Mr. Tan
I met with a small accident with a motor cyclist two years ago. The insurance company did not pay any claim to the motorist but kept a reserve of $3,000 in case there is claim for medical expenses. They reduced by NCD from 50% to 20% and my revised premium jumped from $1,000 to $1,800, which I consider to be quite high.
Almost two years have passed and the motor cyclist has still not submitted a claim. How long will they keep the reserve and penalize me on the NCD? Why should the motor cyclist take so long to submit a claim? If there is no claim, should the insurance company refund the difference in premium to me?
REPLY
It is not fair for the insurance company to penalize you by reducing the NCD when they have not paid any claim. You should ask the insurance company to allow you the full NCD (and give you a refund on the difference in premium for the past year). If a claim actually materialize, they can impose the reduction in NCD at that time. I think that the insurance company should adopt my proposed approach, as it would be fairer to the consumer.
Saturday, July 31, 2010
Residual market for motor insurance
Published in St Times
Madam Phyllis Oh ('Insurance dilemma when repairs are costly'; July 10) found it difficult to obtain renewal of her client's motor insurance.
In America, there is a system of the 'residual market'. The purpose is to make insurance available without giving too much hassle to motorists who cannot get cover from the free market. The residual market is managed by an underwriter and the results are shared by all the licensed insurance companies.
I suggest the Monetary Authority of Singapore or the General Insurance Association consider the feasibility of introducing this concept in Singapore.
Tan Kin Lian
Financial sector and profits
The financial industry is making too much money at the expense of ordinary people. This article explains why you should invested in a low cost indexed fund, or an exchange traded fund, like the STI ETF. Don't pay high fees for actively managed mutual funds or unit trust. The average expense ratio in USA is 0.81%, which the article considered to be high. In Singapore, most funds have expense ratio of 2% to 3%. Imagine how much considers in Singapore are being charged !!!
Land banking
A month ago, a land banking company invited me to visit their office, so that they can educate me on the merits of their type of investment. I have always declined invitations to attend talks on land banking and would be reluctant to waste my time to be brainwashed, in the interest of education.
I replied that I would spend 2 hours if they make a donation of $1,000 to FISCA (Financial Services Consumer Association). I never heard from them again.
I replied that I would spend 2 hours if they make a donation of $1,000 to FISCA (Financial Services Consumer Association). I never heard from them again.
Singapore GDP
Read this article.
My view
In the past, Singaporeans rejoice when the economy performs well. The reaction now is quite different - people do not feel that the GDP growth has benefited them.
My view
In the past, Singaporeans rejoice when the economy performs well. The reaction now is quite different - people do not feel that the GDP growth has benefited them.
Pay a fee for advice
A reader sent 10 benefit illustrations from two insurance companies and asked me to analyse them, and recommend which plan offers the best value. I replied to ask if he is willing to donate $50 for each benefit illustration that I analyse. I never heard from him.
The insurance agent who sent prepared the computerized benefit illustration will earn a few hundred or thousand dollars from the consumer. The agent should be the person who spends the time to explain and guide the consumer to make the right choice. It would be unfair for the consumer to expect Mr. Tan to spend the time to read 10 benefit illustrations and give advice for free.
The insurance agent who sent prepared the computerized benefit illustration will earn a few hundred or thousand dollars from the consumer. The agent should be the person who spends the time to explain and guide the consumer to make the right choice. It would be unfair for the consumer to expect Mr. Tan to spend the time to read 10 benefit illustrations and give advice for free.
Late submission of motor claim
Hi Mr Tan,
Eight months ago, I was involved in a car accident with a van, causing damage to my front wheel. I repaired it for $1,500 in a auto workshop and submitted a claim against the insurer of the other party.
I just received a call from my insurer, telling me that the van is now making a claim against me for $3500.
1) Is it legal to make a claim after so many months? It is incredible to think that he is driving around for 8 months and suddenly needs repair done (and quite serious repair for a total sum of $3500).
2) I was told by my insurance company that my NCD will drop from 50% to 20% due to my claim against th other insurer. Why is this so? If claiming against the other party results in the loss of my NCD, then in every accident, shouldn't those involved just claim against their own insurer? They have nothing to gain by not claiming against their own insurance.
Jennifer
REPLY
1) The other party can make the claim late but you (or your insurer) can reject it. It is for them to prove the the damage were caused by you. You can deny that you were responsible for the damages. It would be difficult for the other party to prove that you caused the damages, after a lapse of 8 months. I hope that your insurance company will help you to reject this unjustified, late claim.
2) If you make a claim against the other party, your NCD will not be affected. Your NCD is affected only if you claim against your own insurance company, or you ask your insurance company to make the third party claim. The claims staff of your insurance company is giving you the wrong information. You should ask them give a reply to you in writing about this matter.
Eight months ago, I was involved in a car accident with a van, causing damage to my front wheel. I repaired it for $1,500 in a auto workshop and submitted a claim against the insurer of the other party.
I just received a call from my insurer, telling me that the van is now making a claim against me for $3500.
