QUESTION FROM JOURNALIST
REPLY BY TAN KIN LIAN
I am writing a story based on what the MAS said last month that motor insurers need to maintain underwriting and pricing discipline.
- Is maintainng underwriting and pricing discipline a challenge for the industry?
Reply: Yes. It is a challenge. Some insurers, with a small volume of risks, do not have adequate statistics on their own claims experience. They use the premium rates charged by other insurers and even give a discount. Their premium rates may not be adequate to cover their claims and expenses, especially if they cannot manage the inflated claims. The shortfall can be as much as 30%. They will suffer a loss and will have to increase their premium rates significantly in the future.
- What has NTUC done in this area?
Reply: NTUC Income review our claim experience every six months. We use the claim experiences to revise our premium rates. We are pro-activly in managing inflated claims and can bring down the claims to a lower level, compared to our competitors. We keep our expenses low and add a modest margin. We are generally able to offer the most competitive rates, and still keep to a modest profit.
- What is NTUC's average motor premium today and is it likely to go lower?
Reply: The average premium for private cars today is $807. This is a reduction of 15% compared to the average premium of 1 year ago.
- Why is there strong competition in motor?
Reply: There is strong competition in motor insurance. Several insurers are charging premium rates below their cost of claims and expenses. The difference can be as much as 30%. This is unsustainable and unsound. They will have to revise their premium rates significantly in the future. Their policyholders will be hit.
- What is NTUC's market share in terms of premiums and vehicles?
Reply: Our market share is now about 35%.
Wednesday, April 26, 2006
Can a bankrupt buy an insurance policy?
QUESTION
I came across your blog recently, and found out your contact. I would like to take this opportunity to clarify some doubts about certain insurance matters.
If one is declared bankrupt, is he still eligible to purchase insurance? Or does he need to seek permission from the relevant authority (Official Assignee) before doing so?
If one purchased insurance without the permission, what are the possible consequences? e.g. in the event of claims, would his claims be confiscated?
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REPLY
When a person becomes a bankrupt in law everything he owns (including his insurance policies) becomes the property of the Official Assignee.
He cannot buy an insurance policy without the permission of the Official Assignee.
The Official Assignee can and may give permission to a Bankrupt to buy a reasonable protection policy (i.e. a Term Policy) for the benefit of the bankrupt’s family. This permission has to be given in writing.
A simpler way to address the problem is to get the spouse to buy a policy on the life of the bankrupt. In which case the policy will be owned by the spouse and not the bankrupt and the official assignee will have no say over the policy.
I came across your blog recently, and found out your contact. I would like to take this opportunity to clarify some doubts about certain insurance matters.
If one is declared bankrupt, is he still eligible to purchase insurance? Or does he need to seek permission from the relevant authority (Official Assignee) before doing so?
If one purchased insurance without the permission, what are the possible consequences? e.g. in the event of claims, would his claims be confiscated?
-------------------------
REPLY
When a person becomes a bankrupt in law everything he owns (including his insurance policies) becomes the property of the Official Assignee.
He cannot buy an insurance policy without the permission of the Official Assignee.
The Official Assignee can and may give permission to a Bankrupt to buy a reasonable protection policy (i.e. a Term Policy) for the benefit of the bankrupt’s family. This permission has to be given in writing.
A simpler way to address the problem is to get the spouse to buy a policy on the life of the bankrupt. In which case the policy will be owned by the spouse and not the bankrupt and the official assignee will have no say over the policy.
Tuesday, April 25, 2006
Why do Singaporeans save so little for their retirement?
QUESTION FROM STRAITS TIMES JOURNALIST
A new survey shows that Singaporeans might not have enough money to last them through their retirement years. The research conducted with 1,000 working adults indicated that only one in ten Singaporeans has actively saved for retirement in the last year. The study also shows that 61 per cent are seriously concerned about having too little money during retirement, while 64 per cent of Singaporeans feel they themselves should bear the financial costs of their retirement.
Why do singaporeans save so little? Are singaporeans in deep trouble for their golden years?
REPLY
Ten years ago or earlier, the contribution to the Central Provident Fund was at a high rate. Most people could rely on the CPF for their retirement. Housing prices was at a more affordable level. After paying for their HDB flat, there was sufficient savings left for retirement.
The situation changed during the recent ten years. CPF contribution was reduced. A higher proportion of the contribution was set aside for medical expenses. Repayment for housing take a major portion of the CPF savings.
