FISCA Talk - Consumer Guide to Insurance

The talk was held on 18 December 2010. It was well received. Here are some feedbacks:


Dear Mr Tan
I attended your  talk today ( and also the previous talk on investing for the long term). I believe Fisca and what you are doing is invaluable and it is very tragic re how poorly regulated financial services are in Singapore. Is there any way more people can get to know about financial literacy? I feel more people especially the old and less literate  should be protected against these scams. Like holding more talks  on a much larger scale? But I suppose it is a behemoth of an industry you might be up against.

Dear Mr Tan

Thanks for the illuminating talk on financial planning and insurance today, I've learned how to derived the costs of insurance as a result of your talk.  Thanks for your work in helping to educate and inform ordinary consumers like us.

More talks

I will be holding more talks on this topic. You can register at www.fisca.sg/events

Attendees of the talk can click here to download the zip file of the relevant FAQs from the TKL website. Here is the outline of the talk, but it is better to attend to talk.

Tan Kin Lian

BEST Business Game

Practice and develop the skill of pricing, marketing and stocking - the essential skills to run a profitable business by trying this game. Click on Video to see a demo of how the game is played and the strategy to follow. There are several games every hour, covering several industries. Each game should take 1 hour to complete.

Use Excel to calculate yield

I gave a talk on "Insuring your Financial Security" under FISCA. If you invest in a life insurance policy, you should aim for a yield of at least 3.5% per annum over a period of 25 years. You can calculate the yield using Excel. It is explained in this FAQ.

Invest in an indexed fund

In the past, the lay person does not know how to invest in shares or which shares to choose. A good choice is to invest in a life insurance policy and let the insurance company manage the investments.

The option of investing in a life insurance policy is no longer attractive for consumers, due to the high deduction may by the insurance company to cover its expenses and profit. Many life insurance companies take away 50% of the accumulated savings from the consumer, leaving a poor yield. For example, the insurance company can earn a yield of 5% but they give only 2% to the consumer. The difference of 3% is a lot of money.

Consumers now have the choice of investing in an indexed fund that takes away 0.3% per annum. If the indexed fund earns 5%, the net yield to the consumer is 4.7%. The consumer can buy the insurance protection through a 25 year term insurance policy and pay a small premium, which is less than 10% of the premium for a whole life or investment linked policy.

After factoring all the cost for the term insurance, the fee of the indexed fund and other expenses, the consumer is able to keep 85% of the accumulated savings, instead of 50% provided by a life insurance policy.

If the accumulated saving is $500,000, the consumer can keep $425,000 (after deducting 15%) instead of $250,000 (after deducting 50%). the difference is more than $150,000.

This concept is explained in several FAQs stored in my website, www.tankinlian.com/ask.aspx. Read this FAQs and learn how to invest in the indexed fund. You can also attend the educational talks organised by FISCA (see www.fisca.sg/events) or buy my book, Practical Guide on Financial Planning.

My message is very important for young people, especially the graduates who are starting work for the first time. Many insurance agents will be seeing you to tell you about investing in a life insurance policy. If you take their advice, you will likely be losing $150,000 or more, during your lifetime. Act now, before it is too late.

Tan Kin Lian

Role of social insurance

Most countries have a universal health insurance system that is provided by the state or through the private sector on conditions that are regulated by the state. It allows the population to have the basic level of health care at an affordable cost. Most developed countries, with the exception of America, have this kind of arrangement.

America has a private health care system. It produced high cost and leaves a significant portion of the population to be uninsured.

Singapore used to have a good and affordable health care system. In recent years, we are adopting some of the bad practices of America. There are now complaints that parents cannot buy insurance through Medisheld or the private alternatives for children with some congenital conditions.

Our problem is caused by the misconception that the private sector is more efficient in the use of resources. This is only partly true, but it has to be balanced with the negative aspects  of the pursuit of profit at the expense of other consideration, and the high cost of marketing and administration.

Some services, such as health care and education, are better handled under a social insurance scheme, rather than by the private sector. See the explanation in this article.

Tan Kin Lian

GPS Navigation System

I wish to look for a GPS navigation system in my car. I have a Packard Bell system, but it has been giving trouble lately. So, I am looking for a different system. Any recommendation of a good system that is easy to use and give good directions?

Tourist attractions

I have added some tourist attractions in Learning Tips. It can be viewed through the internet or on a Windows Phone. http://easyapps.sg/learn/

Renovating an industrial premise [2]

I had a difficult time to find a contractor to renovate my industrial premise. Most of them quoted over $70,000 to renovate and furnish a premise of 1,600 s.f, of which only 1,300 sf need to be furnished.

