Friday, March 03, 2006

Comparison of Motor Premium Rates

We compared the premium rates charged by the key insurers for 10 models of vehicles.

The average premium rate for the 10 models are shown below:

Age of car: 1-5 Years 6 Years
NTUC Income $584 100% $534 100%
Company AI $648 110% $635 119%
Company AS $702 120% $675 126%
Company AX $790 135% $774 145%

The premium rates charged by NTUC Income are lower than the other insurers. One insurer charge 45% more than our rates.

Consumer Education Effort


MAS's deputy managing director, Ms Teo Swee Lian gave a speech outlining the general trends and challenges facing the insurance industry.

Question: Do you agree with the areas mentioned by her?

Reply: I agree with the following priorities:

- futher consumer education efforts
- improve clarity in the sales process and in documents
- raise ethical standards of agents
- raise proficiency of financial advisers

Question: I think NTUC Income for its part, has spearheaded some education efforts. Can you tell me more about these?

Reply: We have set up a website called We encourage the public to visit the webite and learn about specific insurance topics on their own. They can take a simple test. On completing the test, we offer them a modest discount if they take the insurance with us, either directly or through our adviser.

The website receives an average of 500 visitors a day. About 100 take the test daily. We are happy with the results. We consider this to be a successful website.

I also write about insurance matters in my personal blog, About 100 people read my blog each day. Some fo them e-mail to me, after reading my blog to ask additional questions. They told me that they like my blog, as it is educational.

Tuesday, February 28, 2006

Make a direct claim against your insurer

A motorist left the workshop to make a claima against NTUC Income. The workshop inflated the bill and submitted the claim through a lawyer. We disputed the claim.

The motorist sent an e-mail to me directly. He complained that we were not fair in handling this claim and labelled it as "Unfair Insurance Practice".

Here is my reply:



It appears that you are insured with another insurance company and you wish to make a third party claim against NTUC Income.

Under our fair practice, you should contact us directly and allow us to settle the claim with you, Apparently, you did not.

You asked the workshop to handle the claim for you. The workshop probably submitted a claim that is much higher than the cost of
repair that can be done by our workshop.

There is also the question about liability. Is the truck insured by NTUC Income liable for the accident? This has to be

I want you to realise that you have caused a lot of problem to us by your unfair approach. But I realise that you were not aware
about it.

I will ask xxxxxxx to look into this case, and see if he can help to expediate the matter. I hope that you agree with my

Tan Kin Lian
CEO, NTUC Income

Take a cheaper medical plan


I attended A talk on medical insurance given by your manager. I was told that the rider (to cover the balance of the bill) has to be paid by cash and the premium will increase as I grow older.

Mr Tan, is there a limit, that is a certain period of age that can stop paying the premium for the rider. Or we must pay until we die. That means a lot of money to pay for the rider.


Briefly, you can stop the rider at any time, so that you do not need to pay the increasing premium.

My advice is for you to take a lower cost plan, so that there is sufficient money to pay for the basic plan and the rider for as
long as possible.

Monday, February 27, 2006

Principle of profit sharing


Why do you need to charge higher premiums for takaful-based motor insurance?


In a conventional product (ie profit not shared with policyholders), the shareholders take the entire risk. All profit or loss is borne entirely by the shareholders.

In a profit-sharing product, such as takaful insurance, a major portion of the profits goes to the participants. It is necessary to increase the premium rate by about 10% to 20%, to reduce the risk of loss (in case of bad claims). As the shareholders take only a modest portion of the profit, it is fair that they should bear a smaller risk of loss.

It is likely that the rebate (or share of profit) will be more than the additional premium, so that the net cost (after the rebate) will be attractive to the policyholder.

The profit sharing will also encourage the policyholders to work in cooperation to minimise the loss, as they can benefit from the share of profit. This will be good for the policyholders in the long run.

No extra charge for unlimited coverage

Last year, an insurer raises the lifetime limit on its Shield plan to $5 million and charges premiums that are 10% to 50% higher than a similar plan from NTUC Income (ie Incomeshield).

NTUC Income has recently removed the limit on lifetime claims. The policyholder can claim beyond $5 million a year.

We did not change our premium rates. Our premiums are much lower than the other Shield plan, and yet our coverage is better.

Sunday, February 26, 2006

Agents still selling critical year

Some agents are still selling the "critical year" concept. They tell the customer that after paying for 10 to 12 years, they do not have to pay any more premium, and that this is guaranteed.

The agent ask the customer to read 50 pages of policy illustration that are written in vague language.

Here is my advice to the customer.

Write to the insurance company. Ask them to confirm the guarantee in writing. Ask them to specify that this guarantee does not depend on the future bonus rates and investment return.

You will get a different answer from the company.

Here is a better advice. Contact NTUC Income. We will give you our Ideal plan with a decreasing term rider. It is a better plan. It offers you the coverage and a better return.

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