Sunday, May 24, 2009
Terminating an existing life policy
Dear Mr. Tan,
I have bought a vivolife policy 2 yrs ago. Recently, I am thinking of increasing my coverage as I am planning to start a family soon.
After reading your blog, I am thinking of the following: switch to term plan and invest my savings on equity personally. Do you think it's advisable?
REPLY
Please read this FAQ before you take your decision to terminate the Vivolife policy.
If you terminate the policy now, you will lose a large part of what you have paid during the past two years. If you look at the cost for the next five or ten years, you can get a better idea about the advantages of making a switch.
You should also find out the cost of the term insurance policy and critical illness coverage.
It is advisable to take up a term insurance policy, rather than a whole life policy, but a decision to terminate an existing whole life policy has to be considered separately on its merits.
I have bought a vivolife policy 2 yrs ago. Recently, I am thinking of increasing my coverage as I am planning to start a family soon.
After reading your blog, I am thinking of the following: switch to term plan and invest my savings on equity personally. Do you think it's advisable?
REPLY
Please read this FAQ before you take your decision to terminate the Vivolife policy.
If you terminate the policy now, you will lose a large part of what you have paid during the past two years. If you look at the cost for the next five or ten years, you can get a better idea about the advantages of making a switch.
You should also find out the cost of the term insurance policy and critical illness coverage.
It is advisable to take up a term insurance policy, rather than a whole life policy, but a decision to terminate an existing whole life policy has to be considered separately on its merits.
What to do about your endowment policy
This article is written in the context of the situation in the UK. Many of the points are valid when applied to Singapore.
Lehman Role Probed in Selling Securities
onlineWSJ, 21 May
http://online.wsj.com/article/SB124286228762941197.html#mod=rss_whats_news_us
The Justice Department has questioned several former executives at Lehman Brothers Holdings Inc. as part of its criminal investigation into whether they sold supposedly safe, liquid securities to clients while knowing that the market for the securities was drying up.
Prosecutors from the U.S. attorney's office in Brooklyn and lawyers from the Securities and Exchange Commission in recent weeks interviewed several former executives who ran Lehman's auction-rate-securities business, these people said. Auction-rate securities are short-term debt instruments in which the interest rates reset at periodic auctions.
The Standard: Minibond fury hits BOCHK
22 May 2009
Hundreds of Lehman minibond holders vented their anger at Bank of China (Hong Kong) (2388) and demanded a faster settlement although the lender said more than 2,000 cases have been resolved. BOCHK was the largest distributor of the Lehman Brothers-linked products in the territory.
The minibond holders yesterday gathered outside the Hong Kong Convention and Exhibition Centre, Wan Chai, where the bank was holding its annual shareholders' meeting, as well as at its headquarters, demanding that cases be wrapped up soon.
Bank management came under fire at the meeting with half the questions related to the minibonds controversy.
``You said you are concerned about the issue, but you are just paying lip service,'' one shareholder said.
President He Guangbei replied that the bank has already deployed resources to deal with the matter.
``We are handling the issue actively and seriously and hope to settle the cases as soon as possible,'' He said.
An internal audit committee has been set up, and discussions with regulators are continuing.
But He could not give a settlement timetable.
The bank denied speeding up settlements and raising the starting point for resolving the issue because of political pressure _ a claim made by Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims.
``We are handling each case individually as each has a different claims level,'' He said.
Chan claimed that since April 1 the bank has sped up the process and raised the starting level of claims from 10-20 percent to 50 percent to avoid protests on the anniversary of the handover.
The BOCHK chief declined to say whether it will have to fork out more on Lehman-related issues in 2009, after last year's HK$700 million.
``The expenses last year covered costs that might also be incurred this year,'' He said.
Separately, the bank said it has no plans as yet to issue yuan bonds locally and its parent, Bank of China (3988), has no plans to privatize BOCHK.
The minibond holders yesterday gathered outside the Hong Kong Convention and Exhibition Centre, Wan Chai, where the bank was holding its annual shareholders' meeting, as well as at its headquarters, demanding that cases be wrapped up soon.
Bank management came under fire at the meeting with half the questions related to the minibonds controversy.
``You said you are concerned about the issue, but you are just paying lip service,'' one shareholder said.