Many people did not realise the need to make additional savings. The financial products available to them was not satisfactory. The saving in a traditional life insurance product did not give a good return, as a proportion of the premium has to be set aside for the insurance coverage and to pay commission to the insurance agent.
Today, consumers have a better choice.
NTUC Income has launched our Ideal plan. It is an investment-linked plan that encourages regular savings. The savings can be invested in our large, well diversified fund to earn an attractive rate of return. The return during the past three years was exceptionally good, averaging about 15% per annum.
Looking towards the future, we hope that the fund can earn an average of 5% to 7% per annum over the long term. This is not guaranteed. The average return earned over a balanced fund of equity and bond over the past ten years has been about 6% per annum.
Another advantage of our Ideal plan is the flexibility. The consumer can change the amount of regular savings based on their personal circumstances. They can increase or reduce the regular savings, or to stop savings for a short period without suffering any penalty. They can even make cash withdrawals from the plan.
Other insurance companies offer similar products. However, the key advantage of our Ideal plan is the low distribution cost. It works out to an average of 7 months of premium, compared to between 11 to 19 months for similar plans from other insurers.
More details can be found in this website: http://www.askdrmoney.com/Ins_ILP_RP.htm
Our Ideal plan is now actively purchased by consumers as a means to make additional savings for their retirement. The sale of this product has inceased significantly in the past two years.
With a more attractive product, we believe that more people will make additional savings for their retirement. Our insurance advisers are reaching out to educate them on this need.
We also invite the public to learn about insurance in our educational website: www.knowyourinsurance.com.sg
I have another suggestion.
It will be helpful if the government allow a higher amount of tax relief for people to make additional savings for their retirement. Currently, the tax relief is $5,000 per year, inclusive of CPF contributions. If the tax relief is kept at $5,000 and is separate from CPF contribution, it will encourage more people to make this additional savings.
A new survey shows that Singaporeans might not have enough money to last them through their retirement years. The research conducted with 1,000 working adults indicated that only one in ten Singaporeans has actively saved for retirement in the last year. The study also shows that 61 per cent are seriously concerned about having too little money during retirement, while 64 per cent of Singaporeans feel they themselves should bear the financial costs of their retirement.
Why do singaporeans save so little? Are singaporeans in deep trouble for their golden years?
REPLY
Ten years ago or earlier, the contribution to the Central Provident Fund was at a high rate. Most people could rely on the CPF for their retirement. Housing prices was at a more affordable level. After paying for their HDB flat, there was sufficient savings left for retirement.
The situation changed during the recent ten years. CPF contribution was reduced. A higher proportion of the contribution was set aside for medical expenses. Repayment for housing take a major portion of the CPF savings.
Many people did not realise the need to make additional savings. The financial products available to them was not satisfactory. The saving in a traditional life insurance product did not give a good return, as a proportion of the premium has to be set aside for the insurance coverage and to pay commission to the insurance agent.
Today, consumers have a better choice.
NTUC Income has launched our Ideal plan. It is an investment-linked plan that encourages regular savings. The savings can be invested in our large, well diversified fund to earn an attractive rate of return. The return during the past three years was exceptionally good, averaging about 15% per annum.
Looking towards the future, we hope that the fund can earn an average of 5% to 7% per annum over the long term. This is not guaranteed. The average return earned over a balanced fund of equity and bond over the past ten years has been about 6% per annum.
Another advantage of our Ideal plan is the flexibility. The consumer can change the amount of regular savings based on their personal circumstances. They can increase or reduce the regular savings, or to stop savings for a short period without suffering any penalty. They can even make cash withdrawals from the plan.
Other insurance companies offer similar products. However, the key advantage of our Ideal plan is the low distribution cost. It works out to an average of 7 months of premium, compared to between 11 to 19 months for similar plans from other insurers.
More details can be found in this website: http://www.askdrmoney.com/Ins_ILP_RP.htm
Our Ideal plan is now actively purchased by consumers as a means to make additional savings for their retirement. The sale of this product has inceased significantly in the past two years.
With a more attractive product, we believe that more people will make additional savings for their retirement. Our insurance advisers are reaching out to educate them on this need.
We also invite the public to learn about insurance in our educational website: www.knowyourinsurance.com.sg
I have another suggestion.
It will be helpful if the government allow a higher amount of tax relief for people to make additional savings for their retirement. Currently, the tax relief is $5,000 per year, inclusive of CPF contributions. If the tax relief is kept at $5,000 and is separate from CPF contribution, it will encourage more people to make this additional savings.