I finally decided to scale down the work and managed to appoint a contractor at a more affordable cost. It still cost a lot of money, including the fee of $3,500 payable for "fire safety".  I sent my feedback to the Pro-Enterprise Panel, but they have still not acknowledged it after a few days.

Over the past few days, I have to signed many forms to different agencies. It seems to be quite complicated and time consuming to fill up these forms.

It is a hassle to apply to open an account for utilities. The form asked me to state the KVA of the power supply. I am not an engineer, so I do not know how to provide this information. My staff called the hotline of Power Supply and was told to get the KVA from the developer. The call to the developer's office was answered by someone who does not know the KVA. They will get someone to call back. I bet they will forget about calling back, which is quite typical of the standard of customer service in Singapore.

The form also asked for the date of incorporation of my company. I do not understand why this information is needed by Power Supply. So, I have to call my company secretary to find out this information.

Singapore has bred many people who are insensitive to the hassle and expenses cause to other people through their requirements. Some of these cost are imposed directly (through the fees that have to be paid), and some are borne indirectly (through the wasted time and work).

I shall write to the Pro-Enterprise Panel again. I do not expect them to acknowledge my feedback, but I will still write.

Tan Kin Lian

Who pays for the cost of medical report?

I wish to advice consumers who have to get a medical report to support an insurance application or claim. You can ask the insurance company to pay for the medical report in the case of an application.

For an insurance claim, you can add the cost of the medical report as part of the claim and get the insurance company to pay for it, i.e. to reimburse you. This is a legitimate claim expense and should be borne by the insurance company.

If the insurance company expect you to bear this expense, you can lodge a complaint with FIDREC as a dispute. If it is stated in the insurance policy as a contract term, you can lodge a complaint to CASE (Consumer Association of Singapore) that this is an unfair contract term. If I am not mistaken, CASE has a role in the administration of this Act. Alternatively, you can send your policy wordings to me, and I will try to help you to file the complaint.

Tan Kin Lian

Financial planning for a child

Many parents think that they should buy life insurance as a financial plan for a child. This is a bad idea. It is an idea that is planted to them by an insurance agent who wants to earn commission to sell any insurance policy. So, buying insurance for a child, e.g. to fund for university education, is one of these ideas.

It is better for the parent to invest the savings in one pool, to be used for a variety of purposes (one of which is education expenses). It is important that the savings should be invested in a flexible form and should produce a fairly attractive yield. Most life insurance policies in the market fail on both scores - i.e. they are inflexible and provide a poor yield.

Read this FAQ about financial planning for a child.

Read this FAQ about personal risk management for young people.It is more important that they have adequate savings for emergencies and their retirement. If they have more than enough savings, they can use some of this pool of savings for the tertiary education of a child, but it should not be at the expense of the other needs.

Tan Kin Lian

Financial planning for retirees

Many retirees have a sum of savings and are need advice on how to manage these savings. They can buy a Life Annuity, but they don't like the idea of losing their capital on early death. They think that they need life insurance, which is not suitable for retirees, except to pay for the funeral expenses. They cannot get proper advice from insurance agents (or financial advisers) as they only keen to sell unsuitable life insurance policies to earn a commission.

The best way for a retiree to manage the savings is to invest in an indexed fund and to draw down the amount that is required each month. This is explained in this FAQ. The retiree can get more information from my book, Practical Guide on Financial Planning or by attending the educational talks conducted by FISCA.

By spending some time and money to be educated, the retiree can save a lot of money by avoiding the wrong financial products that give them a poor yield or can cause them to lose their capital (remember the Lehman saga)?

There are several articles about investments and financial planning that you can read in www.tankinlian.com/ask.aspx. Just type some keyword and you can get the articles that cover the topic. All articles are quite short, and contain the useful information for the lay person. They are quite easy to understand.

Tan Kin Lian

Keep your existing Living policy

Dear Mr Tan,
I am reviewing my existing policies: Living, Incomeshield and Ideal Plan, I have been unemployed for more than one year and found it difficult to get a new job as I am now in my fifties.

I was advised not terminate my Living Policy. I am considering whether I should buy a term policy (which you have recommended) since it would be cheaper and I could get a larger sum insured. However, will it cover my existing conditions of fibroids? Will this condition affect my Living policy since it was discovered after the policy was issued?

REPLY
My advice of buying a term insurance policy applies mainly for young people - so that they can invest their savings in a low cost investment fund.