President He Guangbei replied that the bank has already deployed resources to deal with the matter.
``We are handling the issue actively and seriously and hope to settle the cases as soon as possible,'' He said.
An internal audit committee has been set up, and discussions with regulators are continuing.
But He could not give a settlement timetable.
The bank denied speeding up settlements and raising the starting point for resolving the issue because of political pressure _ a claim made by Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims.
``We are handling each case individually as each has a different claims level,'' He said.
Chan claimed that since April 1 the bank has sped up the process and raised the starting level of claims from 10-20 percent to 50 percent to avoid protests on the anniversary of the handover.
The BOCHK chief declined to say whether it will have to fork out more on Lehman-related issues in 2009, after last year's HK$700 million.
``The expenses last year covered costs that might also be incurred this year,'' He said.
Separately, the bank said it has no plans as yet to issue yuan bonds locally and its parent, Bank of China (3988), has no plans to privatize BOCHK.
Reuters.com - Singapore's Temasek defends costly Bank of America exit
By Kevin Lim and Saeed Azhar
SINGAPORE (Reuters) - Singapore's Temasek defended its money-losing exit from Bank of America
The explanation, a rarity for the state investor, came in a letter to major Singapore newspapers after the loss on BofA attracted fierce criticism from the usually muted pro-government local media, investors and independent blogs, which noted BofA shares have rallied more than 70 percent after Temasek's exit.
The losses are also expected to be discussed when Singapore's Parliament convenes next week.
Temasek, which is headed by Ho Ching, the wife of Singapore's prime minister, sold its 3 percent stake in BofA in the first quarter after converting its Merrill shares into BofA in January. Temasek has not said how much it lost in the process, but Reuters estimated the loss was more than $3 billion.
Temasek announced in February that Ho will step down and be replaced by Chip Goodyear, the former CEO of BHP Billiton
"Our investment thesis had changed from Merrill's specific businesses to the more diversified BoA linkage to the broader U.S. economy. The risk-return environment had also changed substantially," Myrna Thomas, managing director for corporate affairs, said in the letter.
Temasek's aim is to ensure that its portfolio delivers returns that are higher than the cost of capital employed on a risk-adjusted basis, Thomas said.
"We may choose to divest an investment, even at a loss, to optimize our risk or portfolio exposure, or if there are better opportunities elsewhere or later," she added.
Temasek, which like other sovereign wealth funds, plowed billions into Merrill Lynch in the early phase of the credit crisis, saw the value of its portfolio plunge 31 percent to S$127 billion between March 31 and Nov 30 last year during the severe market turmoil.
KEY QUESTION UNANSWERED
Financial investments accounted for 40 percent of its portfolio.
"The letter doesn't give the answer that everybody is asking. How much did they lose?," Leong Sze Hian, president of the Society of Financial Services Professionals, told Reuters.
The exact losses are difficult to quantify because Temasek had also offloaded about 30 million Merrill shares last year in smaller lots, reducing its exposure to the investment bank by the time BofA took over Merrill.
Conraj Raj, editor-at-large at the Today newspaper in Singapore, threw the spotlight on the sovereign wealth fund's stated strategy of taking a long-term view of its investments.
"After all, it has been drummed into us ad nauseam that both Temasek and its cousin, the Government of Singapore Investment Corporation, invest for the long term with a time horizon that could stretch for as long as 50 years," he wrote on May 18.
"Whatever happened to the sovereign wealth fund's (SWF) strategy of taking a long-term view of its investments?"
Singapore's bigger sovereign wealth fund, GIC, on the other hand said it was a long-term investor in Citigroup
"It is difficult to understand why a long-term investor like Temasek was willing to stick with a dud like Australia's ABC Learning centers to the end, but did not try to exercise a little bit more patience with a U.S. government-backed entity like BofA," Png Eng Huat wrote in a letter to Straits Times forum.
"The U.S. government has stated clearly that it will not nationalize BofA even though it is technically the largest shareholder of the bank."
(Editing by Muralikumar Anantharaman)
China Daily:Settlements complicate Lehman inquiry
HONG KONG: Investigations of financial institutions that sold Lehman Brothers minibonds became more difficult after some complainants in the case reached separate settlements, Hong Kong Monetary Authority chief executive Joseph Yam said yesterday.
