Dear Mr.Tan,
I had read some of your articles about insurance and would like to seek your advice.
It is sad to learn that the current practices by insurance companies and their agents are not as ethical as what they claim in their mission statement or business code of ethics. It is also too late for my wife to realize that her entire CPF savings (ordinary and special) is now suffering heavy loss after being misled by an insurance agent in November 2007.
All along, ordinary people like my wife took insurance agent as professional and able to give reliable and accurate information. However, such trust was shattered after she was misled to loss-making investment-link policies. The way that he pushed the high risk bank-stock-link funds before the stock crash to unaware customer as low-risk investment still upset me today.
Although we complained about the agent's misrepresentation in Feb 2008 and got him admitting his 'ignorance' of the stock market, our request to annul the policies was rejected without clear explanation. His unethical use of national annuity scheme to scare my wife into putting her entire CPF savings in the dubious policies was also unanswered.
We contacted FIDREC but pulled out halfway due to stress and forlorn hope because my wife had already signed the Know Your Client Financial Needs Analysis Form which binds her to everything.
I have some questions below and I wonder you could offer your opinions.
1) Can stock-link-fund-selling agent ignore stock market warnings such as US housing credit crisis, US recession, banks' losses, etc? Isn't he a professional in his industry?
Reply: It is difficult for the fund agent to know that the market will be so bad. If they know, nobody will be transacting in the market.
2) These funds follow STI intimately; can agent ignore STI's sliding from historical peak late Oct 2007 and sell the funds at highest prices? Isn't his financial advice guided by the "buy low sell high" principle? This goes against Income's claim that they care about client's interest and are social responsible.
Reply: It is difficult for the fund agent to know that the market will be so bad. If they know, nobody will be transacting in the market.
3) Is it ethical to use annuity scheme to scare and influence client's decision, instead of sound financial judgment?
Reply: The agent should not use the national annuity scheme to scare the investor into making stock market investments.
4) The business law governing fund selling seems to be flawed. We only realized now that the Financial Needs Analysis Form, done casually, is holding the policy holder solely responsible. Isn't this document a likely signed blank check which could be rigged by unscrupulous agents?
Reply: The financial needs analysis should have been done properly and not casually.
5) Isn't there a mechanism to prevent such suicide-like buying of funds when all the indicators point to a looming stock crash? Can such crash prophets by George Solos, Warren Buffett and Jim Rogers be totally ignored and risks as high as such not mentioned to clients during the selling presentation?
Reply: It is difficult to know if the market will go up or down, at any point of time. One can only know with the benefit of hindsight. Your wife has made a long term investment. You should hold the investment for many years. It is likely to recover.
I made a personal investment myself around that time, and my investment is showing a big loss now. So, I was not aware that the market can be so bad. But I have to wait for it to recover.
Friday, September 05, 2008
Agent does not explain clearly
Many people read my blog regularly. When they meet me, they told me, "I like your blog. It helps me to understand the insurance policies that I have bought over the years. The agent did not explain the policy clearly to me".
Why are insurance companies continuing to design complicated insurance products that their agents are not able to explain to the customer?
Here is the secret. The agent does not want to tell you the truth. If they do, you will not buy the product, because it gives poor value to the consumer. The agent finds a way to make your buy the porduct, without really understanding it.
The regulator requires the agent to give a Benefit Illustration. It does not help, as the Benefit Illustration is confusing to the consumer (and even to an expert like me).
Why are insurance companies continuing to design complicated insurance products that their agents are not able to explain to the customer?
Here is the secret. The agent does not want to tell you the truth. If they do, you will not buy the product, because it gives poor value to the consumer. The agent finds a way to make your buy the porduct, without really understanding it.
The regulator requires the agent to give a Benefit Illustration. It does not help, as the Benefit Illustration is confusing to the consumer (and even to an expert like me).
Twisting of existing life policies
Dear Mr Tan,
I am a young, single working adult. I've met up with two financial planners. One is from a reputatble affliated insurance company (X) and another is a independent financial advisor (Y).
X recommends me to buy a limited whole life plan (coverage of 100K) and a private hospitalisation plan and some other riders such asdiability income. The total premiums payable per month is around 250. Previously I've already bought a ILP ffrom X (100k coverage) and I have another 50K coverage from a whole life plan that my parents bought for me since young ($50 per month).
Y recommends me to cancel the 50K whole life plan that my parents bought for me and buy a term plan including HnS for only 100 (coverage of 250k), and invest the rest.
I understand this is in line with your "buy term, and invest the rest" strategy. But do I have to cancel the plan that my parents have been paying since 13 years ago?
And what is your opinion on limited whole life plan?
REPLY
You should continue your existing policies. Do not terminate them to buy the recommended new policy.
The agents X and Y are trying to "twist" your policy. Read this blog to understand what is "twisting": http://tankinlian.blogspot.com/search?q=twisting
If you wish to "but term and invest the difference", you should choose a 20 or 30 year term and not term to 100 years - which is like whole life insurance. The agent is cunning, and is trying to make a sale at your expense.
Avoid the whole life limited payment plan. It is expensive and give poor values. Do not cancel any existing policy to buy a new policy with high charges.
I am a young, single working adult. I've met up with two financial planners. One is from a reputatble affliated insurance company (X) and another is a independent financial advisor (Y).
X recommends me to buy a limited whole life plan (coverage of 100K) and a private hospitalisation plan and some other riders such asdiability income. The total premiums payable per month is around 250. Previously I've already bought a ILP ffrom X (100k coverage) and I have another 50K coverage from a whole life plan that my parents bought for me since young ($50 per month).
Y recommends me to cancel the 50K whole life plan that my parents bought for me and buy a term plan including HnS for only 100 (coverage of 250k), and invest the rest.
I understand this is in line with your "buy term, and invest the rest" strategy. But do I have to cancel the plan that my parents have been paying since 13 years ago?
And what is your opinion on limited whole life plan?
REPLY
You should continue your existing policies. Do not terminate them to buy the recommended new policy.
The agents X and Y are trying to "twist" your policy. Read this blog to understand what is "twisting": http://tankinlian.blogspot.com/search?q=twisting
If you wish to "but term and invest the difference", you should choose a 20 or 30 year term and not term to 100 years - which is like whole life insurance. The agent is cunning, and is trying to make a sale at your expense.
Avoid the whole life limited payment plan. It is expensive and give poor values. Do not cancel any existing policy to buy a new policy with high charges.
Thursday, September 04, 2008
Land Banking - a scam?
Edited from an article in: http://www.guardian.co.uk/money/2008/aug/23/scamsandfraud.consumeraffairs1 Lesson:
Land banking is listed as a scam in this article.
Land banking
Here you are persuaded to pay a large sum of money for a tenth of an acre in a field - on the promise the land will soon receive planning permission and soar in value. So far, no land banking site has ever gained the building go-ahead. Most land sold in this way is green belt or zoned for agricultural use only.
But land bankers seize on every government statement about the need for more homes to stress that this means that it is certain that the site they are selling will soon be covered in houses - like almost all scams, this relies on an element of truth.
Land banking is listed as a scam in this article.
Land banking
Here you are persuaded to pay a large sum of money for a tenth of an acre in a field - on the promise the land will soon receive planning permission and soar in value. So far, no land banking site has ever gained the building go-ahead. Most land sold in this way is green belt or zoned for agricultural use only.
But land bankers seize on every government statement about the need for more homes to stress that this means that it is certain that the site they are selling will soon be covered in houses - like almost all scams, this relies on an element of truth.
Continue an existing whole life policy
Hi Mr Tan,
I've been reading your website with interest recently, and I noticed that you do not believe in the need for life insurance after the age of 65. I understand your point of view that as the kids have probably grown up already and you are retired with your nest egg funds and no need for the coverage.
However, I have the following view. If I have already saved up enough money for my retirement without the need to surrender my life plan which I started at a young age (thus high coverage and cash value), wouldn't you think it would be better for the family to have that whole sum? I'm assuming life plans cover death up to age 99.
Example, I buy a whole life plan since I'm 21, with death coverage of $200,000. Upon age 65, cash value may be another $200,000. If I do not need the money, I could just leave it there, paying my insurance charges, and assuming I die age 70, my family will have sum assured $200,000 + cash value $200,000, therefore = $400,000 instead of me terminating the policy at age 65, withdraw the money and place in fixed deposits for the next 5 years until iIpass away at age 70?
Please correct me if I'm wrong in any of the assumptions I've made, but what I'm trying to say is that, leaving the money for my next generation through insurance may be another way to look at it instead of the simplistic approach of terminating all my policies once I reach age 65. It should all depends on individuals.
Thanks for your time, and hope to hear your point of view.
REPLY
Please read this blog and watch the video by Suzy Orman
http://tankinlian.blogspot.com/2008/08/susie-orman-on-life-insurance.html
As you have already taken a whole life policy, you can continue with it and leave the proceeds to your children, especially if you have sufficient money to meet your own needs. For young people who are not so well off, it is better to buy term insurance for 20 to 30 years, and invest their savings in a low cost investment fund.
Read this FAQ about continuing with an existing life policy:
http://www.tankinlian.com/faq/exist.html
I've been reading your website with interest recently, and I noticed that you do not believe in the need for life insurance after the age of 65. I understand your point of view that as the kids have probably grown up already and you are retired with your nest egg funds and no need for the coverage.
However, I have the following view. If I have already saved up enough money for my retirement without the need to surrender my life plan which I started at a young age (thus high coverage and cash value), wouldn't you think it would be better for the family to have that whole sum? I'm assuming life plans cover death up to age 99.
Example, I buy a whole life plan since I'm 21, with death coverage of $200,000. Upon age 65, cash value may be another $200,000. If I do not need the money, I could just leave it there, paying my insurance charges, and assuming I die age 70, my family will have sum assured $200,000 + cash value $200,000, therefore = $400,000 instead of me terminating the policy at age 65, withdraw the money and place in fixed deposits for the next 5 years until iIpass away at age 70?
Please correct me if I'm wrong in any of the assumptions I've made, but what I'm trying to say is that, leaving the money for my next generation through insurance may be another way to look at it instead of the simplistic approach of terminating all my policies once I reach age 65. It should all depends on individuals.
Thanks for your time, and hope to hear your point of view.
REPLY
Please read this blog and watch the video by Suzy Orman
http://tankinlian.blogspot.com/2008/08/susie-orman-on-life-insurance.html
As you have already taken a whole life policy, you can continue with it and leave the proceeds to your children, especially if you have sufficient money to meet your own needs. For young people who are not so well off, it is better to buy term insurance for 20 to 30 years, and invest their savings in a low cost investment fund.
Read this FAQ about continuing with an existing life policy:
http://www.tankinlian.com/faq/exist.html
Million Dollar Round Table (MDRT)
Dear Mr. Tan,
I was previously an insurance agent and a salaried agency supervisor with two different insurance companies. From my experience, I have learned to be less than enthusiastic about the so-called prestige of the MDRT (Million Dollar Round Table). In fact, I might even have been sceptical.
The MDRT measures an insurance agent by the first year commission earned on new policies sold. It equates equates more commission earned to being more successful and prestigious. As a sales motivation, , it drives the agents to earn higher incomes. However, it may also tempt many agents into dubious practices in pursuit of qualification for membership.
I feel that to the ultimate consumer, the insurance client, buying a policy from an agent who makes $30,000 p.a. is no different from buying from an agent who makes $300,000 p.a., as long as it's a suitable policy. Just a suggestion. I hope that you may like comment on the MDRT in your blog.
REPLY
You have already made the point well. I have no further comments.
I was previously an insurance agent and a salaried agency supervisor with two different insurance companies. From my experience, I have learned to be less than enthusiastic about the so-called prestige of the MDRT (Million Dollar Round Table). In fact, I might even have been sceptical.
The MDRT measures an insurance agent by the first year commission earned on new policies sold. It equates equates more commission earned to being more successful and prestigious. As a sales motivation, , it drives the agents to earn higher incomes. However, it may also tempt many agents into dubious practices in pursuit of qualification for membership.
I feel that to the ultimate consumer, the insurance client, buying a policy from an agent who makes $30,000 p.a. is no different from buying from an agent who makes $300,000 p.a., as long as it's a suitable policy. Just a suggestion. I hope that you may like comment on the MDRT in your blog.
REPLY
You have already made the point well. I have no further comments.
Articles in Online Citizen
I write an article each week for the Online Citizen.
It can be accessed at www.theonlinecitizen.com
Here are some of my articles, and the comments from the readers:
Beware of scams
http://theonlinecitizen.com/2008/09/beware-of-scams/#comments
One country, two systems
http://theonlinecitizen.com/2008/08/one-country-two-systems/
Poor return on life insurance policies
http://theonlinecitizen.com/2008/08/poor-return-on-life-insurance-policies/
We, the citizens
http://theonlinecitizen.com/2008/08/we-the-citizens/
Important to build a gracious society
http://theonlinecitizen.com/2008/07/important-to-build-a-gracious-society/
Give equal access to social benefits
http://theonlinecitizen.com/2008/06/giving-equal-access-to-social-benefits/
It can be accessed at www.theonlinecitizen.com
Here are some of my articles, and the comments from the readers:
Beware of scams
http://theonlinecitizen.com/2008/09/beware-of-scams/#comments
One country, two systems
http://theonlinecitizen.com/2008/08/one-country-two-systems/
Poor return on life insurance policies
http://theonlinecitizen.com/2008/08/poor-return-on-life-insurance-policies/
We, the citizens
http://theonlinecitizen.com/2008/08/we-the-citizens/
Important to build a gracious society
http://theonlinecitizen.com/2008/07/important-to-build-a-gracious-society/
Give equal access to social benefits
http://theonlinecitizen.com/2008/06/giving-equal-access-to-social-benefits/
Unclaimed money
Banks and life insurance companies make a lot of profit from customers who were not able to claim what wa due to them.
Watch this video:
http://www.youtube.com/watch?v=1_BWTYv7ey4
Watch this video:
http://www.youtube.com/watch?v=1_BWTYv7ey4
Investing in Volatile Markets
What are the three most important factors in investing in property? They are location, location and location.
What are the three most important factors in investing in equity? They are timing, timing and timing.
If you invest at the right time, you can earn 5% to 10% more, compared to investing at the wrong time. What is the right time? It depends on major events and how they affect the market prices.
You can learn about the impact of events on market prices through this simulation game:
www.tankinlian.com/trader
Tips:
1. If interest rate goes up, the currency goes up
2. If USD goes up, JPY and EUR is likely to come down.
3. If stock goes up, bond is likely to come down (as people sell bond to buy stocks)
4. If oil price goes up, USD is likely to come down, and gold will go up.
5. If the US economy does well, the US stock and USD is likely to go up.
6. If company profits goes up, the equity is likely to move up.
With these tips, see if you can learn the right timing decisions!
What are the three most important factors in investing in equity? They are timing, timing and timing.
If you invest at the right time, you can earn 5% to 10% more, compared to investing at the wrong time. What is the right time? It depends on major events and how they affect the market prices.