Monday, April 24, 2006
Guess who says that NTUC Income don't pay claims?
For the past 30 years, our competitors' agents have been trained by their sales managers to tell the customers, "NTUC Income does NOT pay claims".
Is this true? Of course, NOT.
NTUC Income has paid several hundred thousand of claims over the past years, and quite promptly. Our motto is: "Prompt and Fair Settlement of Claims".
Why do these competitors' agents target NTUC Income?
The answer is simple. NTUC Income offers better terms to our customers. It is a fact. The only way to get customers to buy their expensive products (ie pay higher premium to the competitor products) is to tell a lie.
Unfortunately, many Singaporeans believe the lie. They pay a higher premium for the privilege of being served by a more expensive insurance company.
But many more Singaporeans are savvy. They ignore the lie and take their insurance with NTUC Income. We have 1,200,000 policyholders who fit into this category. They know the real facts and make the right choice.
Is this true? Of course, NOT.
NTUC Income has paid several hundred thousand of claims over the past years, and quite promptly. Our motto is: "Prompt and Fair Settlement of Claims".
Why do these competitors' agents target NTUC Income?
The answer is simple. NTUC Income offers better terms to our customers. It is a fact. The only way to get customers to buy their expensive products (ie pay higher premium to the competitor products) is to tell a lie.
Unfortunately, many Singaporeans believe the lie. They pay a higher premium for the privilege of being served by a more expensive insurance company.
But many more Singaporeans are savvy. They ignore the lie and take their insurance with NTUC Income. We have 1,200,000 policyholders who fit into this category. They know the real facts and make the right choice.
I repaired my new car at a quality workshop
I bought a new Mercedes E240 three months ago.
Someone knocked into my car at the car park. It damaged the door. He volunteered to pay for the repair under a private settlement.
I sent it for repair at our quality workshop. It cost $1,400 to change the front passenger door and paint work the side mirror. If my car were to be sent to the distributor, it would have cost $2,700 for the same scope of work.
Although the other party is paying for the repair, I did not send my car to the distributor.
I am not worried about the potential loss of warranty. I think that the distributor cannot enforce it.
Someone knocked into my car at the car park. It damaged the door. He volunteered to pay for the repair under a private settlement.
I sent it for repair at our quality workshop. It cost $1,400 to change the front passenger door and paint work the side mirror. If my car were to be sent to the distributor, it would have cost $2,700 for the same scope of work.
Although the other party is paying for the repair, I did not send my car to the distributor.
I am not worried about the potential loss of warranty. I think that the distributor cannot enforce it.
Is an equity fund appropriate for a retiree?
FROM POLICYHOLDER
I have $150,000 of CPF OA in your Growth fund. I am 61 years old and will not be needing my CPF money.
At the same time I don't know whether it is appropriate for an older person who will be retiring in 6 months time to take risk. I do have additional income from rental and interests from fixed deposits.
I am thinking of switching $20,000 at least to your global equity fund as I think that bonds are not performing well at the moment. I know that the risk is lower with your Growth fund as it is a balanced fund.
Would you advise me to remain with the Growth fund or would you advise me to switch to both Global Equity Fund and Spore Equity Fund or just Global Equity Fund which I think is more diversified.
------------------------------------
MY REPLY
I am 58 years old, and I keep most of my investments in the Growth Fund as well. I intend to invest for the next 20 years, and to withdraw a small sum each month after I retire.
It should be all right to invest in a fund that is largely in equity. By investing for the long term, we diversify our risk.
You can also attend my educational talk. Details of my talks are shown in this weblink: http://www.income.coop/seminar/
I think that this is a good idea to switch part of your investments into an equity fund.
A few months ago, I switched about $100,000 of my investments from the Growth Fund (which is 70% equity and 30% bond) to the Singapore Equity fund. This turned out to be a good decision at that time.
For investors who look towards the long term, I think that the Global Equity Fund may be more appropriate than the Growth Fund.
For the immediate future, there is some uncertainty about the impact of high oil prices on equities, so one has to take this into account.
I have $150,000 of CPF OA in your Growth fund. I am 61 years old and will not be needing my CPF money.
At the same time I don't know whether it is appropriate for an older person who will be retiring in 6 months time to take risk. I do have additional income from rental and interests from fixed deposits.