Yam made the revelation Friday as he was grilled by legislators in the Legislative Council subcommittee hearing on the Lehman Brothers products disaster.
"We can still get the information we need from banks," he said. "However, we cannot make verification with the investors (under terms of settlement agreements, investors are prohibited from disclosing information about their individual cases). That makes our investigation difficult."
Yam's revelation immediately drew criticism from subcommittee members. James To accused the authority of protecting the banks.
"How can you let this happen to hinder your investigation?" he demanded.
Yam defended the authority, countering that it could not stop investors from settling their complaints with the banks that sold the instruments.
"If we imposed restrictions on banks because of the difficulty involved in the investigations, the investors may not be able to reach settlements and get back their money. That is not fair to them," he said.
Yam, who will retire in October, has been grilled by the subcommittee on six occasions. Friday's hearing saw repetition of earlier incidents, with Yam's testimony interrupted by shouts from angry investors in the public gallery. Subcommittee chairman Raymond Ho Chung-tai was forced to call five-minute adjournments on two occasions so that the furor from the gallery could be quieted.
Financial services sector legislator Chim Pui-chung and Hong Kong Island constituency legislator Regina Ip said the authority failed to prevent banks from employing hard-sell tactics to persuade investors to buy Lehman Brothers financial products.
"One of the investors purchased the product through her daughter working in the banks. The daughter has not gone through any training. The bank hires her, and she is just trying hard to sell the products to her relatives as well. It is a problem for banks to set a selling quota for the staff to achieve," she said.
Yam reiterated that the authority does not tolerate irregular sales practices and will deal with the matter seriously.
"If the investors, under the cold call practice, are not interested in the product, and the investors purchased the products simply because the banks or agents called them saying they have money in their accounts, this will not be tolerated," he said.
He said the authority asked about 50 banks to conduct self-assessments in 2008.
He added that the authority would be more thorough when assessing banks in the future.
The authority deputy chief executive Choi Yiu-kwan will give evidence at a hearing of the subcommittee in June. But chairman Ho said legislators intend to recall Yam to give further evidence after Choi's testimony.
Yam made the revelation Friday as he was grilled by legislators in the Legislative Council subcommittee hearing on the Lehman Brothers products disaster.
"We can still get the information we need from banks," he said. "However, we cannot make verification with the investors (under terms of settlement agreements, investors are prohibited from disclosing information about their individual cases). That makes our investigation difficult."
Yam's revelation immediately drew criticism from subcommittee members. James To accused the authority of protecting the banks.
"How can you let this happen to hinder your investigation?" he demanded.
Yam defended the authority, countering that it could not stop investors from settling their complaints with the banks that sold the instruments.
"If we imposed restrictions on banks because of the difficulty involved in the investigations, the investors may not be able to reach settlements and get back their money. That is not fair to them," he said.
Yam, who will retire in October, has been grilled by the subcommittee on six occasions. Friday's hearing saw repetition of earlier incidents, with Yam's testimony interrupted by shouts from angry investors in the public gallery. Subcommittee chairman Raymond Ho Chung-tai was forced to call five-minute adjournments on two occasions so that the furor from the gallery could be quieted.
Financial services sector legislator Chim Pui-chung and Hong Kong Island constituency legislator Regina Ip said the authority failed to prevent banks from employing hard-sell tactics to persuade investors to buy Lehman Brothers financial products.
"One of the investors purchased the product through her daughter working in the banks. The daughter has not gone through any training. The bank hires her, and she is just trying hard to sell the products to her relatives as well. It is a problem for banks to set a selling quota for the staff to achieve," she said.
Yam reiterated that the authority does not tolerate irregular sales practices and will deal with the matter seriously.
"If the investors, under the cold call practice, are not interested in the product, and the investors purchased the products simply because the banks or agents called them saying they have money in their accounts, this will not be tolerated," he said.
He said the authority asked about 50 banks to conduct self-assessments in 2008.
He added that the authority would be more thorough when assessing banks in the future.
The authority deputy chief executive Choi Yiu-kwan will give evidence at a hearing of the subcommittee in June. But chairman Ho said legislators intend to recall Yam to give further evidence after Choi's testimony.