You can learn about the impact of events on market prices through this simulation game:
www.tankinlian.com/trader
Tips:
1. If interest rate goes up, the currency goes up
2. If USD goes up, JPY and EUR is likely to come down.
3. If stock goes up, bond is likely to come down (as people sell bond to buy stocks)
4. If oil price goes up, USD is likely to come down, and gold will go up.
5. If the US economy does well, the US stock and USD is likely to go up.
6. If company profits goes up, the equity is likely to move up.
With these tips, see if you can learn the right timing decisions!
Whole life Limited Payment
Hi Mr. Tan,
My friend, an insurance agent advised me that there is a new life policy where I only need to pay premium for 15 years. My present policy (which I bought from another agent before) needs the premium to be paid until I am 85 years old. She said that it is better to pay more and have the premium stop after 15 years. Should I stop the old policy and take the new one? I find the premium for the new policy to be quite expensive.
REPLY
Your agent is trying to "twist" your policy. Read this blog for an explanation about twisting:
http://tankinlian.blogspot.com/2008/09/twisting-is-bad-for-customer.html
You should lodge a complaint against the agent for this unethical product. Did the agent tell you that she is earning commission by selling the new policy to you? Did she tell you how much is the commission?
My friend, an insurance agent advised me that there is a new life policy where I only need to pay premium for 15 years. My present policy (which I bought from another agent before) needs the premium to be paid until I am 85 years old. She said that it is better to pay more and have the premium stop after 15 years. Should I stop the old policy and take the new one? I find the premium for the new policy to be quite expensive.
REPLY
Your agent is trying to "twist" your policy. Read this blog for an explanation about twisting:
http://tankinlian.blogspot.com/2008/09/twisting-is-bad-for-customer.html
You should lodge a complaint against the agent for this unethical product. Did the agent tell you that she is earning commission by selling the new policy to you? Did she tell you how much is the commission?
Wednesday, September 03, 2008
Dealing with credit card debt
Dear Mr. Tan,
I came across your blog and decided to ask for advise. I am married and have 4 children. I live in a HDB flat.
Recently i chalked up about $30,000 of credit cards debt. I decided to respond to an advertisement that offers to consoidate the debt with the banks. I believe that I can pay my debt, but I have to change my spending habits. They charge a fee. Is this a good solution? I did find out there is one local agency 'CCS' that deal with this situation. Can they help too?
REPLY
You can approach Credit Counselling Singapore.
They will be able to help you.
They give free advice.
Here is their website:
http://www.ccs.org.sg/
I came across your blog and decided to ask for advise. I am married and have 4 children. I live in a HDB flat.
Recently i chalked up about $30,000 of credit cards debt. I decided to respond to an advertisement that offers to consoidate the debt with the banks. I believe that I can pay my debt, but I have to change my spending habits. They charge a fee. Is this a good solution? I did find out there is one local agency 'CCS' that deal with this situation. Can they help too?
REPLY
You can approach Credit Counselling Singapore.
They will be able to help you.
They give free advice.
Here is their website:
http://www.ccs.org.sg/
Joke: I am a crook
A drunk wanders into the lounge of a hotel where an insurance convention is being held, intent on causing trouble. He yells, "I think all insurance agents are crooks, and if anyone doesn't like it, come up and do something about it.
"Immediately, a man runs up to the drunk and says, "You take that back!
"The drunk snears and replies, "Why, are you an agent?"
"No," the man replies, "I'm a crook."
"Immediately, a man runs up to the drunk and says, "You take that back!
"The drunk snears and replies, "Why, are you an agent?"
"No," the man replies, "I'm a crook."
Mis-information of consumers
A policyholder wrote to me as follows: "I sign on a ILP in 2005. I paid $100 every month through Giro. The agent told me I can only withdraw after six years. So far I had invested $36,000 but the return is $27000."
This statement shows the poor state of affairs in Singapore. After paying the premium for 3 years, the policyhholder is still not aware about his contractual rights under this policy, namely:
> He can withdraw his ILP at any time (and not after 6 years)
> The high charges deducted from his premuims represents a certain proportion of his loss
> He does not know that he can approach his insurance company to get an explanation
The Benefit Illustration given at the point of sale should provide a clear explanation to the policyholder. But, most of the Benefit Illustrations are very confusing.
This statement shows the poor state of affairs in Singapore. After paying the premium for 3 years, the policyhholder is still not aware about his contractual rights under this policy, namely:
> He can withdraw his ILP at any time (and not after 6 years)
> The high charges deducted from his premuims represents a certain proportion of his loss
> He does not know that he can approach his insurance company to get an explanation
The Benefit Illustration given at the point of sale should provide a clear explanation to the policyholder. But, most of the Benefit Illustrations are very confusing.
Twisting of ILP to Revosave
Dear Mr Tan,
I sign on a ILP in 2005. I paid $100 every month through Giro. The agent told me I can only withdraw after six years. So far I had invested $36,000 but the return is $27000.
Today another agent explained to me that this ILP will not make any gain for the next three years. Since I have a living policy which muture at 65, he reconmented a RevoSave Policy, which can earn bonus and insure for permenent disablity and death.
I am 58 year old and want to save for my retirement. I found that I rather pay the similar amount to the RevoSave. He told me I can withraw the ILP anytime, it is true? Shall I terminate the ILP and take the RevoSave?
REPLY
The Revosave is not suitable to save for retirement, especially for someone at your age. It gives a poor return. You should continue with your existing ILP.
The new agent is trying to "twist" your policy, but getting you to terminate an existing policy and take up a new policy (i.e. Revosave) so that he can earn a high commission on the new policy. You should ask the agent to explain how much commission he can earn from the new policy.
Here is an explanation about twisting:
http://tankinlian.blogspot.com/2008/08/understanding-twisting-and-churning.html
You should lodge a compliant with the insurance company or Monetary Authority of Singapore about the unethical advice given by the agent.
I sign on a ILP in 2005. I paid $100 every month through Giro. The agent told me I can only withdraw after six years. So far I had invested $36,000 but the return is $27000.
Today another agent explained to me that this ILP will not make any gain for the next three years. Since I have a living policy which muture at 65, he reconmented a RevoSave Policy, which can earn bonus and insure for permenent disablity and death.
I am 58 year old and want to save for my retirement. I found that I rather pay the similar amount to the RevoSave. He told me I can withraw the ILP anytime, it is true? Shall I terminate the ILP and take the RevoSave?
REPLY
The Revosave is not suitable to save for retirement, especially for someone at your age. It gives a poor return. You should continue with your existing ILP.
The new agent is trying to "twist" your policy, but getting you to terminate an existing policy and take up a new policy (i.e. Revosave) so that he can earn a high commission on the new policy. You should ask the agent to explain how much commission he can earn from the new policy.
Here is an explanation about twisting:
http://tankinlian.blogspot.com/2008/08/understanding-twisting-and-churning.html
You should lodge a compliant with the insurance company or Monetary Authority of Singapore about the unethical advice given by the agent.
Premium for the Shield rider is too high
I usually advice people to buy the Shield plan, without the rider to cover the Deductible. If you are hospitalised, you can pay the Deductible from your Medisave. This does not need to be insured.
Here is the reason:
> Assume that the chance of being hospitalised for your age band is 10%
> The Deductible (to cover B1 class) is $2,000.
> The cost of claims is $200 (i.e. 10% X $2,000)
> The premium that you have to pay is about $300 (usually 50% more than the cost of claims).
> $100 each year goes towards the expenses, including commission to the agent.
If you insure for 10 years, you have to pay a total premium of $3,000 and are likely to make 1 claim of $2,000. The additional $1,000 goes to pay expenses.
Here is the reason:
> Assume that the chance of being hospitalised for your age band is 10%
> The Deductible (to cover B1 class) is $2,000.
> The cost of claims is $200 (i.e. 10% X $2,000)
> The premium that you have to pay is about $300 (usually 50% more than the cost of claims).
> $100 each year goes towards the expenses, including commission to the agent.
If you insure for 10 years, you have to pay a total premium of $3,000 and are likely to make 1 claim of $2,000. The additional $1,000 goes to pay expenses.
Tuesday, September 02, 2008
Structured products that are fair to consumers
Financial institutions have been designing structured products that are unsuitable for consumers. They are marketed with misleading advertisements and convassers.
Here are my suggestions on how to ensure that these structured products are designed to be fair to consumers:
http://www.tankinlian.com/articles/structuredi.html
Here are my suggestions on how to ensure that these structured products are designed to be fair to consumers:
http://www.tankinlian.com/articles/structuredi.html
Increase in Shield premium
Dear Mr. Tan,
The premium for my Incomeshield Plus rider has increased from $163 to $276 - an increase of more than 69% for those age group from 41 to 50. This is more than 8 times our GST rate! How can Singaporeans afford a reasonable health insurance with this kind of rate?
NTUC has also have a social mission of providing a reasonable affordable low cost insurance and stablizing food prices.
Is there any body to check on the NTUC insurance for the recent hefty increase in premium! It will definitely affect the middle income family.
REPLY
If you are a member of a trade union, you can write to the secretary general of NTUC to voice your concern. If not, you can write to the chairman of the board of Income. All the best.
The premium for my Incomeshield Plus rider has increased from $163 to $276 - an increase of more than 69% for those age group from 41 to 50. This is more than 8 times our GST rate! How can Singaporeans afford a reasonable health insurance with this kind of rate?
NTUC has also have a social mission of providing a reasonable affordable low cost insurance and stablizing food prices.
Is there any body to check on the NTUC insurance for the recent hefty increase in premium! It will definitely affect the middle income family.
REPLY
If you are a member of a trade union, you can write to the secretary general of NTUC to voice your concern. If not, you can write to the chairman of the board of Income. All the best.
Introduce your friends to my blog
A request to regular visitors to my blog.
Send an e-mail to your friends and ask them to visit my blog. The link is www.tankinlian.blogspot.com.
I hope that you will respond to my request now. Your action will be reflected by an immediate increase in the visitors to my blog over the next few days.
Send an e-mail to your friends and ask them to visit my blog. The link is www.tankinlian.blogspot.com.
I hope that you will respond to my request now. Your action will be reflected by an immediate increase in the visitors to my blog over the next few days.
500,000 visitors by 11-11-2008
I projected earlier that my blog will reach 500,000 visitors by 11-11-2008.
I recalculated by projection this morning, i.e. 2-9-2008. I have an average of 1138 visitors a day. The blog now has 419,668 visitors.
My Excel spreadsheet calculated projected that the target will be reached EXACTLY on 11-11-2008. What a coincidence!
I recalculated by projection this morning, i.e. 2-9-2008. I have an average of 1138 visitors a day. The blog now has 419,668 visitors.
My Excel spreadsheet calculated projected that the target will be reached EXACTLY on 11-11-2008. What a coincidence!
Twisting is bad for the customer
Insurance agents are provided with a range of complex products, such as whole life, endowment and investment-linked plans. There are many variations of these products, including the cash back features. Some have guaranteed returns, some have bonuses, and some products have values that are linked to a fund.
It is easy for an agent to confuse a customer to stop an existing insurance policy to buy a new policy. The agent can easily point out a different feature and explain why it is good for the customer. This is not true, but the agent is trained on how to make the customer believe in the statement.
The agent can earn a high commision on the new policy. This commission can take away newly two years of the premium. If the premium is $300 a month, the customer can lose up to $7,200 of premium as charges taken away from the new policy, mainly to pay commission to the agent.
This practice is called "twisting" and is illegal in many countries. It is quite rampant in Singapore. Many consumers are taken for a ride. If you find that an agent has "twisted" your policy, you should lodge a complaint with the insurance company or with the Monetary Authority of Singapore.
The insurance companies should also be blamed for this bad practice. They introduce new products, which gives the opportunity for the agent to twist the policy of other agents, from the same company or a new company.
How is the customer twisted?
1. If you have a whole life or endowment policy, the agent will tell you that it is better to buy an investment-linked policy by showing the projected returns assuming a high yield
2. If you have an investment-linked policy, the agent will tell you that it has lost money (which it has in the recent market down-turn) and move you back to a whole life or endowment or cash back policy.
Remember: the agent always gains from the high commission when you stop a policy and buy a new policy. This is always done at the expense of the customer.
It is easy for an agent to confuse a customer to stop an existing insurance policy to buy a new policy. The agent can easily point out a different feature and explain why it is good for the customer. This is not true, but the agent is trained on how to make the customer believe in the statement.
The agent can earn a high commision on the new policy. This commission can take away newly two years of the premium. If the premium is $300 a month, the customer can lose up to $7,200 of premium as charges taken away from the new policy, mainly to pay commission to the agent.
This practice is called "twisting" and is illegal in many countries. It is quite rampant in Singapore. Many consumers are taken for a ride. If you find that an agent has "twisted" your policy, you should lodge a complaint with the insurance company or with the Monetary Authority of Singapore.
The insurance companies should also be blamed for this bad practice. They introduce new products, which gives the opportunity for the agent to twist the policy of other agents, from the same company or a new company.
How is the customer twisted?
1. If you have a whole life or endowment policy, the agent will tell you that it is better to buy an investment-linked policy by showing the projected returns assuming a high yield
2. If you have an investment-linked policy, the agent will tell you that it has lost money (which it has in the recent market down-turn) and move you back to a whole life or endowment or cash back policy.
Remember: the agent always gains from the high commission when you stop a policy and buy a new policy. This is always done at the expense of the customer.
Monday, September 01, 2008
The truth about life insurance
I write this article for Online Citizen a few months ago. It cause a lot of discussion from consumers and insurance agents. For those who missed it, you can read it here:
http://www.tankinlian.com/articles/truth.html
http://www.tankinlian.com/articles/truth.html
Sunday, August 31, 2008
Excessive spread and unfair practice
Dear Kin Lian
I bought a regular ILP (with annual contribution of $5,000) using CPF many years ago. I did not notice that the offer and bid spread is 5% at that time and the agent also did not tell me (otherwise, I will not buy it).
Every year when I contribute the amount using CPF, the insurance company will purchase the unit trust using the offer price and immediately redeem it using the bid price to cover the insurance premium. The insurance company is profiting not only on the insurance premium but also on the bid/offer spread.
Currently, investment of unit trust using CPF, the maximum bid/offer spread is 3%. Is this maximum spread of 3% applicable to existing ILP? If yes, how could I get the insurance company to reduce it? If not, how can I request CPF or MAS to look into this?
REPLY
I suggest that you write a complaint to the Insurance Department of MAS addressing the following two issues:
1. Conduct of the insurance agent in failing to inform you about the spread. However, as this occurred many years ago, you may find it difficult to raise this point now, as you failed to do so during the past years.
2. Unfair charge levied by the insurance company in applying the spread on your premium and enchasing it immediately (after deducting the spread) to pay the expenses and mortality charge. It would have been fairer for the company to separate your premium into two portions (for charges and for investments) and to apply the spread only on the investments. I think that MAS should not condone this practice, which is unfair to consumers.
If you find the charges to be too high, it is best for you to terminate the policy.