1) Is it legal to make a claim after so many months? It is incredible to think that he is driving around for 8 months and suddenly needs repair done (and quite serious repair for a total sum of $3500).
2) I was told by my insurance company that my NCD will drop from 50% to 20% due to my claim against th other insurer. Why is this so? If claiming against the other party results in the loss of my NCD, then in every accident, shouldn't those involved just claim against their own insurer? They have nothing to gain by not claiming against their own insurance.
Jennifer
REPLY
1) The other party can make the claim late but you (or your insurer) can reject it. It is for them to prove the the damage were caused by you. You can deny that you were responsible for the damages. It would be difficult for the other party to prove that you caused the damages, after a lapse of 8 months. I hope that your insurance company will help you to reject this unjustified, late claim.
2) If you make a claim against the other party, your NCD will not be affected. Your NCD is affected only if you claim against your own insurance company, or you ask your insurance company to make the third party claim. The claims staff of your insurance company is giving you the wrong information. You should ask them give a reply to you in writing about this matter.
Invest in unit trust
I have written a FAQ on how a unit trust operates and what to look for when you invest in a unit trust. Go to my website and search for the keyword "Unit Trust".
www.tankinlian.com
www.tankinlian.com
Friday, July 30, 2010
Job training and jobs
Read this letter.
My view
Singapore is giving a lot of emphasis on job training. It creates jobs for the trainers, but does not find employment for the trainees, who remain unemployed. It is better to provide job subsidy for recruitment of the unemployed (similar to the Job Credit scheme, which is now being phased out). The subsidy can be for the older people, who now find it difficult to get employment.
My view
Singapore is giving a lot of emphasis on job training. It creates jobs for the trainers, but does not find employment for the trainees, who remain unemployed. It is better to provide job subsidy for recruitment of the unemployed (similar to the Job Credit scheme, which is now being phased out). The subsidy can be for the older people, who now find it difficult to get employment.
Promotion on TKL books
The promotion will end tomorrow midnight (31 July 2010). To enjoy the lower price, order now.
FAQ Investment Linked Policy
Many consumers are confused with an investment-linked policy (ILP). I have explained the key features of this policy in a FAQ in my website, www.tankinlian.com. Search for "Investment-linked Policy".
TKL Website - change name of document
Dear Mr. Tan
I like the design of your website, especially as it allows me to download a document to read later. I can also send it by e-mail to a friend. However, I saw that the saved file does not have a descriptive title, and will only show a number. Can you use the title of the document as the file name?
REPLY
A few people have made the same request. I checked with my developer, but he explained that it would take a lot of work and the database has to be restructured. I already have a lot of documents stored in the database and wish to avoid this tedious work.
I suggest that you can rename the file before it is actually saved. Your browser will ask you for the name, so you can type in the title. You can even change it to suit your own naming style. I hope that this works for you. It will be quite convenient after you get used to it.
www.tankinlian.com
I like the design of your website, especially as it allows me to download a document to read later. I can also send it by e-mail to a friend. However, I saw that the saved file does not have a descriptive title, and will only show a number. Can you use the title of the document as the file name?
REPLY
A few people have made the same request. I checked with my developer, but he explained that it would take a lot of work and the database has to be restructured. I already have a lot of documents stored in the database and wish to avoid this tedious work.
I suggest that you can rename the file before it is actually saved. Your browser will ask you for the name, so you can type in the title. You can even change it to suit your own naming style. I hope that this works for you. It will be quite convenient after you get used to it.
www.tankinlian.com
Investing in gold
Mr. Tan,
My friend approached me to invest in gold. I pay a price for the gold bar and am allowed to keep the gold. I can sell back the goal at a guaranteed price and earn an attractive rate of return. Is this a good investment?
Bob
REPLY
You are probably required to pay for the gold at a much higher price than the market price. When the time comes for you to sell back the gold bar, you will probably not find the seller. At that time, you have to hold the gold bar at an inflated price, i.e. the actual price is lower than the amount that you have invested.
Remember this message: whenever someone comes to market an investment product to you, you have to be careful. It is likely to be a scam, even though the seller may be your friend and your friend may not be aware of the scam. Read my article on "Marketed Financial Products" which can be found in www.tankinlian.com (click on Information and enter the search word "Marketed".
www.tankinlian.com
My friend approached me to invest in gold. I pay a price for the gold bar and am allowed to keep the gold. I can sell back the goal at a guaranteed price and earn an attractive rate of return. Is this a good investment?
Bob
REPLY
You are probably required to pay for the gold at a much higher price than the market price. When the time comes for you to sell back the gold bar, you will probably not find the seller. At that time, you have to hold the gold bar at an inflated price, i.e. the actual price is lower than the amount that you have invested.
Remember this message: whenever someone comes to market an investment product to you, you have to be careful. It is likely to be a scam, even though the seller may be your friend and your friend may not be aware of the scam. Read my article on "Marketed Financial Products" which can be found in www.tankinlian.com (click on Information and enter the search word "Marketed".
www.tankinlian.com
Act of God
Hi Mr Tan
MM Lee attributed the recent floods in Singapore to "an act of God" and said that no amount of engineering can prevent flooding....