SCMP:Yam denies shielding banks from scrutiny
The Monetary Authority cannot stop banks that settle with minibond investors inserting clauses requiring that they drop their complaints and cease disclosing information about their case, its chief executive told lawmakers yesterday.
Joseph Yam Chi-kwong denied he was shielding banks from scrutiny.
He was testifying for the sixth time to the Legislative Council panel inquiring into the alleged mis-selling by banks of credit-linked derivatives, including minibonds, issued or guaranteed by Lehman Brothers. At the end of last year, three months after the American bank filed for bankruptcy - causing 48,000 Hong Kong investors to lose much or all of the HK$20 billion they put into such products - 17 banks paid HK$257 million to settle 616 investors' claims.
"My view is that the HKMA doesn't have any power to interfere with the relationship between the banks and their clients, even if an investor has promised the bank to withdraw their complaint or to not make available further information," Mr Yam told the subcommittee.
"We can still get hold of the information we require from the banks. Of course, if we cannot get information from the investors to corroborate, then it would be more difficult to proceed with the investigation."
He said he would seek legal advice as to whether the inclusion of such conditions in settlements with investors was against the public interest.
A spokesman for the authority said the outcome of such settlements would not affect its investigations.
The authority has received nearly 21,000 complaints about banks' sale of minibonds. Despite their name, minibonds are complex products that derive part of their value from underlying credit instruments.
An authority circular issued in March said banks should not include in settlement agreements clauses that stopped investors disclosing relevant information to regulators.
Democratic Party lawmaker James To Kun-sun called on Mr Yam to reconsider allowing banks to impose such conditions, since they might interfere with the authority's statutory duty to regulate banks. Mr Yam said he would reconsider, but insisted that restricting banks would be unfair if it affected minibond investors' ability to reach a settlement.
Questioned by lawmakers yesterday, Mr Yam sought to show that the authority was on top of the situation. Inspections of bank activities continued between 2003 and 2007 even though there were not many cases of suspected mis-selling of such derivatives, he said. Around the middle of last year, the authority identified more cases of suspected mis-selling. In February last year, the authority set out to investigate 11 banks selling high-risk derivatives, but launched investigations into only four.
Yesterday's Legco session was interrupted three times by rowdy spectators in the public gallery calling for Mr Yam to step down. He will retire on October 1 after 16 years in the job.
Joseph Yam Chi-kwong denied he was shielding banks from scrutiny.
He was testifying for the sixth time to the Legislative Council panel inquiring into the alleged mis-selling by banks of credit-linked derivatives, including minibonds, issued or guaranteed by Lehman Brothers. At the end of last year, three months after the American bank filed for bankruptcy - causing 48,000 Hong Kong investors to lose much or all of the HK$20 billion they put into such products - 17 banks paid HK$257 million to settle 616 investors' claims.
"My view is that the HKMA doesn't have any power to interfere with the relationship between the banks and their clients, even if an investor has promised the bank to withdraw their complaint or to not make available further information," Mr Yam told the subcommittee.
"We can still get hold of the information we require from the banks. Of course, if we cannot get information from the investors to corroborate, then it would be more difficult to proceed with the investigation."
He said he would seek legal advice as to whether the inclusion of such conditions in settlements with investors was against the public interest.
A spokesman for the authority said the outcome of such settlements would not affect its investigations.
The authority has received nearly 21,000 complaints about banks' sale of minibonds. Despite their name, minibonds are complex products that derive part of their value from underlying credit instruments.
An authority circular issued in March said banks should not include in settlement agreements clauses that stopped investors disclosing relevant information to regulators.
Democratic Party lawmaker James To Kun-sun called on Mr Yam to reconsider allowing banks to impose such conditions, since they might interfere with the authority's statutory duty to regulate banks. Mr Yam said he would reconsider, but insisted that restricting banks would be unfair if it affected minibond investors' ability to reach a settlement.
Questioned by lawmakers yesterday, Mr Yam sought to show that the authority was on top of the situation. Inspections of bank activities continued between 2003 and 2007 even though there were not many cases of suspected mis-selling of such derivatives, he said. Around the middle of last year, the authority identified more cases of suspected mis-selling. In February last year, the authority set out to investigate 11 banks selling high-risk derivatives, but launched investigations into only four.
