe what the insurance agents tells you about whole life insurance. Their argument is obvious, it is high commission for themselves and life long source of revenue and income for the insurer.
zhummmeng
Whole life product advocates and especially insurance agents argue that a whole life policy is useful during old age, a time when one is most likely to contract dread illnesses.
Apart from other economic reasons, I want to show that whole life policies are hardly kept beyond age 65. Why is it not kept beyond this age, the obvious reason is many don't believe that it is necessary and many believe in self insurance, a wise idea because liquidity at a time like this is more flexible and better choice.
What if you get and what if you don't get a disease , the probability seems 50/50 but I bet it is more than 80% chance you don't get. If you do, have an H&S is enough plus what you provided for in cash as self insurance will adequately address this problem.
Maintaining a whole life policy at this age is expensive and a waste of money and self insurance is a better option.
Therefore the case for a whole life policy is weak and you are better off if you have a term insurance plus investment with better return. The chances of having a better life and retirement are best via "buy term and invest the rest".
I want to show you statistics from MAS website to corroborate my argument and my findings. If you look at the life insurance persistency from 2001 to 2007 you see a pattern. You see high decline immediately in first 2 years and henceforth persistency declines at a rate of about 4%. This pattern is seen in all the last 5 years.
If I extrapolate the rate of decline to next 20 to 30 years I can see that only about about 10% or less of life policies will in force.
Assuming a 30 year old man buys a policy, by the time he is 60 or 65, he would have terminated or surrendered his policy. This phenomenon is supported by another statistics, the surrender statistics and it has been a whopping high of about 65% compared to maturity of about 35%. In other words a lot of people surrendered their policies earlier.
What do these figures tell you? Very few kept their policies beyond 65 years old. Why buy whole life insurance if you don't keep till old age? Let me tell you, it is burdensome; cash return too low.
I have done another research earlier and posted somewhere on death claim. I found no claim beyond the magical age 65, not that no one died or no one got dread disease but no one or very few kept whole life insurance beyond this age.
Death claim median age is 45 and average claimed amount is only a miserable $45K and the highest of $200k was from a term insurance.
Conclusion: insurance is most needed during time when your responsibility is the highest and you should have enough to address the needs at that point in time. Term is the best instrument, cheap and efficient.
Do not believe what the insurance agents tells you about whole life insurance. Their argument is obvious, it is high commission for themselves and life long source of revenue and income for the insurer.
zhummmeng
Ownership of a life policy
Dear Mr. Tan,
My uncle (as policy holder) bought a life policy for his wife (as insured). If the policy holder passes away, does it mean that the ownership of the policy automatically transfers to his wife (the insured)? Or does it become a 'no ownership policy'. If it is the latter, who has the rights to deal with the policy, for instance, to take a policy loan/terminate it?
REPLY
Your uncle is the owner of the policy. On his death, the policy becomes part of his estate and the administrator of the estate (which is usually his wife) can deal with the policy in any suitable way, such as taking a loan or terminating it.
Your uncle has the choice of transferring the policy to his wife now and write in his will to transfer the policy to the wife on his death.
My uncle (as policy holder) bought a life policy for his wife (as insured). If the policy holder passes away, does it mean that the ownership of the policy automatically transfers to his wife (the insured)? Or does it become a 'no ownership policy'. If it is the latter, who has the rights to deal with the policy, for instance, to take a policy loan/terminate it?
REPLY
Your uncle is the owner of the policy. On his death, the policy becomes part of his estate and the administrator of the estate (which is usually his wife) can deal with the policy in any suitable way, such as taking a loan or terminating it.
Your uncle has the choice of transferring the policy to his wife now and write in his will to transfer the policy to the wife on his death.
Unforgettable sight in Beijing
My friend saw an unforgettable sight during his recent visit to Beijing - something that he has not seen before, and will never see again in the future.
He looked up and saw a blue sky. In preparation for the Beijing Olympics which will start soon, the authority has asked the factories to stop or reduce their production within a large part of Beijing. This reduces the pollution and makes the air clean.
He expects that, after the Olympics, things will get back to normal in Beijing - and that is a polluted environment.
