Saturday, July 23, 2005

A hospital plan that pays without limits

A insurer has introduced a hospital plan that pays the bills "as charged". It does not impose any limit on the amount that can be claimed for each day of hospital stay or on the surgery fees.

This plan is likely to lead to an escalation in hospital bills. The private hospital and doctors will increase the charges to the patient who is covered under this plan, as the insurer has deep pockets.

This will lead to an increase in premium rates for the "as charged" plan. Experience in other countries have shown that this type of plan has the highest escalation in premiums.

If you are interested in the "as charged" plan, you should look at the premium rates. It is around $6,000 a year, at the older ages. This is the premium rate today. In 20 years time, it can be many times higher, due to escalation in medical expenses.

Can you afford this premium, when you grow old? Do you need to have money left for other living expenses?

You need to have an affordable plan that can cover you for a lifetime. Choose a plan that provides adequate coverage at an affordable premium.

Produce More Babies

Many countries face an declining and aging population. People are getting married later, and producing fewer children. Singapore face worse than many countries.

The root cause is the desire of women to compete with men in the working world. Many give priority to a university degree and a steady career. By the time that they are ready to get married and start a family, they are in their late 20s or early 30s. This is past their most productive years.

To change this trend requires a new approach by the government. The state should be willing to bear a larger part of the cost of raising children, and reduce the burden on the individual family.

I propose that each non-working mother should be given an adequate monthly allowance for each child, up to a maximum of three children in the family. The amount should be adequate to meet 80% of the cost of raising the child, and can be paid until the child is 18 years old. I think that a suitable sum is $500 per child.

This will encourage more women to choose to stop work and to raise a family. The women may marry at a younger age and produce a family with 2 or 3 children. The family will not need to depend on foreign maids.

This family payment will be an added cost to the state, and will have to be met with higher taxation. I think that the people who choose not to have children should share in the national cost of producing our next generation.

Many countries already have generous family allowances, of the type proposed by me. They have problems in implementing the benefits, which can be abused. I am sure that we can find a way to prevent the abuse, and focus on the positive aspect of this proposal.

Tuesday, July 19, 2005

Is ILP suitable for older people?

Forum Page
Straits Times

I refer to the letter from Ms Seah Geok Hong entitled "Time Life Insurance Association spoke up" (Straits Times, 19 July). Ms Seah asked the Life Insurance Association to substantiate its claim that regular premium investment plan are suitable for older people.

I like to speak for NTUC Income and address the underlying question.

Compared to a traditional life insurance plan, an investment-linked plan (ILP) has the following advantages:

- flexibility in making regular and adhoc savings, including temporary suspension,
- choice of investment funds,
- flexibility in types and amounts of insurance coverage,
- transparency in the mortality, expense and other charges.

In choosing between different ILP plans available in the market, the consumer should look at the charges and also the investment risks in the various funds.

Older people pay a higher mortality charge for their insurance protection. However, the amount of insurance needed at the older age should reduce, as the children are older and the policyholder has probably already accumulated sufficient savings.

One way to reduce the charge is to deduct the accumulated savings from the initial amount of insurance. The premium will reduce with the lower insured amount. The policyholder also has the flexibility to terminate the insurance coverage on their retirement.

A flexible ILP plan is more suitable for today's uncertain job environment.

The policyholder will need to be properly advised on how to tailor this plan to meet their needs. NTUC Income offers free financial counselling to our policyholders using salaried insurance consultants. We will extend this free service on a limited scale to the general public.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Buy Term and Invest the Difference

"Buy Term" refers to term insurance, which is an insurance contract payable on death. The cost of term insurance is very low, as the chance of making a claim is usually less than 1%. To insure a sum of $100,000, you need to pay $500 or less, depending on your age.

Some people pay more than $5,000 on a life insurance plan to insure $100,000. This is a traditional plan that provides insurance cover and savings. When the policy is terminated at a future date, there is a cash value that is refunded. It represents a portion of the premium, accumulated with interest.

Under the "Invest the Difference" concept, the balance of the savings is invested separately. Usually, it will give a much higher return.

Insurance agents like to sell the traditional plan because they can earn a high rate of commission (up to 100%) of the annual premium, including the saving portion.

If you "buy term" separately, you only pay commission to the agent on the term insurance premium. You save commision on the saving portion.

How much to save for the future?

Someone asked for my advice: how much of my earnings should I save for the future?

My advice - you should save 10 to 15 percent of your earnings. They are for the following:

- in case you lose your job
- for unexpected medical and other expenses
- to supplement your savings for retirement

Many people think that they do not earn enough to meet their living expenses. This is not correct. If they look at how people who earn less cope with their budget, they will find that it is possible to set aside the savings.

They can cut down expenses on buying a car, or they can buy a smaller flat, or spend less on holiday or children's tuition.

It is a matter of priority.

Make some savings. Take care of your future first. Then, you can take care of others.

Sunday, July 17, 2005

Third Party submit an inflated claim

The New Paper

I refer to the letter 'Premium rose after minor accident' (TNP, 13 July) by Ms Janet Chua Yah Choo.

Ms Chua said that she was involved in a minor accident recently. The damage on the third party's vehicle was small but the claim was quite substantial. As a result, she had to pay a premium loading and had her no-claim discount reduced by her insurer during the policy renewal.

Ms Chua is not insured by NTUC Income. As this is a common situation, we wish to share our current practice in dealing with this type of claim, so as to protect the interest of our policyholder.

When we receive a third party claim, we write to our policyholder with the details of the claim. We ask our policyholder to give us his feedback on the claim. If the claim is inflated, we will get a statement from our policyholder to reject or contest the third party claim. If the unjustified claim is not withdrawn, we will take legal action against the motorist who has authorised the workshop to file the claim.

If we are able to reject the claim, we will allow our policyholder to retain the No Claim Discount.

If a third party wish to make a claim against our policyholder, they are advised to go to an Idac center within 24 hours of the accident. We will assess the damages and make an offer to settle the claim expeditiously. We will also offer a cash settlement and allow the third party to find their own repair workshop.

Freddy Neo,
Senior Claims Manager,
NTUC Income

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