Yesterday's Legco session was interrupted three times by rowdy spectators in the public gallery calling for Mr Yam to step down. He will retire on October 1 after 16 years in the job.
Sunday, May 17, 2009
Pledge by public servants
I visited the Parliament building of the provincial government of British Columbia. There was a display showing the pledge taken by the public servants. Some key elements of the pledge are:
1. To serve the people of British Columbia
2. To loyally obey the Government who are the elected representatives of the people
3. To serve the public interest over personal interest and avoid conflict of interest
4. To uphold confidentiality
This pledge recognises that it is the people who are supreme, and that the current Government is there only as the elected representatives of the people, and that the Government can be changed, if the people so desires.
It is quite refreshing to know that this is what democracy and legitimacy of Government really is.
Saturday, May 16, 2009
Survey - social benefits and taxation
Do you prefer the state (i.e. Government) to provide less social benefits and reduce taxes, or to provide more social benefits (to be funded by higher taxes). Give your views in this survey.
Here are the survey results.
Running a business on sound principles
Lessons to be learned about operating a business on sound principles. Read this article.
SCMP:Authority suspected banks of mis-selling
The Monetary Authority suspected three banks of mis-selling credit-linked products before Lehman Brothers collapsed but did not check more banks or alert the public to its findings, its chief executive, Joseph Yam Chi-kwong, told a legislative inquiry yesterday.
There was "not sufficient information to show it was an industry-wide problem", he said.
Credit-linked derivatives, most of them minibonds issued or guaranteed by Lehman, lost much or all of their value after it collapsed last year amid the global financial crisis. Some 48,000 Hongkongers had invested HK$20 billion in such products.
Mr Yam said the authority set out to investigate 11 banks selling such products - including Lehman-linked ones - in February last year because of their high risks. But only four banks were investigated and that process was disrupted when Lehman Brothers collapsed.
Of the four, three were suspected of mis-selling, Mr Yam said. One has since been found guilty of misconduct in connection with the sale of credit-linked products; the other two are still under investigation.
Mr Yam said the inquiry last year identified problems with the way these banks' frontline staff explained to clients the nature of the products and their main risks, staff understanding of the products and staff management systems; and found sales documents were faulty and did not give detailed risk assessments for the products.
Lawmakers criticised the authority for not widening the investigation or alerting the public in time.
"There were about 20 banks selling Lehman products. Why did you not investigate all other banks immediately when you found three out of four problematic?" Ronny Tong Ka-wah of the Civic Party asked.
Independent Regina Ip Lau Suk-yee said: "What you identified in the probe were critical problems. If you had called a halt to such malpractice across the industry in time, and informed the public about that, you'd have saved many people."
Mr Yam said the authority did not have enough information at the time to show there was industry-wide malpractice. He also said the authority was investigating four complaints from bank staff about "oppressive" managements who based incentives solely on sales volume, regardless of any malpractice.
The authority considered having investigators pose as customers to check banks' sales practices, but did not do so since the Securities and Futures Commission did not use the practice and "we have to conform with their standards", Mr Yam said.
There was "not sufficient information to show it was an industry-wide problem", he said.
Credit-linked derivatives, most of them minibonds issued or guaranteed by Lehman, lost much or all of their value after it collapsed last year amid the global financial crisis. Some 48,000 Hongkongers had invested HK$20 billion in such products.
Mr Yam said the authority set out to investigate 11 banks selling such products - including Lehman-linked ones - in February last year because of their high risks. But only four banks were investigated and that process was disrupted when Lehman Brothers collapsed.
Of the four, three were suspected of mis-selling, Mr Yam said. One has since been found guilty of misconduct in connection with the sale of credit-linked products; the other two are still under investigation.
Mr Yam said the inquiry last year identified problems with the way these banks' frontline staff explained to clients the nature of the products and their main risks, staff understanding of the products and staff management systems; and found sales documents were faulty and did not give detailed risk assessments for the products.
Lawmakers criticised the authority for not widening the investigation or alerting the public in time.
"There were about 20 banks selling Lehman products. Why did you not investigate all other banks immediately when you found three out of four problematic?" Ronny Tong Ka-wah of the Civic Party asked.