Looking at your circumstance, i.e. age and medical condition, it is best that you keep the existing Living policy, rather than switch to a term insurance policy, as you will have difficulty with getting term insurance now.

Your fibroid condition was discovered several years after you took your Living policy, so you will not have any problem with the coverage under the Living policy due to this condition. You can read my FAQ on "Indisputability".

I suppose that your children are now quite old, so there may not be any need for you to increase your life insurance coverage.

After the Event Insurance

Dear Mr Tan
While doctors and hospitals can buy insurance to cover malpractice suits, there is no similar plan on the patient side to provide the financial muscle to mount a suit. As a result only the well-heeled can afford to challenge the hospitals.

Also, the medical profession is well protected by the Bolam test that "established that there is no breach of duty of care so long as the doctor acted in accordance with a responsible body of medical opinion."

Just wondering whether an insurance programme, perhaps called The Patient Protection Insurance, can be set up along the lines of travel insurance. Just as a traveller would buy travel insurance before taking a trip, a patient going for surgery could pay a fixed sum upfront. With thousands undergoing surgery every year, a sizable war chest can be built up to provide for seasoned lawyers and independent expert medical witnesses (from abroad for obvious reasons), to sue for damages should an operation go awry.

With this facility, affected patients will at the very least have access to topflight legal advice on the merits of proceeding with a case instead of simply accepting a hospital's explanation with resignation.

TCH

My Reply

There is already such an insurance, called "after the event insurance". You can read the website of Lockton Insurance Brokers to learn more about it.

http://www.lockton.com/Services-And-Solutions/After-The-Event

High insurance charge on ILP

Hi Mr. Tan,
My mother has Pru-Link insurance and has paid for nearly 10 years. She is over 60 now. When she bought the policy, she was told that she only needed to pay 10 years. I looked at her policy now and realized that her insurance charge is half of the monthly premium and there is not much left in the investment account. And I found out that my mother cannot stop the premium as there is not much investment value to cover the insurance charge for long.


My question is:
1. Should I stop the insurance now, as the charge is too high?
2. If I continue the insurance, does it means that I need to give more money every month for protection?

My reply
Please bring your documents and see me in my office. I will discuss the options with you.

Observation
The greedy agent only wanted to make a fat commission and does not care about selling an unsuitable policy and the anguish that is being left with the policyholder and the family.

Capsule hotel in Japan

You can rent a capsule in Japan at a cheap rate. It seems to be quite comfortable. Maybe Singapore can adopt it one day. [Mike Hansford]
www.tankinlian.com/latest.aspx
http://tankinlian.com/admin/file.aspx?id=322

Beauty of the night

Interesting night scenes of cities around the world [Mike Hansford]
www.tankinlian.com/latest.aspx
http://tankinlian.com/admin/file.aspx?id=321

Credit card for those above 60

Why do banks refused to issue credit card for those above age 60?  I guess it must be a mindless ruling from MAS - designed by young officers who live in their ivory towers. SGEP

Concept about aging

C H Yak met an old man on his visit to Nanjing. He posted this message:


Quote
A Response to "Making Life Easier for The Elderly". MM Lee at the old age of 87, said this during a recent constituency event; "If I'm fit, I'm prepared to stand. But whether I stand or not, that's up to the Prime Minister". Asked if he was feeling up to it, Mr Lee chuckled and would only say: 'It's for you to judge.' [ Source : Straits Times, 14 Nov 2010 ] SM Goh announced that the Government is carrying out a 5-year study in Marine Parade to assess the implications and needs of an ageing community. He said the elderly are a special group, and Singapore need more young people to engage older Singaporeans to help them grow old graciously ... but "in a cost effective way". [Source : Today, 13 Dec 2010] During my recent trip to Nanjing, I met this interesting old man ( an octogenarian ),......[http://de-leviathan.blogspot.com]
Unquote


Read his message at SGEP. Here is an idea that is different from MM Lee.

Color printer

I wish to have recommendation on a good color printer to buy, where the price is reasonable for the printer, and the consummables are not expensive.

Download of Window Phone Apps

Videos of these apps are available here:
http://www.tankinlian.com/Information.aspx?CatID=12


The downloads during the past two weeks:
Entrepreneur - 61

4D Simulator - 34

Toto Luck 20

One in a Million 17

Total 132

By country

USA - 54

Germany 19

UK 17

France 6

HK 5

Spore 4

The downloads are better than I expected, but mostly from USA, Germany and UK. Singapore is still slow - only 4 downloads.