I am thinking of switching $20,000 at least to your global equity fund as I think that bonds are not performing well at the moment. I know that the risk is lower with your Growth fund as it is a balanced fund.
Would you advise me to remain with the Growth fund or would you advise me to switch to both Global Equity Fund and Spore Equity Fund or just Global Equity Fund which I think is more diversified.
------------------------------------
MY REPLY
I am 58 years old, and I keep most of my investments in the Growth Fund as well. I intend to invest for the next 20 years, and to withdraw a small sum each month after I retire.
It should be all right to invest in a fund that is largely in equity. By investing for the long term, we diversify our risk.
You can also attend my educational talk. Details of my talks are shown in this weblink: http://www.income.coop/seminar/
I think that this is a good idea to switch part of your investments into an equity fund.
A few months ago, I switched about $100,000 of my investments from the Growth Fund (which is 70% equity and 30% bond) to the Singapore Equity fund. This turned out to be a good decision at that time.
For investors who look towards the long term, I think that the Global Equity Fund may be more appropriate than the Growth Fund.
For the immediate future, there is some uncertainty about the impact of high oil prices on equities, so one has to take this into account.
Sunday, April 23, 2006
Visit to Italy
I spent four days in Italy to attend a conference and also to visit Venice for a holiday. Italy is expensive. This must be due to their economic progress, since joining Europe
Thirty years ago, Italy was known to be cheap. Many people took a holiday in Italy for art, culture and to buy cheap things. How things have changed!
I had to pass through immigration in Frankfurt Germany. After that, I am allowed to move freely into Italy and back, without passing through immigration.
I hope that the countries of South East Asia can work together to simplify travel within the region.
Maybe, by working together in a larger economic zone, our countries can make better economic progress, similar to Europe.
Thirty years ago, Italy was known to be cheap. Many people took a holiday in Italy for art, culture and to buy cheap things. How things have changed!
I had to pass through immigration in Frankfurt Germany. After that, I am allowed to move freely into Italy and back, without passing through immigration.
I hope that the countries of South East Asia can work together to simplify travel within the region.
Maybe, by working together in a larger economic zone, our countries can make better economic progress, similar to Europe.
Sunday, April 16, 2006
Have adequate insurance
For the past 25 years, I have the following insurance:
$1,000,000 in personal accident cover
$500,000 in term insurance cover
Each year, I paid $800 for the personal accident insurance and $1,000 for the term insurance.
Nothing happened to me for 25 years. That's good. I do not expect to get the premium back.
I am glad that I paid the premium for the 25 years, as it provided security for my family. If something did happen, my family would have been well taken care of.
$1,000,000 in personal accident cover
$500,000 in term insurance cover
Each year, I paid $800 for the personal accident insurance and $1,000 for the term insurance.
Nothing happened to me for 25 years. That's good. I do not expect to get the premium back.
I am glad that I paid the premium for the 25 years, as it provided security for my family. If something did happen, my family would have been well taken care of.
Leave something for your grandchilren
Someone suggested to me that we should leave something for our grandchildren in our will. This will make them remember us.
Another way is to name them as beneficiary in a life insurance policy. You can also take a single premium policy to give the maturity benefit to a grandchild, when the beneficiary reaches a certain age.
Another way is to name them as beneficiary in a life insurance policy. You can also take a single premium policy to give the maturity benefit to a grandchild, when the beneficiary reaches a certain age.
Thursday, April 13, 2006
Pay less for your travel insurance
NTUC Income charges the lowest premium rates for
comparable benefits.
All plans pay for 100% of emergency medical evacuation
and also cover terrorism. NTUC Income has just removed
the 15% cost-sharing.
The above is the cost per person. If the diffence is
$30, a family of 5 people will have to pay $150
to the other insurer. You can save this sum by
insuring with NTUC Income.
Call 6332 3456.
comparable benefits.
PREMIER PLAN
Benefit Income Co-A Co-X
Death/PTD $200k $200k $250k
Medical Expenses $500k $500k $300k
Premium (Asia - 7 days) $41 $66 $56
Premium (Europe -7days) $68 $80 $76
BASIC PLAN
Death/PTD $100k $150k $150k
Medical Expenses $250k $250k $150k
Premium (Asia - 7 days) $29 $46 $42
Premium (Europe -7days) $51 $70 $61
All plans pay for 100% of emergency medical evacuation
and also cover terrorism. NTUC Income has just removed
the 15% cost-sharing.