Independent Regina Ip Lau Suk-yee said: "What you identified in the probe were critical problems. If you had called a halt to such malpractice across the industry in time, and informed the public about that, you'd have saved many people."
Mr Yam said the authority did not have enough information at the time to show there was industry-wide malpractice. He also said the authority was investigating four complaints from bank staff about "oppressive" managements who based incentives solely on sales volume, regardless of any malpractice.
The authority considered having investigators pose as customers to check banks' sales practices, but did not do so since the Securities and Futures Commission did not use the practice and "we have to conform with their standards", Mr Yam said.
Second Lehman-backed catastrophe bond defaults
LONDON (Reuters) - A second Lehman Brothers-backed catastrophe bond is in default after issuer Ajax Re Ltd failed to repay principal in full at maturity, according to credit rating agencies.
The $100 million bond, issued in April 2007 to give Bermuda-based Aspen Insurance Holdings Ltd cover against losses from earthquakes in California, had been expected to default following the collapse of Lehman, its effective guarantor.
Credit rating agency Standard & Poor's said in a May 11 statement that it had lowered its rating on the bond to D, signifying default, and withdrawn the rating.
It said Ajax Re had paid all the interest due on the bond, "but the ultimate payment of principal was not made in full on May 8, 2008 due to a shortfall in the realizable value of the collateral assets under the TRS (total return swap)."
S&P had said a default was likely despite a timely payment of interest on March 16.
The deal is among four catastrophe bonds that used a unit of Lehman Brothers as TRS counterparty, contracted to ensure the collateral backing the bonds was sufficient to meet interest and principal repayments, and to make up any shortfall.
When the U.S. investment bank filed for bankruptcy on September 15, investors were left with direct exposure to market losses on the collateral assets, and the bonds were downgraded.
Another of the bonds, issued by Willow Re with Allstate Corp as ceding insurer, was already in default after Willow failed to make in full a February 2 interest payment.
Another rating agency, insurance specialist A.M. Best, also said it had downgraded the Ajax Re notes to "d" following the failure to fully repay the principal at redemption.
Insurers have used catastrophe bonds since the 1990s to manage their exposure to natural disasters such as hurricanes and earthquakes by transferring potential losses to investment funds. Investors receive a high rate of interest but risk losing part or all of their principal if a catastrophe occurs.
(Reporting by Catherine Evans; Editing by Simon Jessop)
Friday, May 15, 2009
British Columbia, Canada
In the province of British Columbia, Canada, there is a Vancouver City, Vancouver Island, Victoria City and Victoria Island. Here are some interesting facts:
> Vancouver City is not on Vancouver Island
> Victoria City is not on Victoria Island.
Victoria City (capital of British Columbia province) is on Vancouver Island and Vancouver City is on the mainland Canada. Victoria Island is not in British Columbia but is near the North Pole (quite far away).
Victoria Island is the largest island in North America and is bigger than Taiwan.
Tuesday, May 12, 2009
Photos from the Canadian Rockies
At a high point in Banff, overlooking the mountains of the Canadian Rockies.
You need a vehicle like this to travel in the glacier. The tourists uses a Snowmobile (like a bus with big wheels).
It is cold and windy at a glacier.
Monday, May 11, 2009
Questions for the AGM of NTUC Income, 29 May 2009
I have submitted the following questions for the annual general meeting of NTUC Income on 29 May 2009. They summarised the questions sent to me from policyholders during the past year.
If you are a policyholder and wish to attend the annual general meeting, you can send your request to the cooperative secretary at this address (lakshmi.b@income.com.sg). You can also send in your own questions.
If you are a policyholder and wish to attend the annual general meeting, you can send your request to the cooperative secretary at this address (lakshmi.b@income.com.sg). You can also send in your own questions.
Questions for the Annual General Meeting of NTUC Income, 29 May 2009
I wish to ask a few questions on behalf of many policyholders who bought life insurance from NTUC Income on the understanding that it is a cooperative working in the interest of its policyholders.
NTUC Income reduced its bonus rates for several series of policies last year, in spite of excellent investment results. At the annual general meeting, the chairman gave the following assurances to the policyholders:
a) While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated. As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.
b) Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.
c) I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund.
