Wednesday, April 26, 2006

Aggressive competition in Motor Insurance


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%.

Can a bankrupt buy an insurance 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?



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?


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?


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:

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:

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.

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.

Is an equity fund appropriate for a retiree?


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.



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:

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.

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