The above is the cost per person. If the diffence is
$30, a family of 5 people will have to pay $150
to the other insurer. You can save this sum by
insuring with NTUC Income.
Call 6332 3456.
ILP vs. Unit Trust – which is best?
Editor
Business Times
I refer to the article by Genevieve Cua, “What clients are not told about ILPs” (BT, April 12).
The article does a good job of pointing out the problems of unit trusts and ILPs which are sold by two life insurance companies: Aviva and Manulife. The ILPs and unit trusts offered by these two insurers are nearly identical. Yet the ILPs cost slightly more than the unit trusts.
The conclusion of the article is give by Mr Ben Fok from IPAC financial planners. He says: “My personal opinion is, if you can avoid investing in ILPs, don't invest. Just go for a unit trust.”
Is this good advice? Are unit trusts really cheaper than ILPs?
To find out, it would be useful to compare expense ratios of unit trusts vs. ILPs.
This has been done. A study recently compiled the expense ratios of both and compared them. To standardise, the study excluded bond funds and considered only equity (stock) funds.
For ILPs, the median expense ratio was 1.8 per cent. For unit trusts, it was slightly higher at 2.1 per cent. The difference is a small one.
Of equal importance is that among the 11 insurers, the median expense ratios of their ILPs ranged from a low of 1.0 per cent to a high of 2.2. The range is important since people typically don’t buy an average fund. They buy one or more funds from a single insurer.
The study found the insurers with the lowest expense ratios for ILPs are NTUC Income (1.0 per cent), GreatEastern Life (1.4 per cent) and Prudential (1.5 per cent).
Indeed there are bargains to be found among ILPs.
Source: www.AskDrMoney.com “Best ILPs -- single premium”.
Tan Kin Lian
Chief Executive Officer
NTUC Income
Business Times
I refer to the article by Genevieve Cua, “What clients are not told about ILPs” (BT, April 12).
The article does a good job of pointing out the problems of unit trusts and ILPs which are sold by two life insurance companies: Aviva and Manulife. The ILPs and unit trusts offered by these two insurers are nearly identical. Yet the ILPs cost slightly more than the unit trusts.
The conclusion of the article is give by Mr Ben Fok from IPAC financial planners. He says: “My personal opinion is, if you can avoid investing in ILPs, don't invest. Just go for a unit trust.”
Is this good advice? Are unit trusts really cheaper than ILPs?
To find out, it would be useful to compare expense ratios of unit trusts vs. ILPs.
This has been done. A study recently compiled the expense ratios of both and compared them. To standardise, the study excluded bond funds and considered only equity (stock) funds.
For ILPs, the median expense ratio was 1.8 per cent. For unit trusts, it was slightly higher at 2.1 per cent. The difference is a small one.
Of equal importance is that among the 11 insurers, the median expense ratios of their ILPs ranged from a low of 1.0 per cent to a high of 2.2. The range is important since people typically don’t buy an average fund. They buy one or more funds from a single insurer.
The study found the insurers with the lowest expense ratios for ILPs are NTUC Income (1.0 per cent), GreatEastern Life (1.4 per cent) and Prudential (1.5 per cent).
Indeed there are bargains to be found among ILPs.
Source: www.AskDrMoney.com “Best ILPs -- single premium”.
Tan Kin Lian
Chief Executive Officer
NTUC Income
Reply: What clients are not told about ILPs
Editor
Business Times
I refer to the article entitled “What clients are not told about ILPs” by Genevieve Cua (BT, 12 April).
The article does a good job of highlighting a serious problem: Funds in Singapore cost too much. More than any other insurer, NTUC Income has been fighting this problem with its low-cost funds.
The article concludes with Mr Ben Fok of IPAC saying, “…if you can avoid investing in ILPs, don’t invest. Insurance is for protection, just go for a Unit Trust".
I hold a different view.
In choosing the right investment plan, the investor should consider the following:
- the risk profile of the fund
- the distribution charges
- the fund management fees
- the charges for the insurance protection (in the case of an investment-linked plan)
Many investment plans (ie unit trusts or ILPs) have high distribution charges and fund management fees which are not properly disclosed to the investor. The advisers earn a large share of these fees, and are required to disclose this fact. In spite of it, many layman continue to be confused.
There is an independent comparision of these charges in the website, www.askdrmoney.com.
NTUC Income keeps our charges at a competitive level, so that most of the returns are given back to our investors. Our charges for our ILP funds are generally lower than the unit trusts.