There is an announcement that the bonus cut will be extended to all other series of policies this year.
My questions are:
1. What is the total amount of bonus that were reduced in 2007 and 2008 compared to the bonuses that would have been declared if the bonuses had been maintained at the same rates declared in 2006. Please provide the actuarial value of the bonuses that have been reduced, in millions of dollars, for the policies that were affected.
2. What is the amount of management and selling expenses incurred for the life insurance business for 2006, 2007 and 2008. Are steps being taken to reduce these expenses in line with the reduction in bonuses suffered by the policyholders?
3. Please explain how the reduction in bonus can achieve a better payout to policyholders? With the reduction in the bonus last year, was the cooperative able to invest the undistributed surplus to earn a higher return for policyholders?
4. Will the cooperative be able to maintain the special bonus payable on maturity and surrender, which was adjusted to compensate for the reduction in the annual bonuses? Is there any likelihood that the special bonus will have to be reduced, due to the global financial crisis?
5. For policies which have matured since the last AGM, was the cooperative able to meet the promise that the payout will be fair and based on the actual experience of the fund? Where the actual payouts were short of what is due to them, does the cooperative intend to make the appropriate adjustment for these policyholders?
6. Based on renewals made in recent months, what is the average rate of increase in motor insurance premium paid by policyholders who did not make any claim during the past year? Does the cooperative intend to control its expenses and claims to allow it to reduce the premium rates for its policyholders? What steps are being taken to achieve this goal?
I wish to ask a few questions on behalf of many policyholders who bought life insurance from NTUC Income on the understanding that it is a cooperative working in the interest of its policyholders.
NTUC Income reduced its bonus rates for several series of policies last year, in spite of excellent investment results. At the annual general meeting, the chairman gave the following assurances to the policyholders:
a) While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated. As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.
b) Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.
c) I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund.
There is an announcement that the bonus cut will be extended to all other series of policies this year.
My questions are:
1. What is the total amount of bonus that were reduced in 2007 and 2008 compared to the bonuses that would have been declared if the bonuses had been maintained at the same rates declared in 2006. Please provide the actuarial value of the bonuses that have been reduced, in millions of dollars, for the policies that were affected.
2. What is the amount of management and selling expenses incurred for the life insurance business for 2006, 2007 and 2008. Are steps being taken to reduce these expenses in line with the reduction in bonuses suffered by the policyholders?
3. Please explain how the reduction in bonus can achieve a better payout to policyholders? With the reduction in the bonus last year, was the cooperative able to invest the undistributed surplus to earn a higher return for policyholders?
4. Will the cooperative be able to maintain the special bonus payable on maturity and surrender, which was adjusted to compensate for the reduction in the annual bonuses? Is there any likelihood that the special bonus will have to be reduced, due to the global financial crisis?
5. For policies which have matured since the last AGM, was the cooperative able to meet the promise that the payout will be fair and based on the actual experience of the fund? Where the actual payouts were short of what is due to them, does the cooperative intend to make the appropriate adjustment for these policyholders?
6. Based on renewals made in recent months, what is the average rate of increase in motor insurance premium paid by policyholders who did not make any claim during the past year? Does the cooperative intend to control its expenses and claims to allow it to reduce the premium rates for its policyholders? What steps are being taken to achieve this goal?
Tan Kin Lian
Sunday, May 10, 2009
Differential pricing for petrol
My friend pointed out to me the price of 1 litre of petrol, as displayed in a prominent sign at the petrol stations. The price was around CAD 1.05 in the morning and reduces in stages to CAD 0.95 at around midnight. The next morning, the price went back to CAD 1.05.
The petrol station used differential pricing to encourage some drivers to fill up the tank during the night hours. This helps to reduce the crowd at the petrol station during the working hours. It is an interesting way to spread out the queue.
Perhaps petrol stations in Singapore can consider a similar strategy? It seems to work quite well in Canada.
Wearing masks
I took a flight from Singapore to Vancouver. The only people in the plane wearing masks are the flight crew and a few Singaporeans. The other passengers did not consider it necessary to wear masks. Were they irresponsible or unaware of the risk?
I do not think so. I think that they know the risk and have decided that it is the risk is too small to take these precautions. Singaporeans tend to over-react.
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