I bought a regular ILP (with annual contribution of $5,000) using CPF many years ago. I did not notice that the offer and bid spread is 5% at that time and the agent also did not tell me (otherwise, I will not buy it).
Every year when I contribute the amount using CPF, the insurance company will purchase the unit trust using the offer price and immediately redeem it using the bid price to cover the insurance premium. The insurance company is profiting not only on the insurance premium but also on the bid/offer spread.
Currently, investment of unit trust using CPF, the maximum bid/offer spread is 3%. Is this maximum spread of 3% applicable to existing ILP? If yes, how could I get the insurance company to reduce it? If not, how can I request CPF or MAS to look into this?
REPLY
I suggest that you write a complaint to the Insurance Department of MAS addressing the following two issues:
1. Conduct of the insurance agent in failing to inform you about the spread. However, as this occurred many years ago, you may find it difficult to raise this point now, as you failed to do so during the past years.
2. Unfair charge levied by the insurance company in applying the spread on your premium and enchasing it immediately (after deducting the spread) to pay the expenses and mortality charge. It would have been fairer for the company to separate your premium into two portions (for charges and for investments) and to apply the spread only on the investments. I think that MAS should not condone this practice, which is unfair to consumers.
If you find the charges to be too high, it is best for you to terminate the policy.
Joke: Open a tin of peas
A man called on a married couple whom he had not seen for some time. The door was opened by the woman to whom the man said, "Hello, Mabel, and how is Jack?"
"Oh," she replied, "didn't you know? He died a while ago."
"Well, I am sorry to hear that," the man said, "How did it happen?"
"Well," he informed him, "he went into the garden to pull a cabbage for dinner, when he collapsed and died."
"Dear, dear," said the man, "whatever did you do?"
"Well", she rejoined, "what could we do? We had to open a tin of peas".
"Oh," she replied, "didn't you know? He died a while ago."
"Well, I am sorry to hear that," the man said, "How did it happen?"
"Well," he informed him, "he went into the garden to pull a cabbage for dinner, when he collapsed and died."
"Dear, dear," said the man, "whatever did you do?"
"Well", she rejoined, "what could we do? We had to open a tin of peas".
Does NTUC Fairprice give good value?
Dear Mr Tan,
I am an avid reader of your enlightening blog. I remember that you once cited that NTUC Fairprice offers the most economical pricings. What is your comment on the article below:
Price chart figures can be misleading
I refer to last Sunday's table titled 'At the shops', which compared the prices of food products in various supermarkets and wet markets in Singapore.
I have issues with the way in which the food prices were presented. At best, the figures require the readers to do some calculations to arrive at the right conclusions. At worst, the numbers mislead the readers into thinking that NTUC FairPrice always offers the most competitive prices.
For example, in citing the prices of kai lan, the table displayed FairPrice's pricing as $1/200g. This works out to $5/kg, which is higher than that in Sheng Siong supermarket ($2.50/kg) and Chung Ling Wet Market ($3/kg).
The comparative prices of cucumber and cai xin were also presented using sometimes different units of measure.
It turned out that in these instances, FairPrice's prices were the least competitive. From the table, it seemed FairPrice offered the most competitive pricing only for a carton of 10 eggs.
Most readers just want a quick look at the comparative prices. This being the case, the way the figures were presented can easily mislead the readers into thinking that FairPrice products are priced the lowest, when that may not be the case.
REPLY
It is a matter of opinion. Generally, Fairprice offers good value. Sheng Siong gives good value as well.
I am an avid reader of your enlightening blog. I remember that you once cited that NTUC Fairprice offers the most economical pricings. What is your comment on the article below:
Price chart figures can be misleading
I refer to last Sunday's table titled 'At the shops', which compared the prices of food products in various supermarkets and wet markets in Singapore.
I have issues with the way in which the food prices were presented. At best, the figures require the readers to do some calculations to arrive at the right conclusions. At worst, the numbers mislead the readers into thinking that NTUC FairPrice always offers the most competitive prices.
For example, in citing the prices of kai lan, the table displayed FairPrice's pricing as $1/200g. This works out to $5/kg, which is higher than that in Sheng Siong supermarket ($2.50/kg) and Chung Ling Wet Market ($3/kg).
The comparative prices of cucumber and cai xin were also presented using sometimes different units of measure.
It turned out that in these instances, FairPrice's prices were the least competitive. From the table, it seemed FairPrice offered the most competitive pricing only for a carton of 10 eggs.
Most readers just want a quick look at the comparative prices. This being the case, the way the figures were presented can easily mislead the readers into thinking that FairPrice products are priced the lowest, when that may not be the case.
REPLY
It is a matter of opinion. Generally, Fairprice offers good value. Sheng Siong gives good value as well.
Saturday, August 30, 2008
Increase in motor insurance premiums
Motor insurance premiums will continue to increase, until the authority act to prevent inflated claims. The reasons are contained in this letter:
http://www.tankinlian.com/articles/puncturing.html
Laywers and workshops are happy with the current situation, as it gives them a lot of business in litigation and inflated repair cost. The higher cost have to be paid by consumers. This situation will continue, until suitable action is taken.
http://www.tankinlian.com/articles/puncturing.html
Laywers and workshops are happy with the current situation, as it gives them a lot of business in litigation and inflated repair cost. The higher cost have to be paid by consumers. This situation will continue, until suitable action is taken.
Joke: class conscious
Henry used to go out with a girl was was very class conscious. He didn't have any class and she was very conscious of it.
Avoid being twisted
A reader of my blog asked my advice about terminating his investment-linked policy. His friend advised him that the policy has a "time bomb" and give a poor return. I learned later that the friend was an insurance agent, trying to sell him a whole life policy with premium payable for 25 years.
The conduct of the insurance agent "friend" is considered to be unethical. This practice is called "twisting" and is to the disadvantage of the customer. The distribution cost of the whole life policy is about two years of the premium, amounting to about $3,000. This is an additional cost to be incurred by the customer in switching the policy.
In the USA, this practice is considered to be illegal. In Singapore, there is a warning in the benefit illustration to warn consumers about "twisting" but many consumers are not aware that they are being "twisted".
The conduct of the insurance agent "friend" is considered to be unethical. This practice is called "twisting" and is to the disadvantage of the customer. The distribution cost of the whole life policy is about two years of the premium, amounting to about $3,000. This is an additional cost to be incurred by the customer in switching the policy.
In the USA, this practice is considered to be illegal. In Singapore, there is a warning in the benefit illustration to warn consumers about "twisting" but many consumers are not aware that they are being "twisted".
Example of low cost investment fund
Hi Mr Tan,
I have been reading your articles and you have been mentioned low cost investment fund, can you state an example of such product on offer currently?
REPLY
REad this FAQ
http://www.tankinlian.com/faq/lowcost.html
I prefer the STI Exchange Traded Fund managed by StateStreet. You can invest in 1000 shares (about $3,000) through the Singapore Exchange SGX.
I have been reading your articles and you have been mentioned low cost investment fund, can you state an example of such product on offer currently?
REPLY
REad this FAQ
http://www.tankinlian.com/faq/lowcost.html
I prefer the STI Exchange Traded Fund managed by StateStreet. You can invest in 1000 shares (about $3,000) through the Singapore Exchange SGX.
Friday, August 29, 2008
Churning a policy
Some unethical insurance agents engage in "churning" their policies. They approach their existing clients and tell them that a new and better policy has been introduced. They advise the client to terminate an old policy and take up the a new policy.
The client is not aware that this is to his disadvantage. By taking up the new policy, the client has to incur the upfront charges once again. About two years of the premium is taken away in these charges.
Some insurance agents churn the policies every five years. A client may be churned several times during their working life. The client does not realise that the premiums that they have saved over the years is used up in paying commission to the clients. The client gets a poor or negative return on the savings over the years.
The client is not aware that this is to his disadvantage. By taking up the new policy, the client has to incur the upfront charges once again. About two years of the premium is taken away in these charges.
Some insurance agents churn the policies every five years. A client may be churned several times during their working life. The client does not realise that the premiums that they have saved over the years is used up in paying commission to the clients. The client gets a poor or negative return on the savings over the years.
Joke: Can I sell you a policy?
A super genius goes in to see a doctor. "Doc," the genius says, "I think I'm too smart. I'm having trouble even communicating with people because we have no common frame of reference, and it's ruining my social life. Can anything be done?"
The doctor runs a series of tests on the genius, and indeed finds that he is too smart. He says, "Currently, your IQ is 250, which is vastly superior to an average man. This is why your having trouble communicating. I do have a cure, however. I have a machine that will drain away some of your intellegence, leaving you with an IQ of 160. You'll still be a genius, but you should be able to lead a normal life as well."
The genius immediately agrees to the treatment, so the doctor straps him into the machine.Just as the doctor turns on the device, he gets a phone call from his ex-wife. They have a heated phone conversation for several minutes before the doctor remembers his patient. He rushes back, and is shocked when he sees the IQ readout at 75.
The doctor says, "Are you all right?"The former genius just stares blankly.The doctor shakes him, saying "Say Something."
The former genius replies, "Can I interest you in a health insurance policy?"
The doctor runs a series of tests on the genius, and indeed finds that he is too smart. He says, "Currently, your IQ is 250, which is vastly superior to an average man. This is why your having trouble communicating. I do have a cure, however. I have a machine that will drain away some of your intellegence, leaving you with an IQ of 160. You'll still be a genius, but you should be able to lead a normal life as well."
The genius immediately agrees to the treatment, so the doctor straps him into the machine.Just as the doctor turns on the device, he gets a phone call from his ex-wife. They have a heated phone conversation for several minutes before the doctor remembers his patient. He rushes back, and is shocked when he sees the IQ readout at 75.
The doctor says, "Are you all right?"The former genius just stares blankly.The doctor shakes him, saying "Say Something."
The former genius replies, "Can I interest you in a health insurance policy?"
How does news events influence prices?
How does news events influence the price of equity, bond, US Dollar and Gold? You can learn from this simulation game:
http://www.tankinlian.com/trader/trader.html
Play the game at:
http://www.tankinlian.com/trader
http://www.tankinlian.com/trader/trader.html
Play the game at:
http://www.tankinlian.com/trader
Thursday, August 28, 2008
Save for a child's education
Hi Mr Tan,
Reading your blog has been a daily thing to do for me. Thank you for all the advice, interesting info. on places you visit, hot topics and jokes.
My only insurance for my only son (9 years old) is a Life insurance for 150k. As I do not have an education plan for him, I am considering to buy the NTUC PayMyUni insurance for him. The quote is 50k for 15 years, premium at $348 monthly plus 2 riders on hospital benefit and waiver of premium based on my life.
I would like to have your advice if this is a good savings for my son's education cos the premium is quite high monthly.
Maturity return
Projected at 3.75%: $71,440
Projected at 5.25%: $81,692
REPLY
The return from the above education policy is fair. It is not great, but is not bad. If you buy this policy, you should commit for the full term of 15 years.
If you invest $348 monthly to earn 5% per annum (not guaranteed) in a low cost investment fund, you will get a total of $92,300.
Read this FAQ:
http://www.tankinlian.com/faq/education.html
Reading your blog has been a daily thing to do for me. Thank you for all the advice, interesting info. on places you visit, hot topics and jokes.
My only insurance for my only son (9 years old) is a Life insurance for 150k. As I do not have an education plan for him, I am considering to buy the NTUC PayMyUni insurance for him. The quote is 50k for 15 years, premium at $348 monthly plus 2 riders on hospital benefit and waiver of premium based on my life.
I would like to have your advice if this is a good savings for my son's education cos the premium is quite high monthly.
Maturity return
Projected at 3.75%: $71,440
Projected at 5.25%: $81,692
REPLY
The return from the above education policy is fair. It is not great, but is not bad. If you buy this policy, you should commit for the full term of 15 years.
If you invest $348 monthly to earn 5% per annum (not guaranteed) in a low cost investment fund, you will get a total of $92,300.
Read this FAQ:
http://www.tankinlian.com/faq/education.html
Understanding Twisting and Churning
http://ezinearticles.com/?Life-Insurance-Fraud---Understanding-Churning-And-Twisting&id=782681
There are two types of life insurance fraud carried out by unscrupulous agents you should be aware of. The two closely related types of insurance scams are known as churning and twisting.
How do those agents carry them out and what do you do if you're a victim? Make sure you know these before you get scammed!
The fraudulent practice of making an insured drain one life insurance policy in other to fund another new policy is called churning. Important information about the full consequence of their action is dishonestly withheld by the agent involved.
Closely related to this is twisting. In twisting the policy holder is tricked to drain funds to buy another policy from another life insurance carrier. Run; don't walk if an agent promises you a new policy that will give you more coverage without increasing your premium. It's a scam so beware!
It's only when they get bills for new premiums that victims find out that something really was wrong. For some it could take up to two years before they find out.
Now is there anything you can do if you've been so scammed? But can a person get more coverage without increasing their premium?
For those who've been scammed there's help and for those who want more for less, there's a way. For those who've been ripped off, you can get help from your state's department of insurance or its equivalent. (In Singapore, you can complain to the Monetary Authority of Singapore).
Just a visit their website and you'll find resources that will help you. You can also call if you prefer that. Many reputable insurance companies will quickly compensate you once it's established that you were a victim of such fraud. You just have to contact their main office directly and not a branch.
There are two types of life insurance fraud carried out by unscrupulous agents you should be aware of. The two closely related types of insurance scams are known as churning and twisting.
How do those agents carry them out and what do you do if you're a victim? Make sure you know these before you get scammed!
The fraudulent practice of making an insured drain one life insurance policy in other to fund another new policy is called churning. Important information about the full consequence of their action is dishonestly withheld by the agent involved.
Closely related to this is twisting. In twisting the policy holder is tricked to drain funds to buy another policy from another life insurance carrier. Run; don't walk if an agent promises you a new policy that will give you more coverage without increasing your premium. It's a scam so beware!
It's only when they get bills for new premiums that victims find out that something really was wrong. For some it could take up to two years before they find out.
Now is there anything you can do if you've been so scammed? But can a person get more coverage without increasing their premium?
For those who've been scammed there's help and for those who want more for less, there's a way. For those who've been ripped off, you can get help from your state's department of insurance or its equivalent. (In Singapore, you can complain to the Monetary Authority of Singapore).
Just a visit their website and you'll find resources that will help you. You can also call if you prefer that. Many reputable insurance companies will quickly compensate you once it's established that you were a victim of such fraud. You just have to contact their main office directly and not a branch.
Watch out for these scams
Edited from an article in:
http://www.guardian.co.uk/money/2008/aug/23/scamsandfraud.consumeraffairs1
Lesson: Land banking is listed as item #8
1. Phoney jobs
This is usually an "advance fee" fraud where you wire money in the expectation you will get a job, usually one offering substantial money for "part-time work from home". The money transmission may be called a "test". Fraudsters often use the names of legitimate companies and "guarantee" earnings.