Our fund management fee is about 1% per annum. This fee for most similar funds, including unit trusts, is 1.5% to 2% per annum. Some financial advisers charge a separate level of advisory fee which is additional to the fund management fees at the unit trust level.
Our distribution charges are generally lower than for similar products. Our spread is 3.5%, compared to 5% for similar funds. During our sales promotion, we give a bonus units of up to 2%, which reduces the spread to 1.5%.
Our distribution charge for a regular saving plan is about one third of the cost of similar ILP offered by other insurance plans.
Our total expense ratio is among the lowest for all funds and unit trusts in the market. As the expense ratio is an annual charge, it has the most significant impact in determining the net return to the investor, for a similar risk profile of the investments.
The insurance protection embedded in our ILP plan is offered free of charge. It is funded by the margin in our modest charges.
We provide a low-cost term assurance plan to be bought separately as a rider. The premium is extremely low, and is kept level for the duration of the rider. The cost does not increase with age.
We advise long-term investors to select our combined fund, which is a large, well diversified fund of $3,800 million. It is invested in 900 good quality equity and bond invesments. It is managed by 9 top fund managers around the world. It has earned an attractive return for our investors during the past three years. The fees are among the lowest, ie 1% per annum.
We educate consumers to make the right choice. We invite them to visit our educational website, www.knowyourinsurance.com.sg
Tan Kin Lian
Chief Executive Officer
NTUC Income
Business Times
I refer to the article entitled “What clients are not told about ILPs” by Genevieve Cua (BT, 12 April).
The article does a good job of highlighting a serious problem: Funds in Singapore cost too much. More than any other insurer, NTUC Income has been fighting this problem with its low-cost funds.
The article concludes with Mr Ben Fok of IPAC saying, “…if you can avoid investing in ILPs, don’t invest. Insurance is for protection, just go for a Unit Trust".
I hold a different view.
In choosing the right investment plan, the investor should consider the following:
- the risk profile of the fund
- the distribution charges
- the fund management fees
- the charges for the insurance protection (in the case of an investment-linked plan)
Many investment plans (ie unit trusts or ILPs) have high distribution charges and fund management fees which are not properly disclosed to the investor. The advisers earn a large share of these fees, and are required to disclose this fact. In spite of it, many layman continue to be confused.
There is an independent comparision of these charges in the website, www.askdrmoney.com.
NTUC Income keeps our charges at a competitive level, so that most of the returns are given back to our investors. Our charges for our ILP funds are generally lower than the unit trusts.
Our fund management fee is about 1% per annum. This fee for most similar funds, including unit trusts, is 1.5% to 2% per annum. Some financial advisers charge a separate level of advisory fee which is additional to the fund management fees at the unit trust level.
Our distribution charges are generally lower than for similar products. Our spread is 3.5%, compared to 5% for similar funds. During our sales promotion, we give a bonus units of up to 2%, which reduces the spread to 1.5%.
Our distribution charge for a regular saving plan is about one third of the cost of similar ILP offered by other insurance plans.
Our total expense ratio is among the lowest for all funds and unit trusts in the market. As the expense ratio is an annual charge, it has the most significant impact in determining the net return to the investor, for a similar risk profile of the investments.
The insurance protection embedded in our ILP plan is offered free of charge. It is funded by the margin in our modest charges.
We provide a low-cost term assurance plan to be bought separately as a rider. The premium is extremely low, and is kept level for the duration of the rider. The cost does not increase with age.
We advise long-term investors to select our combined fund, which is a large, well diversified fund of $3,800 million. It is invested in 900 good quality equity and bond invesments. It is managed by 9 top fund managers around the world. It has earned an attractive return for our investors during the past three years. The fees are among the lowest, ie 1% per annum.
We educate consumers to make the right choice. We invite them to visit our educational website, www.knowyourinsurance.com.sg
Tan Kin Lian
Chief Executive Officer
NTUC Income
Monday, April 10, 2006
Reduced special bonus for Prime Life
Several insurers (not NTUC Income) sold large numebrs of Prime Life policies about 20 years ago. They paid a low rate of annual bonus, but promises special bonus of 300%, 400% and 500% of the accunmulated bonus on the 20th, 25th and 30th year.
They were not able to meet their projection. In reality, special bonus rates were something reduced to 100%, 150%, 200% respectively.
The policyhoholders who bought these plans suffered several cuts in their expected bonus payouts.