He looked up and saw a blue sky. In preparation for the Beijing Olympics which will start soon, the authority has asked the factories to stop or reduce their production within a large part of Beijing. This reduces the pollution and makes the air clean.
He expects that, after the Olympics, things will get back to normal in Beijing - and that is a polluted environment.
Cost of Private Shield
A reader asked how it is possible for the cost of a private Shield plan to be more than $100,000 for ages 30 to 85.
You can add up the total cost from the websites of the insurance companies. Here is an example from NTUC Income:
For the enhanced plan (subject to deductible and co-insurance):
http://income.com.sg/insurance/incshield/premium.asp
For the plus rider (to cover the deductible and co-insurance)
http://income.com.sg/insurance/incshieldplus/
Add up the premium rate for plan P (which covers private hospital) for the ages from 30 to 85. Remeber to muliply by the number of years in each category. I got a total of $102,344.
This does not include the cost beyond age 85, and also for future increases in premium rates due to medical inflation. These rates are not guaranteed at the current level and can be adjusted in future years.
You can find out the premium rates charged by the other insurance companies for their private Shield plan. I believe that the total cost will be higher, i.e. more than NTUC Income.
You can add up the total cost from the websites of the insurance companies. Here is an example from NTUC Income:
For the enhanced plan (subject to deductible and co-insurance):
http://income.com.sg/insurance/incshield/premium.asp
For the plus rider (to cover the deductible and co-insurance)
http://income.com.sg/insurance/incshieldplus/
Add up the premium rate for plan P (which covers private hospital) for the ages from 30 to 85. Remeber to muliply by the number of years in each category. I got a total of $102,344.
This does not include the cost beyond age 85, and also for future increases in premium rates due to medical inflation. These rates are not guaranteed at the current level and can be adjusted in future years.
You can find out the premium rates charged by the other insurance companies for their private Shield plan. I believe that the total cost will be higher, i.e. more than NTUC Income.
How banks lose the trust of their customers
An elderly person told me, "Long ago, many people can trust their bank to give them a fair return on their savings. Nowadays, the banks make a lot of profit by selling bad financial products to their customers. Many customers now distrust the banks".
What has happened during the past ten years, that makes the banks lose the trust of their customers?
Long ago, the banks are tightly controlled by the regulator. They have a few common products that their customers can understand, such as a saving account, a current account and fixed deposits. The customers can compare the interest rate paid on these savings and deposits. The banks have to offer competitive terms to attract and retain their customers.
The situation changed in the past decade. Banks started to offer complicated financial products. They employ marketing officers to sell these products, such as high cost life insurance products. Later, they sell structured investment products.
There is a change in the role of the regulator. They are not concerned about ensuring fairness to the consumers, and decide to leave this matter to the market. The consumers are left at the mercy of the issuers of these products. The issuers have the objective of maximising their profit and do not mind "ripping off the consumers". Business ethics disappeared.
The banks market these products to their consumers. They make a handsome profit from the commissions paid by the product issuers. But the poor consumers are given poor financial products. They only realise it after 3 to 5 years, but by then, it is too late.
This is how banks lose the confidence of the customers.
What has happened during the past ten years, that makes the banks lose the trust of their customers?
Long ago, the banks are tightly controlled by the regulator. They have a few common products that their customers can understand, such as a saving account, a current account and fixed deposits. The customers can compare the interest rate paid on these savings and deposits. The banks have to offer competitive terms to attract and retain their customers.
The situation changed in the past decade. Banks started to offer complicated financial products. They employ marketing officers to sell these products, such as high cost life insurance products. Later, they sell structured investment products.
There is a change in the role of the regulator. They are not concerned about ensuring fairness to the consumers, and decide to leave this matter to the market. The consumers are left at the mercy of the issuers of these products. The issuers have the objective of maximising their profit and do not mind "ripping off the consumers". Business ethics disappeared.
The banks market these products to their consumers. They make a handsome profit from the commissions paid by the product issuers. But the poor consumers are given poor financial products. They only realise it after 3 to 5 years, but by then, it is too late.
This is how banks lose the confidence of the customers.
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