2. Racing tipsters
There are many legitimate services trying to predict winners. But there are many scams - danger signals include claims of huge past gains (it's easy to copy the list of winners from yesterday's paper), schemes that "beat the bookies" and "guaranteed tax-free earnings". Others sell software which, they say, will produce winners.
3. Car scams
Why would anyone offer you 30% to 50% more than market price for your car? Because they are scamming you. One version is to give you a phoney "banker's draft" and take your car away. You can't usually claim on your insurance.
4. Spanish lotteries
Millions of letters and emails go out, telling recipients they have won in legitimate lotteries. But those who get the letters can't win as they have never bought a ticket.
That does not stop otherwise sensible people losing their heads - and money. One reader filled in a questionnaire and was soon told he had won a large sum of money in the lottery. He sent money to cover "transfer costs". Then he was told "it was blocked by the Spanish government".
5. Phoney psychics
The only thing these people predict correctly is that vulnerable people will send them cash in response to mail shots which contain a mix of menace - you could die or fall ill if you don't respond - and reassurance such as "you'll be safe and will win on the lottery" if you send off the money for this. These are usually sent by post - often targeted at elderly people whose details are sold and resold.
6. Mail-order brides
This is really sad. Scamsters look for lonely people - usually men - and offer them love on the internet or by post. The "beautiful" women, who often claim to be Eastern European or Asian, don't exist: what victims see are pictures copied from entertainment, fashion or celebrity magazines.
Once smitten, men are asked to send their lovers money for air tickets, cash for "the family" or even amounts to pay off old boyfriends. To keep them interested, the targets may be sent sexy pictures or intimate clothing items. Victims are strung along until they realise they have been stung - or until they run out of money.
6. Boiler rooms
Persuasive salesmen cold call investors and try to persuade them to buy shares or commodities on the promise that "they will double or treble your investment in three to six months".
The sales pitch may have a pinch of truth, but what is on offer is phoney. Investors are often shuttled between "analysts" and "senior analysts" but these titles are meaningless.
The shares are usually in companies that don't exist, while those bets on currency exchange rates or heating oil are never made - often the boiler room tells victims they have quick gains, to encourage them to invest even more.
7. The Nigerian scam
When the "widow" of a former Nigerian dictator emails to ask your help in getting access to the millions that happens to be locked in a bank account, most treat it as a joke. Using various names, this scam has been around for at least 30 years. While the dictator was real, and the fact that those in corrupt regimes stashed away money in offshore banks is not disputed, the widow is a total phoney - as is the promised bank account.
8. Land banking
Here you are persuaded to pay a large sum of money for a tenth of an acre in a field - on the promise the land will soon receive planning permission and soar in value. So far, no land banking site has ever gained the building go-ahead.
Most land sold in this way is green belt or zoned for agricultural use only. But land bankers seize on every government statement about the need for more homes to stress that this means that it is certain that the site they are selling will soon be covered in houses - like almost all scams, this relies on an element of truth.
9. Ostrich farms
Ostrich farms exploited victims who believed that the commodity would profit from rarity. But the same ostrich was sold over and over - and the expected market for ostrich meat never happened. Equally, champagne and scotch firms are quite capable of expanding output ahead of an event such as the millennium. Those who bought champagne at top prices found they had very non-vintage fizz - if anything at all.
http://www.guardian.co.uk/money/2008/aug/23/scamsandfraud.consumeraffairs1
Lesson: Land banking is listed as item #8
1. Phoney jobs
This is usually an "advance fee" fraud where you wire money in the expectation you will get a job, usually one offering substantial money for "part-time work from home". The money transmission may be called a "test". Fraudsters often use the names of legitimate companies and "guarantee" earnings.
2. Racing tipsters
There are many legitimate services trying to predict winners. But there are many scams - danger signals include claims of huge past gains (it's easy to copy the list of winners from yesterday's paper), schemes that "beat the bookies" and "guaranteed tax-free earnings". Others sell software which, they say, will produce winners.
3. Car scams
Why would anyone offer you 30% to 50% more than market price for your car? Because they are scamming you. One version is to give you a phoney "banker's draft" and take your car away. You can't usually claim on your insurance.
4. Spanish lotteries
Millions of letters and emails go out, telling recipients they have won in legitimate lotteries. But those who get the letters can't win as they have never bought a ticket.
That does not stop otherwise sensible people losing their heads - and money. One reader filled in a questionnaire and was soon told he had won a large sum of money in the lottery. He sent money to cover "transfer costs". Then he was told "it was blocked by the Spanish government".
5. Phoney psychics
The only thing these people predict correctly is that vulnerable people will send them cash in response to mail shots which contain a mix of menace - you could die or fall ill if you don't respond - and reassurance such as "you'll be safe and will win on the lottery" if you send off the money for this. These are usually sent by post - often targeted at elderly people whose details are sold and resold.
6. Mail-order brides
This is really sad. Scamsters look for lonely people - usually men - and offer them love on the internet or by post. The "beautiful" women, who often claim to be Eastern European or Asian, don't exist: what victims see are pictures copied from entertainment, fashion or celebrity magazines.
Once smitten, men are asked to send their lovers money for air tickets, cash for "the family" or even amounts to pay off old boyfriends. To keep them interested, the targets may be sent sexy pictures or intimate clothing items. Victims are strung along until they realise they have been stung - or until they run out of money.
6. Boiler rooms
Persuasive salesmen cold call investors and try to persuade them to buy shares or commodities on the promise that "they will double or treble your investment in three to six months".
The sales pitch may have a pinch of truth, but what is on offer is phoney. Investors are often shuttled between "analysts" and "senior analysts" but these titles are meaningless.
The shares are usually in companies that don't exist, while those bets on currency exchange rates or heating oil are never made - often the boiler room tells victims they have quick gains, to encourage them to invest even more.
7. The Nigerian scam
When the "widow" of a former Nigerian dictator emails to ask your help in getting access to the millions that happens to be locked in a bank account, most treat it as a joke. Using various names, this scam has been around for at least 30 years. While the dictator was real, and the fact that those in corrupt regimes stashed away money in offshore banks is not disputed, the widow is a total phoney - as is the promised bank account.
8. Land banking
Here you are persuaded to pay a large sum of money for a tenth of an acre in a field - on the promise the land will soon receive planning permission and soar in value. So far, no land banking site has ever gained the building go-ahead.
Most land sold in this way is green belt or zoned for agricultural use only. But land bankers seize on every government statement about the need for more homes to stress that this means that it is certain that the site they are selling will soon be covered in houses - like almost all scams, this relies on an element of truth.
9. Ostrich farms
Ostrich farms exploited victims who believed that the commodity would profit from rarity. But the same ostrich was sold over and over - and the expected market for ostrich meat never happened. Equally, champagne and scotch firms are quite capable of expanding output ahead of an event such as the millennium. Those who bought champagne at top prices found they had very non-vintage fizz - if anything at all.
Heavy loss on ILP for first two years
Dear Mr Tan,
In September 2006, I bought an Investment-linked policy for $150,000 death, critical illness, and disability. First 2 years, no investment portion, all the money go to insurance coverage. Just recently I realize ILP is a 'time bomb' after read some article about it.
Now our friend recommanded me to stop the ILP and take the loss of $6000. Should I continue with the ILP, by paying the lowest fee till the market recover? I hope that I can recover back my investment in 5 years time. My friend said if I continue with my monthly savings, I will lose more, compare with the loss of $6000 now.
REPLY
Generally, you suffered the upfront cost during the first two years. After that, the charges are not too heavy. So, if you have already paid for more than two years, it is generally better to continue the ILP.
If you find the insurance cost to be too high, you can reduce the coverage. But, you must compare the charges against a term insurance policy.
These are general remarks. I am not able to give you specific advice on your particular matter.
In September 2006, I bought an Investment-linked policy for $150,000 death, critical illness, and disability. First 2 years, no investment portion, all the money go to insurance coverage. Just recently I realize ILP is a 'time bomb' after read some article about it.
Now our friend recommanded me to stop the ILP and take the loss of $6000. Should I continue with the ILP, by paying the lowest fee till the market recover? I hope that I can recover back my investment in 5 years time. My friend said if I continue with my monthly savings, I will lose more, compare with the loss of $6000 now.
REPLY
Generally, you suffered the upfront cost during the first two years. After that, the charges are not too heavy. So, if you have already paid for more than two years, it is generally better to continue the ILP.
If you find the insurance cost to be too high, you can reduce the coverage. But, you must compare the charges against a term insurance policy.
These are general remarks. I am not able to give you specific advice on your particular matter.
Joke: Cancel the policy on her husband
Steve's barn burned down. Julie, his wife, called the insurance company and said, "We had that barn insured for fifty thousand and I want my money."
"Whoa there, just a minute, Julie, it doesn't work like that. We will assess the value of the building and provide you with a new one of comparable worth." the agent replied.
Julie, after a pause, said, "Well, in that case, I'd like to cancel the policy on my husband."
"Whoa there, just a minute, Julie, it doesn't work like that. We will assess the value of the building and provide you with a new one of comparable worth." the agent replied.
Julie, after a pause, said, "Well, in that case, I'd like to cancel the policy on my husband."
Tuesday, August 26, 2008
Cash value boosted by non-guaranteed terminal bonus
Dear Mr. Tan
I am offered a whole life policy with premium of $2,053 payable for 15 years. At the end of 40 years, I get a cash value of $114,000. It represents a reduction of 33% from the accumulated premium of $171,000 (based on 5.25% yield). Is this a good deal?
REPLY
The reduction of 33% appears to be reasonable. I have seen another policy, where the reduction is 46%.
However, I am not sure if you can rely on cash value of $114,000. Some insurance companies show high terminal bonus at the longer duration to make the cash value look attractive. They know that most people do not keep their policies so long. If they terminate the policy earlier, they get a poor return.
Even if the policyholder keep the policy for 40 years, they may find that the insurance company can reduce the cash value, as the terminal bonus is not guaranteed.
I am offered a whole life policy with premium of $2,053 payable for 15 years. At the end of 40 years, I get a cash value of $114,000. It represents a reduction of 33% from the accumulated premium of $171,000 (based on 5.25% yield). Is this a good deal?
REPLY
The reduction of 33% appears to be reasonable. I have seen another policy, where the reduction is 46%.
However, I am not sure if you can rely on cash value of $114,000. Some insurance companies show high terminal bonus at the longer duration to make the cash value look attractive. They know that most people do not keep their policies so long. If they terminate the policy earlier, they get a poor return.
Even if the policyholder keep the policy for 40 years, they may find that the insurance company can reduce the cash value, as the terminal bonus is not guaranteed.
Whole life policy with premium for 10 years
Dear Mr. Tan,
I am 24 years and pay a premium of $2,500 for 10 years to be covered for $80,000 for death and critical illness for life. The cash value at 65 is $89,000. Is this a good deal?
REPLY
If you invest the 10 years of premium to earn 5.25% (which is the same rate used by the insurance company to project the bonus, you will get a total amount of $164,000 when you are 65. The cash value of $89,000 represents a reduction of 46% from the amount due to you. I consider a reduction of 46% to be too large and the policy gives you a poor return.
I am 24 years and pay a premium of $2,500 for 10 years to be covered for $80,000 for death and critical illness for life. The cash value at 65 is $89,000. Is this a good deal?
REPLY
If you invest the 10 years of premium to earn 5.25% (which is the same rate used by the insurance company to project the bonus, you will get a total amount of $164,000 when you are 65. The cash value of $89,000 represents a reduction of 46% from the amount due to you. I consider a reduction of 46% to be too large and the policy gives you a poor return.
Joke: statements of motor accidents
> I was thrown from my car as it left the road. I was later found in a ditch by some stray cows.
> I had been learning to drive with power steering. I turned the wheel to what I thought was enough and found myself in a different direction going the opposite way.
> I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car.
> I had been learning to drive with power steering. I turned the wheel to what I thought was enough and found myself in a different direction going the opposite way.
> I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car.
A fair reduction in yield
If you invest $5,000 for 30 years to earn a yield of 5%, you will receive $332,000 on the end of the period. This is an attractive investment, if the average inflation rate during this period is less than 3%.
If you invest in a life insurance product, you are likely to get an estimated yield of about 2.5%, giving $220,000 at the end of the period. The reduction of 2.5% in yield works out to $112,000 or 34% of the maturity sum of $332,000.
The actual cost of the life insurance protection is estimated to be 5% of the maturity sum. The remaining 29% in charges goes to pay commission to the agent and the expenses and profit of the insurance company.
I consider the reduction of 34% in maturity sum or 2.5% in yield to be too high and that the life insurance policy gives a poor deal to consumers.
A fair deduction should be 20% of the maturity sum, instead of 34%. This is used to provide the cost of insurance protection (5%) and the expenses (15%) for marketing and administration.
A reduction of 20% in the maturity sum over 30 years amounts to a reduction in yield of 1.4%. In the above example, the policyholder will get a return of $266,000 instead of $220,000.
Lesson: if the reduction in yield is less than 1.5%, the policy is giving a fair return (as it includes the cost of life insurance protection). If the reduction in yield is more than 1.5%, the policy is giving a poor deal to the consumer.
If you invest in a life insurance product, you are likely to get an estimated yield of about 2.5%, giving $220,000 at the end of the period. The reduction of 2.5% in yield works out to $112,000 or 34% of the maturity sum of $332,000.
The actual cost of the life insurance protection is estimated to be 5% of the maturity sum. The remaining 29% in charges goes to pay commission to the agent and the expenses and profit of the insurance company.
I consider the reduction of 34% in maturity sum or 2.5% in yield to be too high and that the life insurance policy gives a poor deal to consumers.
A fair deduction should be 20% of the maturity sum, instead of 34%. This is used to provide the cost of insurance protection (5%) and the expenses (15%) for marketing and administration.
A reduction of 20% in the maturity sum over 30 years amounts to a reduction in yield of 1.4%. In the above example, the policyholder will get a return of $266,000 instead of $220,000.
Lesson: if the reduction in yield is less than 1.5%, the policy is giving a fair return (as it includes the cost of life insurance protection). If the reduction in yield is more than 1.5%, the policy is giving a poor deal to the consumer.
Monday, August 25, 2008
Joke: statements of motor accidents
> The pedestrian had no idea which way to run as I ran over him.
> I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car.
> The indirect cause of the accident was a little guy in a small car with a big mouth.
> I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car.
> The indirect cause of the accident was a little guy in a small car with a big mouth.
Sunday, August 24, 2008
Real estate site in Singapore
Visitors to this site said that it is the best real estate website that they've come across. They find it easy to search, and benefit from the price trends and transaction data available. This helps them make more informed decisions against real estate agents, especially the unethical ones who are only interested in closing a deal fast, and do not give their clients accurate information.
http://www.streetsine.com/
http://www.streetsine.com/
Baby Package 2008
We have so much trouble with the cutoff date for the Baby Package. The first cutoff date of 1 January 2009 brought a lot of protest from expecting mothers with babies due to be delivered this year. The revised cutoff date of 17 August produced another group of unhappy parents whose babies arrived earlier this year.