NTUC Income refused to issue this type of policy. We prefer to pay a higher rate of annual bonus, and to keep our special bonus at 25%. Our policyholders have enjoyed much better bonus compared to Prime Life plans.
They were not able to meet their projection. In reality, special bonus rates were something reduced to 100%, 150%, 200% respectively.
The policyhoholders who bought these plans suffered several cuts in their expected bonus payouts.
NTUC Income refused to issue this type of policy. We prefer to pay a higher rate of annual bonus, and to keep our special bonus at 25%. Our policyholders have enjoyed much better bonus compared to Prime Life plans.
Sunday, April 09, 2006
Special bonus maintained at 25%
NTUC Income pays a special bonus on maturity and death. This is computed at 25% of the accumulated bonus.
We are probably the only insurer that maintains the special bonus even in difficult times. Other insurers has cut their special bonus on several occasions in past years. Their policyholders will suffer a big cut, if their policies matured in these years. The amount of the cut can be more than 10% of the policy proceeds. That is a lot of money.
NTUC Income prefer to adjust the annual bonus to reflect changes in our investment earnings. This ensures that the adjustment applies fairly to all policyholders and is not borne by the policyholders whose policies mature in the current year.
Our policyholders have found our method to be fairer. We are also able to give a higher return to our policyholders in the past years.
We are probably the only insurer that maintains the special bonus even in difficult times. Other insurers has cut their special bonus on several occasions in past years. Their policyholders will suffer a big cut, if their policies matured in these years. The amount of the cut can be more than 10% of the policy proceeds. That is a lot of money.
NTUC Income prefer to adjust the annual bonus to reflect changes in our investment earnings. This ensures that the adjustment applies fairly to all policyholders and is not borne by the policyholders whose policies mature in the current year.
Our policyholders have found our method to be fairer. We are also able to give a higher return to our policyholders in the past years.
Saturday, April 08, 2006
Technology Fund performed well during past 3 years
The Technology Fund managed by NTUC Income started in 2001 and had two bad years.
It performed well during past 3 years (2003 to 2005), as follows:
- actual return (net of manager fee): 18.2%
- benchmark: 17.2% pa.
- outperformance: 1.0% p.a
It continued to perform well during the first quarter of 2006:
- actual return (net of manager fee) 6.4%
- benchmark's 3.4%.
- outperforamnce: 3.0%
During my educational talk for the past year, I was often asked by a participant, "Should I move out of Technology Fund? What is your advice?".
My answer was, "I also invested in the Technology Fund. I have decided to stay invested. The Fund will recover".
My view turned out to be right.
It performed well during past 3 years (2003 to 2005), as follows:
- actual return (net of manager fee): 18.2%
- benchmark: 17.2% pa.
- outperformance: 1.0% p.a
It continued to perform well during the first quarter of 2006:
- actual return (net of manager fee) 6.4%
- benchmark's 3.4%.
- outperforamnce: 3.0%
During my educational talk for the past year, I was often asked by a participant, "Should I move out of Technology Fund? What is your advice?".
My answer was, "I also invested in the Technology Fund. I have decided to stay invested. The Fund will recover".
My view turned out to be right.
Friday, April 07, 2006
Adequate provision for motor claims
Some companies make a low provision for their outstanding claims. This gives the impression that their motor insurance is profitable. This allows them to reduce their premium rates.
Here are the claim provision for three large insurers during 2004:
NTUC Income: 101%
Company A: 60%
Company X: 72%
NTUC Income makes adequate provision for our claims. This means that we will be able to keep our competitive premium rates for a longer period.
The insurers who have inadequate provision will have to increase their premium rates in the near future.
Insure with NTUC Income, to enjoy lower premiums over the next few years.
Here are the claim provision for three large insurers during 2004:
NTUC Income: 101%
Company A: 60%
Company X: 72%
NTUC Income makes adequate provision for our claims. This means that we will be able to keep our competitive premium rates for a longer period.
The insurers who have inadequate provision will have to increase their premium rates in the near future.
Insure with NTUC Income, to enjoy lower premiums over the next few years.
Additional Cover for Renting a car overseas
NTUC Income is providing an extended benefit for its motor policyholders who has to drive a rented car overseas. This extension will covers the additional third party liability for death, bodily injury or damage to property over the limited cover provided by the rental car company. The additional premium charged by NTUC Income for a similar coverage is likely to be lower than the market.