While Chairman Mao pledged that the Chinese would be able to bend nature to their will, our MM thinks that no amount of engineering can prevent flooding in Singapore as they are "acts of God"....
Lu Xun, one of the great thinkers of the democratic May 4th Movement in the first decades of the 20th century, made a famous attack on the then ruling elite for issuing telegrams that blamed God for the woes befalling China. Lu quipped, "God replied in dismay: 'But I wasn't even there!'”
Read http://de-leviathan.blogspot.com/
C H Yak
MM Lee attributed the recent floods in Singapore to "an act of God" and said that no amount of engineering can prevent flooding....
While Chairman Mao pledged that the Chinese would be able to bend nature to their will, our MM thinks that no amount of engineering can prevent flooding in Singapore as they are "acts of God"....
Lu Xun, one of the great thinkers of the democratic May 4th Movement in the first decades of the 20th century, made a famous attack on the then ruling elite for issuing telegrams that blamed God for the woes befalling China. Lu quipped, "God replied in dismay: 'But I wasn't even there!'”
Read http://de-leviathan.blogspot.com/
C H Yak
Thursday, July 29, 2010
Excessive deduction on investment-linked policy
Hi Mr Tan
I read about your explanation about Benefit Illustration and Effect of Deduction. I did a calculation on my investment-linked policy and found that the effect at the end of 40 years is 67%!
I am not sure my calculation is correct, would you help me out here? There was no mention of guaranteed cash value in the policy.
REPLY
I usually look at the effect of deduction for 25 years (rather than 40 years). Here are the figures taken from your benefit illustration.
At the assumed yield of 9%, the effect of deduction of $65,000 represents 55% of the value of accumulated premium of $118,000. At the assumed yield of 5%, the effect of deduction represents 52% of the accumulated premiums.
The effect of deduction of 52% to 55% is extremely high for a 25 year duration. In most other benefit illustrations , they are around 35% (which is already too high). In my book on financial planning, I advised that the effect of deduction for 25 years should NOT exceed 20%.
The cash value is NOT guaranteed as this is an investment linked policy. There is no guarantee on the maturity benefit or cash value.
I do not understand why this policy should take away so much from the policyholders. Clearly this is excessive, amounting to a rip-off of the trusting consumer.
There is additional premium payable for the riders. I do not know if the premium rates for these covers are too high. But they have to be paid for separately.
Please consider this suggestion: write a strong letter to complain to MAS for this type of excessive deduction. It does not seem right for consumers to be given such a poor deal.
Practical Guide on Financial Planning
I read about your explanation about Benefit Illustration and Effect of Deduction. I did a calculation on my investment-linked policy and found that the effect at the end of 40 years is 67%!
I am not sure my calculation is correct, would you help me out here? There was no mention of guaranteed cash value in the policy.
REPLY
I usually look at the effect of deduction for 25 years (rather than 40 years). Here are the figures taken from your benefit illustration.
At the assumed yield of 9%, the effect of deduction of $65,000 represents 55% of the value of accumulated premium of $118,000. At the assumed yield of 5%, the effect of deduction represents 52% of the accumulated premiums.
The effect of deduction of 52% to 55% is extremely high for a 25 year duration. In most other benefit illustrations , they are around 35% (which is already too high). In my book on financial planning, I advised that the effect of deduction for 25 years should NOT exceed 20%.
The cash value is NOT guaranteed as this is an investment linked policy. There is no guarantee on the maturity benefit or cash value.
I do not understand why this policy should take away so much from the policyholders. Clearly this is excessive, amounting to a rip-off of the trusting consumer.
There is additional premium payable for the riders. I do not know if the premium rates for these covers are too high. But they have to be paid for separately.
Please consider this suggestion: write a strong letter to complain to MAS for this type of excessive deduction. It does not seem right for consumers to be given such a poor deal.
Practical Guide on Financial Planning
FISCA course - Investing for the Long Term
www.fisca.sg
FISCA will be organising a course, "Investing for the Long Term" from August (tentative). It will cover the following topics:
FISCA will be organising a course, "Investing for the Long Term" from August (tentative). It will cover the following topics:
- Principles of long term investing, compounding and dollar cost averaging
- Earn a better yield by investing in equities
- Reduce risk by investing for the long term in a low cost, diversified fund
- How to access information from the SGX website
- How to get information about ETFs, REITS and blue chip shares (with high dividend yield)
- How to open an account with a stockbroker (using a remisier or an online account)
- Expenses of investing
There will be practical exercises and a question & answer session.
More details will be available soon in the FISCA website. If you are interested, please register your particulars in this survey now.
No retirement age
Mr. Lee Kuan Yew said that old people should continue to work. He quoted himself as an example.
My view
If old people in Singapore can earn $3 million a year, they would not mind working until they are 100 years old!
Here is another person's view.
My view
If old people in Singapore can earn $3 million a year, they would not mind working until they are 100 years old!
Here is another person's view.
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