We faced this problem with cutoff date on many occasions during the past 25 years. Each time that new incentives were introduced, many parents felt disadvantaged by being on the wrong side of the cutoff date.
We never learned the lesson. Our birth-rate continued to decline over the years, in spite of the repeated efforts.
I met a Singaporean couple who worked in Perth and had their baby delivered there. The incentives given to parents in Australia are:
> AUD 5,000 on delivery of the baby
> 5 months of paid maternity leave
> An allowance to the mother who stopped work to look after the baby during the first two years
The incentive is simple, compared to our Baby Package introduced in Singapore.
Singapore has the unique system of incentives that differ according to the tax bracket of the parents, the working status of the mother, the birth order of the baby, the date of birth and other factors. We need to read a detailed booklet and to ask for explanation to understand the incentives.
We faced this problem with cutoff date on many occasions during the past 25 years. Each time that new incentives were introduced, many parents felt disadvantaged by being on the wrong side of the cutoff date.
We never learned the lesson. Our birth-rate continued to decline over the years, in spite of the repeated efforts.
I met a Singaporean couple who worked in Perth and had their baby delivered there. The incentives given to parents in Australia are:
> AUD 5,000 on delivery of the baby
> 5 months of paid maternity leave
> An allowance to the mother who stopped work to look after the baby during the first two years
The incentive is simple, compared to our Baby Package introduced in Singapore.
Singapore has the unique system of incentives that differ according to the tax bracket of the parents, the working status of the mother, the birth order of the baby, the date of birth and other factors. We need to read a detailed booklet and to ask for explanation to understand the incentives.
Joke: statements of motor accidents
> An invisible car come out of nowhere, struck my car and vanished.
> I told the police that I was not injured but on removing my hat found that I had a fractured skull.
> I was sure the old fellow would never make it to the other side of the road when I struck him.
> I told the police that I was not injured but on removing my hat found that I had a fractured skull.
> I was sure the old fellow would never make it to the other side of the road when I struck him.
Adequate life insurance
Do you have adequate life insurance? Are you buying the right type of life insurance? What is the suitable plan for young people?
Watch this video:
http://www.youtube.com/watch?v=iqaMcde3zgA
Watch this video:
http://www.youtube.com/watch?v=iqaMcde3zgA
500,000 visitors by 11-11-2008
I have 409,000 visitors to my blog now. I estimate that it will reach 500,000 by 11-11-2008, maybe earlier.
Managing Personal Risks
Insurance agents tell customers about the risk of death and gets them to save a lot of money in life insurance policies.
To manage your personal risks, you need to consider the following:
> you need to take care of the risk of "premature death", i.e. death that occurs during your working life (until your children are grown up)
> there is no need for life insurance beyond 65 (as everyone will die one day anyway)
> you need to have sufficient savings for your retirement
> your medical expenses can be covered by Medishield , so critical illness insurance is not necessary.
Too much savings is being spent on whole life and critical illness insurance today, due to advice by insurance agents. The chance of death or a critical illness occurring during the working life is less than 5% or 10%. But, it takes away too much savings and leave behind too little savings being invested for retirement (which is the risk faced by more than 90% of the population.
Many people today have inadequate savings for their retirement, due to bad management of their personal finances. They put too much money in life insurance policies that take away high expenses and give a poor yield on their savings.
To manage your personal finances better, read these FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
Remember. The insurance agent will give you many other reasons to buy a whole life or critical illness insurance. They must market the product, as they are paid commission on the sales. You can ask the agent how much commission is paid to them. It is stated in the Benefit Illustration. The commission comes from your premium. It does not come from the generosity of the life insurance company.
To manage your personal risks, you need to consider the following:
> you need to take care of the risk of "premature death", i.e. death that occurs during your working life (until your children are grown up)
> there is no need for life insurance beyond 65 (as everyone will die one day anyway)
> you need to have sufficient savings for your retirement
> your medical expenses can be covered by Medishield , so critical illness insurance is not necessary.
Too much savings is being spent on whole life and critical illness insurance today, due to advice by insurance agents. The chance of death or a critical illness occurring during the working life is less than 5% or 10%. But, it takes away too much savings and leave behind too little savings being invested for retirement (which is the risk faced by more than 90% of the population.
Many people today have inadequate savings for their retirement, due to bad management of their personal finances. They put too much money in life insurance policies that take away high expenses and give a poor yield on their savings.
To manage your personal finances better, read these FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
Remember. The insurance agent will give you many other reasons to buy a whole life or critical illness insurance. They must market the product, as they are paid commission on the sales. You can ask the agent how much commission is paid to them. It is stated in the Benefit Illustration. The commission comes from your premium. It does not come from the generosity of the life insurance company.
Saturday, August 23, 2008
Joke: statements of motor accidents
> As I approached an intersection a sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.
> To avoid hitting the bumper of the car in front I struck a pedestrian.
> My car was legally parked as it backed into another vehicle.
> To avoid hitting the bumper of the car in front I struck a pedestrian.
> My car was legally parked as it backed into another vehicle.
New era of shortages
Will the world enter into a new era of shortages? Oil? Food? What will be the impact?
http://newpaper.asia1.com.sg/columnists/story/0,4136,169560,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,169560,00.html
http://www.tankinlian.com/drmoney/
Financial planning for a young family
Hi Mr. Tan
My husband and I are doing our reviews of our profile. My financial planner recently recommends that we increase our critical illness coverage to at least $125K, via a limited pay term insurance. The two products recommended are Asia Life TM Legacy and NTUC Income Vivolife.
I have read your FAQ and I'm not sure if we should be increasing the critical illness coverage by another $100K. We have two young children, that's also the reason why we want to ensure at least we are sufficiently covered.
REPLY
Both of these products are high cost products that give poor value to the consumer. I advice people to buy a 20 year Level Term insurance, and to invest the difference in a low cost fund.
You can see some examples of the difference in the FAQs in my blog:
www.tankinlian.com/faq
http://www.tankinlian.com/faq/true.html
http://www.tankinlian.com/faq/age65.html
My husband and I are doing our reviews of our profile. My financial planner recently recommends that we increase our critical illness coverage to at least $125K, via a limited pay term insurance. The two products recommended are Asia Life TM Legacy and NTUC Income Vivolife.
I have read your FAQ and I'm not sure if we should be increasing the critical illness coverage by another $100K. We have two young children, that's also the reason why we want to ensure at least we are sufficiently covered.
REPLY
Both of these products are high cost products that give poor value to the consumer. I advice people to buy a 20 year Level Term insurance, and to invest the difference in a low cost fund.
You can see some examples of the difference in the FAQs in my blog:
www.tankinlian.com/faq
http://www.tankinlian.com/faq/true.html
http://www.tankinlian.com/faq/age65.html
Friday, August 22, 2008
Joke: statements of motor accidents
> In an attempt to kill a fly, I drove into a telephone pole.
> I had been shopping for plants all day and was on my way home. As I reached an intersection a hedge sprang up, obscuring my vision and I did not see the other car.
> I had been driving for forty years when I fell asleep at the wheel and had an accident.
> I had been shopping for plants all day and was on my way home. As I reached an intersection a hedge sprang up, obscuring my vision and I did not see the other car.
> I had been driving for forty years when I fell asleep at the wheel and had an accident.
Claim ratios on motor insurance
Are you paying the right premium for your motor insurance? Dr. Money analyses some claim ratios of insurance companies in Singapore:
http://newpaper.asia1.com.sg/columnists/story/0,4136,170194,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,170194,00.html
http://www.tankinlian.com/drmoney/
Charges of Investment-linked plans
Hi Mr. Tan,
May I know is it that all regular ILP does not invest 100% of our preimum from the 1st mth? Does single premium ILP invest 100% of our preimum?
REPLY
There must be 100 different ILPs in the market. I am not able to tell you the difference in structures between these plans. You should ask the insurance companies.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
May I know is it that all regular ILP does not invest 100% of our preimum from the 1st mth? Does single premium ILP invest 100% of our preimum?
REPLY
There must be 100 different ILPs in the market. I am not able to tell you the difference in structures between these plans. You should ask the insurance companies.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
Thursday, August 21, 2008
Joke: statements on motor accidents
> I collided with a stationary truck coming the other way.
> The guy was all over the road. I had to swerve a number of times before I hit him.
> I pulled away from the side of the road, glanced at my mother-in-law and headed over the embankment.
> The guy was all over the road. I had to swerve a number of times before I hit him.
> I pulled away from the side of the road, glanced at my mother-in-law and headed over the embankment.
Flexi-link and Ideal plans
Hi Mr. Tan,
From the website, I realised NTUC income have Flexi-link policy & Ideal policy. May I know what are the main difference between the two? If I did not understand wrongly, Flexi-Link(Invest in 1 lump sum min. $5000) Ideal (Invest regularly - min. $100/mth)
There are different plans policy under Flexi-Link (IB1/2/3/4) and Ideal (ID1/2/5/6/7). However the differences are not explained clearly in the website. I only managed to found out a table which shows the policy fee and adviser charges of each policy.
Are you familiar with the above policies? Can you explained more to me about the differences of these policies to clear my doubt. Thks.
REPLY
If you have $5,000 to start the initial investment, it is better to invest in the Flexi-Link. You can have regular monthly top-ups. The front-end charge for Flexi-Link is 3.5% for each investment. The annual charge is deducted from the fund and varies from 1% to 1.5% depending on the fund invested.
The Ideal plan is a regular saving plan for people who are not able to make the initial investment of $5,000. The Ideal plan are subject to the same charges as the Flexi-link plan and, in addition, there is a further charge of 15% on the annual premium for 3 years (total of 45%) for ID2 and a different charge for ID7 (only available through the business center).
I suggest that you go to the business center in Bras Basah Road and ask the consultant to explain it the difference to you in detail.
The best choice is Flexi-link (if you have $5,000 to invest) or ID7 (but only available through the business center).
From the website, I realised NTUC income have Flexi-link policy & Ideal policy. May I know what are the main difference between the two? If I did not understand wrongly, Flexi-Link(Invest in 1 lump sum min. $5000) Ideal (Invest regularly - min. $100/mth)
There are different plans policy under Flexi-Link (IB1/2/3/4) and Ideal (ID1/2/5/6/7). However the differences are not explained clearly in the website. I only managed to found out a table which shows the policy fee and adviser charges of each policy.
Are you familiar with the above policies? Can you explained more to me about the differences of these policies to clear my doubt. Thks.
REPLY
If you have $5,000 to start the initial investment, it is better to invest in the Flexi-Link. You can have regular monthly top-ups. The front-end charge for Flexi-Link is 3.5% for each investment. The annual charge is deducted from the fund and varies from 1% to 1.5% depending on the fund invested.
The Ideal plan is a regular saving plan for people who are not able to make the initial investment of $5,000. The Ideal plan are subject to the same charges as the Flexi-link plan and, in addition, there is a further charge of 15% on the annual premium for 3 years (total of 45%) for ID2 and a different charge for ID7 (only available through the business center).
I suggest that you go to the business center in Bras Basah Road and ask the consultant to explain it the difference to you in detail.
The best choice is Flexi-link (if you have $5,000 to invest) or ID7 (but only available through the business center).
Wednesday, August 20, 2008
Joke: statements of motor accidents
> Coming home I drove into the wrong house and collided with a tree I don't have.
> The other car collided with mine without giving warning of its intentions.
> I thought my window was down, but I found it was up when I put my head through it.
> The other car collided with mine without giving warning of its intentions.
> I thought my window was down, but I found it was up when I put my head through it.
Depression of the 1930s
Will the world enter into an economic depression? Dr. Money explained what happened during the early 1930s.
http://newpaper.asia1.com.sg/columnists/story/0,4136,171882,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,171882,00.html
http://www.tankinlian.com/drmoney/
How to avoid scams
Hello, Mr. Tan,
I was approached by an financial consultant offering an investment product called forex phaetorian. This product originated from an investment company in Singapore. It is a 2 years term, capital guaranteed and 12% interest guaranteed payable every six month. The consultant told me that 12% investment return in singapore is very common.
Mr Tan, what do you think? I mean, if it is so good, then the whole of Singapore should know about it and sold out fast. Why do they have to come to Malaysia and sell to us? I was told it is a private placement and not a public offering product.
REPLY
There must be a catch. If something is too good to be true, then it is likely to be a scam. Do not trust any product that appears "too good to be true".
I was approached by an financial consultant offering an investment product called forex phaetorian. This product originated from an investment company in Singapore. It is a 2 years term, capital guaranteed and 12% interest guaranteed payable every six month. The consultant told me that 12% investment return in singapore is very common.
Mr Tan, what do you think? I mean, if it is so good, then the whole of Singapore should know about it and sold out fast. Why do they have to come to Malaysia and sell to us? I was told it is a private placement and not a public offering product.
REPLY
There must be a catch. If something is too good to be true, then it is likely to be a scam. Do not trust any product that appears "too good to be true".
Tuesday, August 19, 2008
Joke: reduce the probability
An actuary is walking down the corridor when he feels a twinge in his chest. Immediately, he runs to the stairwell and hurls himself down.
His friend, visiting him in the hospital, asks why he did that. The actuary replies, "The chances of having a heart attack and falling down the stairs are much lower than the chances of having a heart attack only."
His friend, visiting him in the hospital, asks why he did that. The actuary replies, "The chances of having a heart attack and falling down the stairs are much lower than the chances of having a heart attack only."
How to stretch your dollar
Dr. Money writes about how to stretch your dollar with the right type of insurance plan:
http://newpaper.asia1.com.sg/columnists/story/0,4136,172456,00.html
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,172456,00.html
http://www.tankinlian.com/drmoney/
Perfect husband
Several men are in the locker room of a golf club. A cell phone on a bench rings and a man engages the hands free speaker function and begins to talk. Everyone else in the room stops to listen.
MAN: 'Hello'
WOMAN: 'Honey, it's me. Are you at the club?'
MAN: 'Yes'
WOMAN: 'I am at the mall now and found this beautiful leather coat. It's only $1,000. Is it OK if I buy it?'
MAN: 'Sure, go ahead if you like it that much.'
WOMAN: 'I also stopped by the Mercedes dealership and saw the new 2008 models. I saw one I really liked.'
MAN: 'How much?'
WOMAN: '$390,000'
MAN: 'OK, but for that price I want it with all the options.'
WOMAN: 'Great! Oh, and one more thing...the house I wanted last year is back on the market. They're asking $2,950,000' for it.
MAN: 'Well, then go ahead and give them an offer of $2,800,000. They will probably take it. If not, we can go the extra $150,000 if it's really a pretty good price.'
WOMAN: 'OK. I'll see you later! I love you so much!'
MAN: 'Bye! I love you, too.'
The man hangs up. The other men in the locker room are staring at him in astonishment, mouths agape.
He turns and asks: 'Anyone know who this phone belongs to?'
MAN: 'Hello'
WOMAN: 'Honey, it's me. Are you at the club?'
MAN: 'Yes'
WOMAN: 'I am at the mall now and found this beautiful leather coat. It's only $1,000. Is it OK if I buy it?'
MAN: 'Sure, go ahead if you like it that much.'