This cover is for US$1 million and covers the policyholder against third party liability that exceeds the basic cover provided by the car rental company. The premium rate that is charged by NTUC Income will be 50% of the normal market rate and is available only to a policyholder who has a No Claim Discount of 20% or more.
If the policyholder does not meet the requirement, the policyholder can purchase the cover from the overseas insurer of the rental company.
This cover is for US$1 million and covers the policyholder against third party liability that exceeds the basic cover provided by the car rental company. The premium rate that is charged by NTUC Income will be 50% of the normal market rate and is available only to a policyholder who has a No Claim Discount of 20% or more.
If the policyholder does not meet the requirement, the policyholder can purchase the cover from the overseas insurer of the rental company.
Thursday, April 06, 2006
Quite a hassle to file my income tax returns through internet
Many people said that it is easy to file the income tax return to IRAS through the internet. I have a different experience. It was quite difficult time for me.
Here are the problems:
- my Singpass is not accepted
- I am required to use exactly 8 character for my RAS password (no more, no less)
- it rejected my new password, bacause "it was used before".
- the website was very, very slow
- it was quite difficult to enter my income from property
- it was quite difficult to navigate.
Why is this the case? IRAS has designed a system that is convenient for them, but NOT for the taxpayer.
It is easier for me to fill a form and to fax to IRAS.
Here are the problems:
- my Singpass is not accepted
- I am required to use exactly 8 character for my RAS password (no more, no less)
- it rejected my new password, bacause "it was used before".
- the website was very, very slow
- it was quite difficult to enter my income from property
- it was quite difficult to navigate.
Why is this the case? IRAS has designed a system that is convenient for them, but NOT for the taxpayer.
It is easier for me to fill a form and to fax to IRAS.
Wednesday, April 05, 2006
Do not rent your car to a stranger
For the last three months, we have four cases where the owner rent their car to a stranger for a certain period.
Later, the hirer disappears without a trace leaving the car owner in a lurch. The car was reported as "stolen" but the insurance policy does not cover the lost of the vehicle while it is being illegally rented out.
We suspect that the rented cars were driven across the Causeway to be sold.
We wish to warn the public that it is illegal to rent your vehicle without a proper permit and insurance coverage. Most importantly, you should not fall victim to this criminal act.
Later, the hirer disappears without a trace leaving the car owner in a lurch. The car was reported as "stolen" but the insurance policy does not cover the lost of the vehicle while it is being illegally rented out.
We suspect that the rented cars were driven across the Causeway to be sold.
We wish to warn the public that it is illegal to rent your vehicle without a proper permit and insurance coverage. Most importantly, you should not fall victim to this criminal act.
Tuesday, April 04, 2006
Banks charge differently from what they say
I refer to the letter from Gan Siok Bin, “Why do existing customers pay a higher 2nd-year rate?” (ST March 31)
Gan Siok Bin took a floating rate home-loan from United Overseas Bank (UOB). The loan is now in its second year and it costs 4.05 per cent. However, UOB’s advertised second year rate is only 3.5 per cent.
The 3 local banks offer identical home-loan rates and our family had a similar experience with a different bank. Our year 2 home loan rate shot up to 3.85 per cent while the quoted rate is also 3.5 per cent.
I looked into this and found there is no relation between the rates banks quote and the rates they charge. In fact, a loan officer told me, "The variable rates we tell customers does not obligate the bank in any way."
It turns out that how much you pay depends on the bank’s "board rate". Each bank has many board rates and can re-set them at any time. This determines how much a borrower must pay for a variable rate home-loan. It is independent of a bank’s advertised rates.
Larry Haverkamp
Gan Siok Bin took a floating rate home-loan from United Overseas Bank (UOB). The loan is now in its second year and it costs 4.05 per cent. However, UOB’s advertised second year rate is only 3.5 per cent.
The 3 local banks offer identical home-loan rates and our family had a similar experience with a different bank. Our year 2 home loan rate shot up to 3.85 per cent while the quoted rate is also 3.5 per cent.
I looked into this and found there is no relation between the rates banks quote and the rates they charge. In fact, a loan officer told me, "The variable rates we tell customers does not obligate the bank in any way."
It turns out that how much you pay depends on the bank’s "board rate". Each bank has many board rates and can re-set them at any time. This determines how much a borrower must pay for a variable rate home-loan. It is independent of a bank’s advertised rates.
Larry Haverkamp
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