WOMAN: 'I also stopped by the Mercedes dealership and saw the new 2008 models. I saw one I really liked.'
MAN: 'How much?'
WOMAN: '$390,000'
MAN: 'OK, but for that price I want it with all the options.'
WOMAN: 'Great! Oh, and one more thing...the house I wanted last year is back on the market. They're asking $2,950,000' for it.
MAN: 'Well, then go ahead and give them an offer of $2,800,000. They will probably take it. If not, we can go the extra $150,000 if it's really a pretty good price.'
WOMAN: 'OK. I'll see you later! I love you so much!'
MAN: 'Bye! I love you, too.'
The man hangs up. The other men in the locker room are staring at him in astonishment, mouths agape.
He turns and asks: 'Anyone know who this phone belongs to?'
Monday, August 18, 2008
Joke: brother-in-law
Mr. Smith was brought to Mercy Hospital (a Catholic hospital), and taken quickly in for coronary surgery. The operation went well and, as the groggy man regained consciousness, he was reassured by a Sister of Mercy, who was waiting by his bed.
"Mr. Smith, you're going to be just fine," said the nun, gently patting his hand. "We do need to know, however, how you intend to pay for your stay here. Are you covered by insurance?" "No, I'm not," the man whispered hoarsely.
"Then can you pay in cash?" persisted the nun. I'm afraid I cannot, Sister."
"Well, do you have any close relative?" the nun questioned sternly. Just my sister in New Mexico," he volunteered. "But she's a humble spinster nun."
Oh, I must correct you, Mr. Smith. Nuns are not spinsters - they are married to God."
"Wonderful," said Mr. Smith. "In that case, please send the bill to my brother-in-law."
"Mr. Smith, you're going to be just fine," said the nun, gently patting his hand. "We do need to know, however, how you intend to pay for your stay here. Are you covered by insurance?" "No, I'm not," the man whispered hoarsely.
"Then can you pay in cash?" persisted the nun. I'm afraid I cannot, Sister."
"Well, do you have any close relative?" the nun questioned sternly. Just my sister in New Mexico," he volunteered. "But she's a humble spinster nun."
Oh, I must correct you, Mr. Smith. Nuns are not spinsters - they are married to God."
"Wonderful," said Mr. Smith. "In that case, please send the bill to my brother-in-law."
Foreign currency deposit rates
Dear Sir,
Currently the FD rates offered by banks in Singapore are 1% or less. I have just opened an Australian Foreign Currency Fixed Deposit that gives me 7+% per annum.
I have no intention to convert the money back to Singapore Dollars in the forseeable future. the money is kept aside for retirement. Would this be a way for Singaporeans to save. Has interest rates in Australia ever gone down to levels similar to Singapore?
REPLY
I suggest that you ask your bank to give this information to you. They have the past record of currency conversion rates and interest rates.
Currently the FD rates offered by banks in Singapore are 1% or less. I have just opened an Australian Foreign Currency Fixed Deposit that gives me 7+% per annum.
I have no intention to convert the money back to Singapore Dollars in the forseeable future. the money is kept aside for retirement. Would this be a way for Singaporeans to save. Has interest rates in Australia ever gone down to levels similar to Singapore?
REPLY
I suggest that you ask your bank to give this information to you. They have the past record of currency conversion rates and interest rates.
Avoid whole life policies
Many people are badly advised by insurance agents into buying whole life insurance. Being expensive (compared to term insurance), the consumer has inadequate insurance for their needs.
The agent says that "term insurance will expire after 20 years, and you will not be uninsured at that time".
Many people are unduly concerned about this point. It is largely irrelevant. Most people only need adequate life insurance to cover premature death when their children are young. An insurance period of 20 years is quite adequate to meet this need.
Beyond 20 years, they need to have sufficient savings for their retirement. As a whole life policy provide a poor return, it will not meet this purpose. Many people who invested most of their savings in whole life policies received a poor deal.
I fall into this category. Two of my whole life Living policies have not even reach the breakeven point after more than 10 years. Fortunately for me, they represent only a small part of my total savings.
The return on my two Living policies are far below what is due to me, if my insurance company had distributed bonuses fairly, based on the actual experience of the fund. As these are participating policies, there is an expectation that the insurance company has to act fairly, but they did not. The return on similar policies offered by other insurance companies are probably worse, as they have higher expenses.
It is best to avoid all types of life insurance policies, except for term insurance. Many insurance companies overcharge on their term insurance policies, to push consumers into buying whole life policies. You can compare the premium rates with the benchmark provided in this FAQ:
http://www.tankinlian.com/faq/benchmark.html
If you wait for a few more months, a new life insurance company will be offering term insurance at an attractive rate.
If you have the opportunity, you should join a group insurance scheme, such as a plan offered by SAF, SAFRA or your employer. It does not matter that the term insurance is on a yearly renewable basis.
The agent says that "term insurance will expire after 20 years, and you will not be uninsured at that time".
Many people are unduly concerned about this point. It is largely irrelevant. Most people only need adequate life insurance to cover premature death when their children are young. An insurance period of 20 years is quite adequate to meet this need.
Beyond 20 years, they need to have sufficient savings for their retirement. As a whole life policy provide a poor return, it will not meet this purpose. Many people who invested most of their savings in whole life policies received a poor deal.
I fall into this category. Two of my whole life Living policies have not even reach the breakeven point after more than 10 years. Fortunately for me, they represent only a small part of my total savings.
The return on my two Living policies are far below what is due to me, if my insurance company had distributed bonuses fairly, based on the actual experience of the fund. As these are participating policies, there is an expectation that the insurance company has to act fairly, but they did not. The return on similar policies offered by other insurance companies are probably worse, as they have higher expenses.
It is best to avoid all types of life insurance policies, except for term insurance. Many insurance companies overcharge on their term insurance policies, to push consumers into buying whole life policies. You can compare the premium rates with the benchmark provided in this FAQ:
http://www.tankinlian.com/faq/benchmark.html
If you wait for a few more months, a new life insurance company will be offering term insurance at an attractive rate.
If you have the opportunity, you should join a group insurance scheme, such as a plan offered by SAF, SAFRA or your employer. It does not matter that the term insurance is on a yearly renewable basis.
Whole Life by Limited Premium
Hi Mr. Tan,
I understand that Buy term and invest the rest strategy and I believe this strategy is better, but would it be risky to buy all insurance on term insurance? Shouldn't one buy at least one small whole life insurance to hedge as well as to keep it for life. Term insurance do not cover for life, if so , it would be very expensive as well.
Should the term insurance lapse for any reasons, the person would be without any insurance coverage. Shouldnt one buy one limited whole life payment for WL, like what you did?
REPLY
Limited payment whole life has high expenses and does not give value for money. When the Term insurance expires, you will have sufficient savings (if you have invested the savings) and you do not need life insurance any more.
I bought whole life insurance many years ago, but they are not necessary for me now. I get a poor return on these policies. Some of them have still not reach the breakeven point after more than 10 years. Anyway, they represent only a small part of my total savings, so it does not matter to me.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
I understand that Buy term and invest the rest strategy and I believe this strategy is better, but would it be risky to buy all insurance on term insurance? Shouldn't one buy at least one small whole life insurance to hedge as well as to keep it for life. Term insurance do not cover for life, if so , it would be very expensive as well.
Should the term insurance lapse for any reasons, the person would be without any insurance coverage. Shouldnt one buy one limited whole life payment for WL, like what you did?
REPLY
Limited payment whole life has high expenses and does not give value for money. When the Term insurance expires, you will have sufficient savings (if you have invested the savings) and you do not need life insurance any more.
I bought whole life insurance many years ago, but they are not necessary for me now. I get a poor return on these policies. Some of them have still not reach the breakeven point after more than 10 years. Anyway, they represent only a small part of my total savings, so it does not matter to me.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Taxi fare surcharges
Read this letter:
http://www.asiaone.com/Motoring/News/Story/A1Story20071120-37566.html
Read about taxi fares in other cities:
http://www.singaporepublictransport.blogspot.com/
A few weeks ago, Comfort taxi imposed a 30 cent diesel surchage due to higher prices. As fuel prices have dropped 20% during the past few weeks, perhaps they should withdraw the surcharge (which they promised to).
I did some research and found this statement from Comfort. It looks like the diesel surcharge will continue for quite a long time:
http://en.china.cn/content/d343963,7ba501,1912_6577.html
http://www.asiaone.com/Motoring/News/Story/A1Story20071120-37566.html
Read about taxi fares in other cities:
http://www.singaporepublictransport.blogspot.com/
A few weeks ago, Comfort taxi imposed a 30 cent diesel surchage due to higher prices. As fuel prices have dropped 20% during the past few weeks, perhaps they should withdraw the surcharge (which they promised to).
I did some research and found this statement from Comfort. It looks like the diesel surcharge will continue for quite a long time:
http://en.china.cn/content/d343963,7ba501,1912_6577.html
The trend is your friend
When you trade (or invest) in stocks or other market products, it is important to catch the right trend, so that you get a better price. Catching the right price is a skill that is difficult to acquire. You can practice with a simulation game, that is developed to be realistic and close to real life.
http://project.projects.tankinlian.com/trader/
http://project.projects.tankinlian.com/trader/
Is this the right time to invest in stocks?
I think that this may be a good time to invest in stocks. The reasons are:
> The last few months of the year are usually good for stocks
> Oil and commodity prices are moderating
> The stock markets have fallen 30% during the past year
Will the global economy recover? Will there be more bad news? On balance, I think that the bad news have probably been discounted.
> The last few months of the year are usually good for stocks
> Oil and commodity prices are moderating
> The stock markets have fallen 30% during the past year
Will the global economy recover? Will there be more bad news? On balance, I think that the bad news have probably been discounted.
Taxi fares in other cities
I made a comparsion of taxi fares and service in a few cities:
www.singaporepublictransport.blogspot.com
www.singaporepublictransport.blogspot.com
More cars, so more ERP
Read about the views expressed in the Online Citizen:
http://theonlinecitizen.com/2008/08/more-cars-so-more-erps/#comment-17687
Read about public transport in:
www.singaporepublictransport.blogspot.com
http://theonlinecitizen.com/2008/08/more-cars-so-more-erps/#comment-17687
Read about public transport in:
www.singaporepublictransport.blogspot.com
Transfer of shares to family members
The Singapore Exchange allows a shareholder to transfer shares to a family member at a nominal fee of $10 per transfer per share. This arrangement applies only to a transfer to a family member only.
To transfer shares to any other person, the shareholder has to sell the shares through the exchange, and pay the normal fees (which are much higher).
To transfer shares to any other person, the shareholder has to sell the shares through the exchange, and pay the normal fees (which are much higher).
Sunday, August 17, 2008
20 year Term Insurance
I advice consumers to buy a 20 year Term Insurance (or 30 year Decreasing Term insurance).
Some people felt that they need whole life insurance. They must have been "sold" this idea by an insurance agent. Here is the reason why a 20 year Term Insurance is suitable for most people:
http://www.youtube.com/watch?v=sGDgYLCpnDo&feature=related
At present, Decreasing Term insurance is not available in the market. It will be available in 2009.
Here are some benchmark premium rates:
http://www.tankinlian.com/faq/benchmark.html
Some people felt that they need whole life insurance. They must have been "sold" this idea by an insurance agent. Here is the reason why a 20 year Term Insurance is suitable for most people:
http://www.youtube.com/watch?v=sGDgYLCpnDo&feature=related
At present, Decreasing Term insurance is not available in the market. It will be available in 2009.
Here are some benchmark premium rates:
http://www.tankinlian.com/faq/benchmark.html
Joke: accurate but totally useless
A skydiver is blown off-course and lands in a tree in a remote area. After dangling from branches for an hour, he spots a hiker walking by. "Excuse me," yells the parachutist, "but could you tell me where I am?"
The hiker looks up and says, "Yes, you're twenty feet above the ground." "Thank you," replies the skydiver, "You must be an Singaporean."
"What makes you say that?" asked the hiker.
The skydiver answered, "Because what you just told me was 100% accurate, but totally worthless!"
The hiker looks up and says, "Yes, you're twenty feet above the ground." "Thank you," replies the skydiver, "You must be an Singaporean."
"What makes you say that?" asked the hiker.
The skydiver answered, "Because what you just told me was 100% accurate, but totally worthless!"
Educational videos on Life Insurance
View these videos:
Whole Life vs Term
http://www.youtube.com/watch?v=yQZ1285SkgY&feature=related
Susie Orman – Life Insurance
http://www.youtube.com/watch?v=sGDgYLCpnDo&feature=related
Term vs Cash Value Life Insurance
http://www.youtube.com/watch?v=7zGRDIVKUh4
Whole Life vs Term
http://www.youtube.com/watch?v=yQZ1285SkgY&feature=related
Susie Orman – Life Insurance
http://www.youtube.com/watch?v=sGDgYLCpnDo&feature=related
Term vs Cash Value Life Insurance
http://www.youtube.com/watch?v=7zGRDIVKUh4
Ask the right questions
A reader was given a Benefit Illustration for a life insurance policy (PayMyUni). He did not understand the product and asked for my advice.
The Benefit Illustration contained many pages of information. It is quite complicated to read through the details. Most of the information are not relevant to the consumer who has to make the decision.
The consumer should ask a few questions to the financial adviser:
1. What is the amount that I can get back at the end of the term, based on a projected yield of 3.75% and 5.25% p.a. ?
2. What is the amount that I can get by investing the same premium over the same period to earn 4% p.a. ?
If you buy Term insurance (and spend 5% of the premium) and invest the remaining 95% in a low cost investment fund, you should be able to earn a net yield of at least 4% p.a.
The insurance agent will tell you a lot of other information, that are usually irrelevant to your decision. You should not be distracted by the sales talk. You should focus on getting the relevant figures for your decision.
My advice is to avoid all life insurance products sold by insurance agents, as they have high expenses. To save for a child's education, you can follow the tips here:
http://www.tankinlian.com/faq/education.html
The Benefit Illustration contained many pages of information. It is quite complicated to read through the details. Most of the information are not relevant to the consumer who has to make the decision.
The consumer should ask a few questions to the financial adviser:
1. What is the amount that I can get back at the end of the term, based on a projected yield of 3.75% and 5.25% p.a. ?
2. What is the amount that I can get by investing the same premium over the same period to earn 4% p.a. ?
If you buy Term insurance (and spend 5% of the premium) and invest the remaining 95% in a low cost investment fund, you should be able to earn a net yield of at least 4% p.a.
The insurance agent will tell you a lot of other information, that are usually irrelevant to your decision. You should not be distracted by the sales talk. You should focus on getting the relevant figures for your decision.
My advice is to avoid all life insurance products sold by insurance agents, as they have high expenses. To save for a child's education, you can follow the tips here:
http://www.tankinlian.com/faq/education.html
Pro-Trader getting to be popular
105 players have now registered to try this application that provides a simulted trading environment:
http://tankinlian.com/trader/
35 players logged in yesterday to play the game. Many of them played a multi-player game to compete against other players.
http://tankinlian.com/trader/
35 players logged in yesterday to play the game. Many of them played a multi-player game to compete against other players.
Saturday, August 16, 2008
Save for a child's education
Dear Mr. Tan
I've read your blog and aware of benefit of term insurance (cheaper compare to whole life policy). I intend to buy one term and one education policy for my child. As you were formerly with NTUC Income, you should be able to tell me more about the plan call 'PayMyUni' whether it provide good returns or not.
REPLY
I am not familiar with PayMyUni as it was introduced after I left Income. Usually, I advise people to save for a child education through a low cost investment fund. Read this FAQ:
http://www.tankinlian.com/faq/education.html
I've read your blog and aware of benefit of term insurance (cheaper compare to whole life policy). I intend to buy one term and one education policy for my child. As you were formerly with NTUC Income, you should be able to tell me more about the plan call 'PayMyUni' whether it provide good returns or not.
REPLY
I am not familiar with PayMyUni as it was introduced after I left Income. Usually, I advise people to save for a child education through a low cost investment fund. Read this FAQ:
http://www.tankinlian.com/faq/education.html
Learn the skill of trading of financial products
How does USD or S&P or Treasuries react to news events? Will the price go up or down? You can learn about the behavior by playing this simulated game:
http://project.projects.tankinlian.com/trader/
The simulated game is designed to be as realistic as possible. Each game is different from the previus games, as they are picked randomly from 50 different scenarios.
This game is now available for free for the time being. It will be restricted to paid subscribers at a later date.
http://project.projects.tankinlian.com/trader/
The simulated game is designed to be as realistic as possible. Each game is different from the previus games, as they are picked randomly from 50 different scenarios.
This game is now available for free for the time being. It will be restricted to paid subscribers at a later date.
Buy Term and Invest the Savings
Hi Mr Tan,
After reading your reply, I decided not to rush into buying a policy. After all the research I had done, I am still kind of lost. I do not know which policy suit me better for my age and my situation.
For your information, I am 20 this year, fresh diploma graduate who had just started my 1st career. I did not buy any insurance previously. Hence this will be the 1st I am buying for myself. Being the bread winner of my family, I think buying an insurance will be safer for me and my family. To me, my concern will be life protection plus some investment which will make my saving grow.
Initially I thought that buying a long term saving plan eg 25years, will be better. I was told that by an insurance company that it will double up by return. The sum of money return was very attractive. However I understand it tied up my money. In case of emergency, I might have financially difficulties. Hence I thought of buying ILP.
However I understand that ILP Will have high charges involved after reading your blog. As u mentioned, by buying a term insurance or decreasing term insurance will be cheaper. Then invest the money in some other investment funds such as uni-trust, bonds, equities etc. The problem is I do not know anything about the share market. I wonder if I am able to invest my money into the right funds. Some banks who I visited, or 1 of the insurance company who I spoke to, offered me regular saving plans or ILP.
No one offered term insurance to me yet. I understand that term insurance had no cash value. Hence I am worry, if I bought a term insurance but end up I do not know how to invest on the investment funds, I might end up buying another ILP. Where do you think I can get more informations about those investment funds? Or is there any ILP or regular saving plan which offer good return with reasonable charges in the market now?
In your advice, is there anything in particular which I should be take note/ beware of before buying any policy? What do you recommend I should do? I also had several doubts which I think maybe you can clarify for me.
1) All policies, regardless whether from bank or insurances companies have yearly policy fee unless otherwise stated?
2) The policy fee had been calculated into our mthly premium or is there additional charges?
3) Does fixed deposit earn better interest and give more flexibility than ILP/saving plan? Appreciate for your time and patient.Hope to hear from you soon.
REPLY
Please read these FAQ:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
http://www.tankinlian.com/faq/termd.html
After reading your reply, I decided not to rush into buying a policy. After all the research I had done, I am still kind of lost. I do not know which policy suit me better for my age and my situation.
For your information, I am 20 this year, fresh diploma graduate who had just started my 1st career. I did not buy any insurance previously. Hence this will be the 1st I am buying for myself. Being the bread winner of my family, I think buying an insurance will be safer for me and my family. To me, my concern will be life protection plus some investment which will make my saving grow.
Initially I thought that buying a long term saving plan eg 25years, will be better. I was told that by an insurance company that it will double up by return. The sum of money return was very attractive. However I understand it tied up my money. In case of emergency, I might have financially difficulties. Hence I thought of buying ILP.
However I understand that ILP Will have high charges involved after reading your blog. As u mentioned, by buying a term insurance or decreasing term insurance will be cheaper. Then invest the money in some other investment funds such as uni-trust, bonds, equities etc. The problem is I do not know anything about the share market. I wonder if I am able to invest my money into the right funds. Some banks who I visited, or 1 of the insurance company who I spoke to, offered me regular saving plans or ILP.
No one offered term insurance to me yet. I understand that term insurance had no cash value. Hence I am worry, if I bought a term insurance but end up I do not know how to invest on the investment funds, I might end up buying another ILP. Where do you think I can get more informations about those investment funds? Or is there any ILP or regular saving plan which offer good return with reasonable charges in the market now?
In your advice, is there anything in particular which I should be take note/ beware of before buying any policy? What do you recommend I should do? I also had several doubts which I think maybe you can clarify for me.
1) All policies, regardless whether from bank or insurances companies have yearly policy fee unless otherwise stated?
2) The policy fee had been calculated into our mthly premium or is there additional charges?
3) Does fixed deposit earn better interest and give more flexibility than ILP/saving plan? Appreciate for your time and patient.Hope to hear from you soon.
REPLY
Please read these FAQ:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/investown.html
http://www.tankinlian.com/faq/termd.html
Friday, August 15, 2008
Joke: Wrote a check
Mr. John Johnson was a rich old man was dying from a rare disease. On his deathbed, he called for his insurance agent, doctor and preacher:"
I trusted each you my entire life. Now I want to give each of you $30,000 cash in an envelope to put in my grave. I want to take it with me."
Mr. Johnson died and at the funeral, each one placed the envelope on top of the man, then he was laid to rest.
On the way from the funeral, in the limo, the doctor confessed "I must tell you gentlemen, I only put $20,000 on top of Mr. Johnson, I wanted buy this new machine that would enable me to diagnose his rare disease and save others. It's what he would have wanted."
Then the preacher said: "I have to confess, I only put $10,000 on top of Mr. Johnson. We needed that money to help more homeless, and it's what Mr. Johnson would've wanted"
The insurance agent was angry at both the man, and said: "I can't believe both of you, stealing from a dead man. I wrote Mr. Johnson a check for the full $30,000!"
I trusted each you my entire life. Now I want to give each of you $30,000 cash in an envelope to put in my grave. I want to take it with me."
Mr. Johnson died and at the funeral, each one placed the envelope on top of the man, then he was laid to rest.
On the way from the funeral, in the limo, the doctor confessed "I must tell you gentlemen, I only put $20,000 on top of Mr. Johnson, I wanted buy this new machine that would enable me to diagnose his rare disease and save others. It's what he would have wanted."
Then the preacher said: "I have to confess, I only put $10,000 on top of Mr. Johnson. We needed that money to help more homeless, and it's what Mr. Johnson would've wanted"
The insurance agent was angry at both the man, and said: "I can't believe both of you, stealing from a dead man. I wrote Mr. Johnson a check for the full $30,000!"
Practice trading with this simulated game
66 people have registered and started to play this simulation game:
http://project.projects.tankinlian.com/trader/
It provides a simulated environment for the user to trade stocks, bonds, US dollar and gold. The prices of these product move according to the news.
You can practice as a single player first. Afterwards, you can compete with other players under the multi-player mode. The auto-game starts within 15 minutes and those players can join in.
Give it a try!
http://project.projects.tankinlian.com/trader/
It provides a simulated environment for the user to trade stocks, bonds, US dollar and gold. The prices of these product move according to the news.
You can practice as a single player first. Afterwards, you can compete with other players under the multi-player mode. The auto-game starts within 15 minutes and those players can join in.
Give it a try!
Thursday, August 14, 2008
A painful learning experience
Hi Mr. Tan,
Recently, I bought a whole life policy from a particular insurance company. I paid them a year of premiums in advance already. However, 4 months into the policy, after reading your blog and doing some self reading, I decided to end this high cost product early. My agent informed me that I will not be able to get back the future 8 months of premiums that I have paid earlier. What should I do now? Can I complain to FiDREC?
REPLY
I think that you have paid an annual premium under the policy. There is usually no surrender value, if you cancel the policy during the first two or three years. It will be difficult for you to argue that you are entitled to a refund of 8/12 of the annual premium on termination after four months. If you like, you can try FiDREC and see if they agree with you. (Most likely, they will not take up your case).
Hi Mr. Tan,
Thanks a lot for your kind attention and input you have given me. I greatly appreciate it. Please continue with your great work in educating the public about the pitfalls and truth with regards to insurance products. I was also "awakened" to all these after reading your blog and website! Guess i have treat this experience as a painful learning lseeson.
Recently, I bought a whole life policy from a particular insurance company. I paid them a year of premiums in advance already. However, 4 months into the policy, after reading your blog and doing some self reading, I decided to end this high cost product early. My agent informed me that I will not be able to get back the future 8 months of premiums that I have paid earlier. What should I do now? Can I complain to FiDREC?
REPLY
I think that you have paid an annual premium under the policy. There is usually no surrender value, if you cancel the policy during the first two or three years. It will be difficult for you to argue that you are entitled to a refund of 8/12 of the annual premium on termination after four months. If you like, you can try FiDREC and see if they agree with you. (Most likely, they will not take up your case).
Hi Mr. Tan,
Thanks a lot for your kind attention and input you have given me. I greatly appreciate it. Please continue with your great work in educating the public about the pitfalls and truth with regards to insurance products. I was also "awakened" to all these after reading your blog and website! Guess i have treat this experience as a painful learning lseeson.
Joke: Let the boss have the first say
A insurance agent, an administration clerk and their manager are walking to lunch when they find an antique oil lamp. They rub it and a genie comes out in a puff of smoke. The Genie says, "I usually only grant three wishes, so I´ll give each of you just one."
"Me first! Me first!" says the admin clerk. "I want to be in the Bahamas, driving a speedboat, without a care in the world." Poof! She´s gone.
In astonishment, "Me next! Me next!" says the sales rep. "I want to be in Hawaii, relaxing on the beach with my personal masseuse, an endless supply of Pina Coladas and the love of my life." Poof! He´s gone."
OK, you´re up," the Genie says to the manager. The manager says, "I want those two back in the office after lunch."
Moral of story: always let your boss have the first say.
"Me first! Me first!" says the admin clerk. "I want to be in the Bahamas, driving a speedboat, without a care in the world." Poof! She´s gone.
In astonishment, "Me next! Me next!" says the sales rep. "I want to be in Hawaii, relaxing on the beach with my personal masseuse, an endless supply of Pina Coladas and the love of my life." Poof! He´s gone."
OK, you´re up," the Genie says to the manager. The manager says, "I want those two back in the office after lunch."
Moral of story: always let your boss have the first say.
Honesty and business ethics
Is your insurance agent honest? Is your insurance company trustworthy? Do they observe ethics? Read about my comments on business ethics in:
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-17387
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-17387
Effect of Deduction
Dear Sir,
I have an enquiry to make regarding the Effect of Deduction after reading your blog. I took out my policy and I am pretty stunned to see the amount that is written under the effects of deduction.
My annual premium is $3,000 and assuming that I live till 65, it will be a full 44 years. I was 21 when I signed the plan.
Looking at it, Total premium paid is $132,000, total distribution cost is $5468, Non-Guaranteed Cash Value at 5% is 205,600 and at 9% 691,800. Effects of deduction is $882,776. I was not told about the effects of deduction when I signed up the plan and looking at it, I am pretty much being shortchanged for the amount of money that I put in.
Kindly advise on what should I do.
REPLY
You can write a letter of complaint to the deputy managing director in charge of market conduct in MAS, as shown below.
http://app.sgdi.gov.sg/listing_expand.asp?agency_subtype=dept&agency_id=0000008384-
The agent has a duty to disclose and explain this important point to the policyholder. It is shocking that the Effect of Deduction is higher than the Cash Value (assuming an investment yield of 9%).
I have an enquiry to make regarding the Effect of Deduction after reading your blog. I took out my policy and I am pretty stunned to see the amount that is written under the effects of deduction.
My annual premium is $3,000 and assuming that I live till 65, it will be a full 44 years. I was 21 when I signed the plan.
Looking at it, Total premium paid is $132,000, total distribution cost is $5468, Non-Guaranteed Cash Value at 5% is 205,600 and at 9% 691,800. Effects of deduction is $882,776. I was not told about the effects of deduction when I signed up the plan and looking at it, I am pretty much being shortchanged for the amount of money that I put in.
Kindly advise on what should I do.
REPLY
You can write a letter of complaint to the deputy managing director in charge of market conduct in MAS, as shown below.
http://app.sgdi.gov.sg/listing_expand.asp?agency_subtype=dept&agency_id=0000008384-
The agent has a duty to disclose and explain this important point to the policyholder. It is shocking that the Effect of Deduction is higher than the Cash Value (assuming an investment yield of 9%).
Wednesday, August 13, 2008
Pro Trader (Trading of Financial Products)
This website allows you to practice your trading skills:
http://tankinlian.com/trader/
You are given simulated prices for 4 financial products which change in response to economic news. You can buy or sell up to 10 contracts of these products. You will see your gain or loss each second, as the prices change.
You have to register an account and select the single player mode. There are instructions for how to trade. You can play the multi-player game and compete with other players.
All the best.
http://tankinlian.com/trader/
You are given simulated prices for 4 financial products which change in response to economic news. You can buy or sell up to 10 contracts of these products. You will see your gain or loss each second, as the prices change.
You have to register an account and select the single player mode. There are instructions for how to trade. You can play the multi-player game and compete with other players.
All the best.
Tuesday, August 12, 2008
Opt out of Eldershield
Dear Mr. Tan,
My wife received an "opt out letter on Eldershield" from Great Eastern. She is not a customer of Great Eastern. How did Great Eastern get her particulars? Is it fair to apply "opt out", especially to people who are illiterate?
My wife received an "opt out letter on Eldershield" from Great Eastern. She is not a customer of Great Eastern. How did Great Eastern get her particulars? Is it fair to apply "opt out", especially to people who are illiterate?
REPLY
The Ministry of Health makes it mandatory for everyone reaching age 40 to be covered under Eldershield. This is provided under the Eldershield legislation. Although it is compulsory, the insured person has the right to opt out. If they do not opt out, they automatically join the scheme and the premium for Eldershield is deducted from Medisave.
The Ministry divided the people reaching age 40 into three groups and passed them to the three participating insurers, namely Great Easter, Income and Aviva. Your wife is probably in the group that is given to Great Eastern by M of Health. This is how Great Eastern got her particulars.
When Eldershield was first introduced, about 35% of the people opted out, as they found the premium to be too high, relative to the benefits. The opt out rate has fallen (but I do not know the current level today). I have not analysed the premium and benefit recently, so I am not able to give an opinion if it is worth joining Eldershield.
The Ministry divided the people reaching age 40 into three groups and passed them to the three participating insurers, namely Great Easter, Income and Aviva. Your wife is probably in the group that is given to Great Eastern by M of Health. This is how Great Eastern got her particulars.
When Eldershield was first introduced, about 35% of the people opted out, as they found the premium to be too high, relative to the benefits. The opt out rate has fallen (but I do not know the current level today). I have not analysed the premium and benefit recently, so I am not able to give an opinion if it is worth joining Eldershield.
Insurance agent does not tell the truth
Dear Mr. Tan,
I met an insurance agent on the street, and was introduced to their "savings" plan. I read through your website and understand that such a policy is called a regular premium ILP policy, which provides life insurance cover and also an investment portion.
The agent told me about the "percentage that is allocation for investments", which is described as the distribution cost in your website. She did not mention anything about this percentage as being a cost.
I asked her what is the minimum amount and number of years needed for the plan. She said that the life insurance policy portion of the plan will need a minimum amount of $100 per month and take 13-15 years just to break even, and I understand from your website that this means the company has high expenses.
I told her I could buy term insurance and invest the rest in index funds and get better returns based on what I read from newspapers. Also, I told her that I understood that the commission she gets from selling ILP/life insurance policies is more than what she would earn from selling term insurance policies.
She said for the investment portion, the cost is 1-1.5% per annum. I asked her if her commission and other expenses are included, what is the total cost like ?
She said she was unable to tell me the figure.
She then introduced a medical insurance plan which she said enhances cover for Medishield, as its coverage is very low.
I asked her to provide me a copy of the terms and conditions for the earlier ILP Policy and the medical insurance plan. She said she would only provide me the benefits illustration (with terms and conditions) for the medical insurance plan.
Questions:
1) The agent said that the commission she gets from this ILP policy or a term insurance policy is the same (50% in the first year). I did not ask her the percentage for the subsequent years. In the end, she did not introduce any term insurance policy to me (although she said she also sells them) , which I had at least shown some interest in.
Does this mean she is dishonest or does the insurance company earn much more from the ILP policy than the term policy (and she earns the same from both) ?
2) What do you think of this insurance agent ?
3) I had in the past encountered insurance agents from the same company selling this type of ILP policy at least 4-5 times on the street during their roadshows. I understand other companies do sell the same thing too, but they are much less aggressive and seem to organise very few roadshows compared to this particular company.
What is the reason for this ?
This has become very irritating to me, and I would try to avoid this company once I see them from afar.
REPLY
I believe that this agent is dishonest and is not looking after the best interest of the client. Unfortunately, this type of behaviour is typical of most insurance agents from most companies. It is a sad state of affairs.
I hope that clients like you, are willing to write to the MAS and tell them about the real behaviour of insurance agents. If MAS acts against the dishonest agents, it may improve the situation and make the agents more ethical.
I met an insurance agent on the street, and was introduced to their "savings" plan. I read through your website and understand that such a policy is called a regular premium ILP policy, which provides life insurance cover and also an investment portion.
The agent told me about the "percentage that is allocation for investments", which is described as the distribution cost in your website. She did not mention anything about this percentage as being a cost.
I asked her what is the minimum amount and number of years needed for the plan. She said that the life insurance policy portion of the plan will need a minimum amount of $100 per month and take 13-15 years just to break even, and I understand from your website that this means the company has high expenses.
I told her I could buy term insurance and invest the rest in index funds and get better returns based on what I read from newspapers. Also, I told her that I understood that the commission she gets from selling ILP/life insurance policies is more than what she would earn from selling term insurance policies.
She said for the investment portion, the cost is 1-1.5% per annum. I asked her if her commission and other expenses are included, what is the total cost like ?
She said she was unable to tell me the figure.
She then introduced a medical insurance plan which she said enhances cover for Medishield, as its coverage is very low.
I asked her to provide me a copy of the terms and conditions for the earlier ILP Policy and the medical insurance plan. She said she would only provide me the benefits illustration (with terms and conditions) for the medical insurance plan.
Questions:
1) The agent said that the commission she gets from this ILP policy or a term insurance policy is the same (50% in the first year). I did not ask her the percentage for the subsequent years. In the end, she did not introduce any term insurance policy to me (although she said she also sells them) , which I had at least shown some interest in.
Does this mean she is dishonest or does the insurance company earn much more from the ILP policy than the term policy (and she earns the same from both) ?
2) What do you think of this insurance agent ?
3) I had in the past encountered insurance agents from the same company selling this type of ILP policy at least 4-5 times on the street during their roadshows. I understand other companies do sell the same thing too, but they are much less aggressive and seem to organise very few roadshows compared to this particular company.
What is the reason for this ?
This has become very irritating to me, and I would try to avoid this company once I see them from afar.
REPLY
I believe that this agent is dishonest and is not looking after the best interest of the client. Unfortunately, this type of behaviour is typical of most insurance agents from most companies. It is a sad state of affairs.
I hope that clients like you, are willing to write to the MAS and tell them about the real behaviour of insurance agents. If MAS acts against the dishonest agents, it may improve the situation and make the agents more ethical.
Monday, August 11, 2008
Large "effect of deduction" on Living policies
Dear Mr. Tan
I am considering terminating the Living Policy for myself and my husband and buying term insurance instead.
About the effect of deduction, wow, I really didn't know about that until you mentioned it in your blog. And I read again our policies, they really take away such big amount from us! Is this the standard practise? Do other insurance companies do this also?
REPLY
It is true that the Living policy takes away a lot of the premium. But the coverage is wider than a Term policy (unless you buy a Term policy that covers the critical illness as well).
My advice on buying Term insurance applies to a new policy (and not to the termination of an existing policy). Usually, after a policy is taken, I advise people to continue the policy as they have already incurred the high initial expenses. I have two Living policies on my own life as well, which I am continuing.
If you wish to terminate an existing policy, you should look at the yield over the next 5 years. This is explained in this FAQ:
http://www.tankinlian.com/faq/exist.html
The effect of deduction for similar policies sold by other insurance companies is likely to be higher.
I am considering terminating the Living Policy for myself and my husband and buying term insurance instead.
About the effect of deduction, wow, I really didn't know about that until you mentioned it in your blog. And I read again our policies, they really take away such big amount from us! Is this the standard practise? Do other insurance companies do this also?
REPLY
It is true that the Living policy takes away a lot of the premium. But the coverage is wider than a Term policy (unless you buy a Term policy that covers the critical illness as well).
My advice on buying Term insurance applies to a new policy (and not to the termination of an existing policy). Usually, after a policy is taken, I advise people to continue the policy as they have already incurred the high initial expenses. I have two Living policies on my own life as well, which I am continuing.
If you wish to terminate an existing policy, you should look at the yield over the next 5 years. This is explained in this FAQ:
http://www.tankinlian.com/faq/exist.html
The effect of deduction for similar policies sold by other insurance companies is likely to be higher.
Joke: that's not covered
A client calls up his insurance agent and tells him he needs to file a claim.
Agent: “Tell me what happened?”
Client: "This is how it happens ....."
Agent: "I’m sorry but that’s not covered.”
Client: “Well, let me explain better what happened.”
Agent: “I´m sorry but that´s not covered either.”
Client: "I´ll tell you what, you tell me what´s covered and I´ll tell you how it happened!”
Agent: “Tell me what happened?”
Client: "This is how it happens ....."
Agent: "I’m sorry but that’s not covered.”
Client: “Well, let me explain better what happened.”
Agent: “I´m sorry but that´s not covered either.”
Client: "I´ll tell you what, you tell me what´s covered and I´ll tell you how it happened!”
Encourage people to use public transport
I find public transport to be quite convenient. But there are ways to improve our bus and train services, so that more people can take public transport. Top priority is an improved feeder service, such as the system used in Hong Kong.
More ideas can be found in:
http://www.singaporepublictransport.blogspot.com/
http://www.tankinlian.com/articles/transport.html
http://www.tankinlian.com/articles/express.html
More ideas can be found in:
http://www.singaporepublictransport.blogspot.com/
http://www.tankinlian.com/articles/transport.html
http://www.tankinlian.com/articles/express.html
Regulate selling
It is important to regulate “selling”.
If salesman goes around to sell products, they are likely to make the sale by misleading the customer. The regulation of selling should include the following:
1. The product is inherently fair to consumers (e.g. the manufacturer cannot make false claims)
2. Suitable information is provided to the customer (i.e. the information has to be verified by an expert)
3. The selling process has to meet standards of good conduct.
If the other conditions are not met, the selling should be considered as “touting” and the product should be suspected to be bad for consumers.
If salesman goes around to sell products, they are likely to make the sale by misleading the customer. The regulation of selling should include the following:
1. The product is inherently fair to consumers (e.g. the manufacturer cannot make false claims)
2. Suitable information is provided to the customer (i.e. the information has to be verified by an expert)
3. The selling process has to meet standards of good conduct.
If the other conditions are not met, the selling should be considered as “touting” and the product should be suspected to be bad for consumers.
Present partial information only
I met a property agent. He was taught to adopt the following approach:
> present the postive aspects of the property to be sold
> tell the negative aspects, only if the buyer ask about them
If the buyer does not ask, then the negative aspect is not disclosed. This is what "professional ethics" is being taught. I consider this approach to be dishonest.
> present the postive aspects of the property to be sold
> tell the negative aspects, only if the buyer ask about them
If the buyer does not ask, then the negative aspect is not disclosed. This is what "professional ethics" is being taught. I consider this approach to be dishonest.
Motor accident reports
The General Insurance Association implemented a new framework to handle motor accidents from 1 July 2008. During the past two months, a total of 33,100 accidents were reported, representing an increase of 35% over the same period last year.
Derek Teo, President of GIA, claimed that the new framework is a success. I wonder how the insurance companies are able to bring down the claim cost, when the number of insurance claims has increased.
I remembered that the framework included roadside assessment by the assessors sent by the insurance company. I wonder if this new measure has been implemented, as it is a major strategy in the new framework to avoid inflated claims.
Derek Teo, President of GIA, claimed that the new framework is a success. I wonder how the insurance companies are able to bring down the claim cost, when the number of insurance claims has increased.
I remembered that the framework included roadside assessment by the assessors sent by the insurance company. I wonder if this new measure has been implemented, as it is a major strategy in the new framework to avoid inflated claims.
Sunday, August 10, 2008
Invest in the Exchange Traded Fund
Dear Mr.Tan,
I am new to investing and will like to start investing after getting my bonus next month. I read some of your blogs and the Exchange Traded Funds seems like a good choice. I am interested in investing in ETFs but not familiar with the process. How much do i need to invest in ETFs? Can i do the investment on my own or through a broker? I do not have any trading accounts, do i need to get a trading account first?
REPLY
If you go through a stockbroker, you need about $3000 to buy 1000 shares of ETF.
If you wish to invest in smaller amounts, you can go through Philips Securities. They have a plan to allow you to invest monthly, but they impose a monthly charge. I do not know the details. You can ask Philipps Securities.
I am new to investing and will like to start investing after getting my bonus next month. I read some of your blogs and the Exchange Traded Funds seems like a good choice. I am interested in investing in ETFs but not familiar with the process. How much do i need to invest in ETFs? Can i do the investment on my own or through a broker? I do not have any trading accounts, do i need to get a trading account first?
REPLY
If you go through a stockbroker, you need about $3000 to buy 1000 shares of ETF.
If you wish to invest in smaller amounts, you can go through Philips Securities. They have a plan to allow you to invest monthly, but they impose a monthly charge. I do not know the details. You can ask Philipps Securities.
Private Shield with Riders
What is the cost of a Private Shield plan, covering medical bills as charged in a private hospital, together with a rider to cover the Deductible and Co-insurance of 10%?
I calculated the total cost from age 30 to 85 to be more than $100,000, based on the premium rates today. If you add the cost beyond age 85, it will be much higher. The premum rates will increase in future years, but the future increase can probably be covered through the interest earned on your savings.
If you wish to have a private Shield plan to cover your expenses in a private hospital, you must have $100,000 in your Medisave account by the time you retire.
Insurance agents advice you to buy a private Shield plan. I hope that they have pointed out to you about the lifetime cost, so that you are well informed.
If you have to set aside $100,000 for your private Shield insurance, how much of that money is actually paid in claims? Based on the figures available from MAS website, the claim payout is 43%. This means that you are paying $100,000 in premium to get $43,000 in claims. Can you afford to give away the additional $57,000 of your savings to the insurance company?
After paying so much in premium, are you worried that your claim may be rejected due to "non-disclosure of pre-existing medical conditions", especially if you were not aware about these conditions? This has happened to many policyholders.
Think about the lifetime cost, if you wish to buy the insurance plan that covers all expenses "as charged". Make sure that you have sufficient money to pay the premium up to age 85 and beyond.
Note: If you take a private Shield plan without the rider, the total cost is $66,000. In this case, you have to pay the Deductible and Co-insurance.
I calculated the total cost from age 30 to 85 to be more than $100,000, based on the premium rates today. If you add the cost beyond age 85, it will be much higher. The premum rates will increase in future years, but the future increase can probably be covered through the interest earned on your savings.
If you wish to have a private Shield plan to cover your expenses in a private hospital, you must have $100,000 in your Medisave account by the time you retire.
Insurance agents advice you to buy a private Shield plan. I hope that they have pointed out to you about the lifetime cost, so that you are well informed.
If you have to set aside $100,000 for your private Shield insurance, how much of that money is actually paid in claims? Based on the figures available from MAS website, the claim payout is 43%. This means that you are paying $100,000 in premium to get $43,000 in claims. Can you afford to give away the additional $57,000 of your savings to the insurance company?
After paying so much in premium, are you worried that your claim may be rejected due to "non-disclosure of pre-existing medical conditions", especially if you were not aware about these conditions? This has happened to many policyholders.
Think about the lifetime cost, if you wish to buy the insurance plan that covers all expenses "as charged". Make sure that you have sufficient money to pay the premium up to age 85 and beyond.
Note: If you take a private Shield plan without the rider, the total cost is $66,000. In this case, you have to pay the Deductible and Co-insurance.
Saturday, August 09, 2008
Opening of Beijing Olympics
The Beijing Olympics opening ceremony started at 8:08:08 pm on 8 August 2008. How creative!
The opening ceremony is a combination of:
> modern technology
> art and culture
> discipline and focus of the people.
China can be proud of its remarkable achievements during the past two decades. Many people now forget that China is a Communist controlled country. China has shown that a Communist system can deliver peace, progress and prosperity for its people. I am amazed at the pride and loyalty of the people towards China.
The opening ceremony is a combination of:
> modern technology
> art and culture
> discipline and focus of the people.
China can be proud of its remarkable achievements during the past two decades. Many people now forget that China is a Communist controlled country. China has shown that a Communist system can deliver peace, progress and prosperity for its people. I am amazed at the pride and loyalty of the people towards China.
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