Saturday, September 09, 2006

Customer wish to make a gift to a grandchild

A customer wanted to invest a lump sum, to provide $1 million to a grandchild at age 25.

I suggested the following solution:

- take an investment-linked policy in the payor's name
- endorse the policy to be transferred to the grandchild at age 25

I recommend to invest $250,000 in our combined fund. If it earns 6% per annum (not guaranteed) for 24 years, it will accumulate to more than $1 million.


For other customers, you can leave a more modest sum for your grandchild. If you invest $10,000, it can grow to $40,000 in 24 years time, assuming an average yield of 6% (not guaranteed).

I repaired my new car at quality workshop

A customer told me that he faced a delay in the repair of his car. His car was hit from behind by another car insured by Income. The bumper was damaged.

As his car was new, he asked for the bumper to be replaced by the distributor workshop. It took two days for us to negotiate the price.

I told the customer that the distributor workshop normally charged 2 to 3 times of the price of our quality workshop. If he had agreed for his bumper to be replaced by our quality workshop, it would have been done immediately.

Earlier this year, my new car (Mercedes Benz) was involved in a accident at the car park. The door had to be replaced. The driver of the other vehicle agreed to pay for the repair, out of his pocket, as he was careless.

I sent the car (which is still under warranty) for repair at our quality workshop. I helped the other driver to pay a smaller repair bill.

I hope that all customers can help us to reduce the repair bills.

Friday, September 08, 2006

Advice on insurance


Hi Mr Tan,

I've read your blog with interest. I've shopped around with a few insurance companies, and am unable to find an agent who can intelligently advise me.

I am looking for a insurance policy that covers 1)Death, 2)Total permanent disability and 3)30 critical illness for my husband.

I am looking for a term policy without any cash value to cover him till he's 80 years old. I would need coverage for the above 3 criteria for the whole period



Dear D

My colleague will get a product expert to call you.

In the meantime, you can read the following plans at our website:

Living policy:

Term insurance (can apply online):

Invest your CPF savings:

Invest your regular savings

Wait for a better time

An investor who is locked into a 10 year structured product (sold by a bank) asked my advice if it is better to encash now and take a loss. Here is my reply:


If you keep the investment for the remaining 8 years, you can get a return of about 1.5% p.a. You avoid the loss of 20% (or about 2.5% for each year). Your total opportunity cost is 4% per year.

If you take a loss now and re-invest it, you must earn 4% to break even.

If I were you, I will keep the investment for the time being and wait for a better time to encash it, eg if the loss is reduced significantly.

Otherwise, I will keep it till the maturity date.

It is good to take investment risk, if your cost of funds is 2.5% (like money in the CPF or bank deposit). It may not be worth the risk, if the cost of funds is higher, at 4%.

More about structured products

If you want to know more about structured products offered in Singapore, you can get a detailed explanation from this website:

Details of recent structured products

Explanation on Structured Products

Thursday, September 07, 2006

Similar plan from NTUC Income likely to pay 16.9% more


Hello Mr Tan

I was very disappointed when company A informed me that the projected reversionary bonus were much lower than projected.

Plan : 20 year endowment
Entry date: Apr 1991
Maturity date: Apr 2011
Premium : $551.10 per annum
Projected benefit (original) : $20,080
Age Entry : 24 years old

New Projected benefit:

(a) $14,597 (3.7%)
(b) $15,172 (4.7%)
(c) $15,746 (5.7%)



Dear J

If you had bought a similar endowment policy from NTUC Income in 1991 with the same annual premium, your projected maturity amount in 2011 would be $17,736.

This is 16.9% higher than the middle projected benefit of $15,172.

This difference is consistent with other polcies of 20 years duration that have matured recently. We pay about 15% more than company A.

Thank you for supporting our insurance advisers

I want to thank our policyholders for supporting our insurance advisers.

Our advisers earn a modest commission. It is about half of the commission paid to other company's agents.

The lower commission allows us to reduce our expenses and give you a better return on your life insurance savings.

In most cases, we give 10% to 20% more on the maturity of your policy. If the maturity amount is $100,000, you can get $10,000 to $20,000 more from NTUC Income.

Some companies (not NTUC Income) make unrealistic projections of their return. They pay high commission and incur high expenses. Many years later, they are not able to fulfil their projections. Their policyholders are disappointed, but it is too late.

You can trust NTUC Income. We keep our expenses low and give a better return to our policyholders.

Once again, thank you for your support.

Tan Kin Lian
Chief Executive Officer

Can I get out of this structured product?


Hi Mr Tan,

I refer to your blog on the above topic.

I believe that the Structured Product that I bought from X Bank was not as good as described to us.

After reading your blog, I decided to come back to see what I have bought. To my horror, the worst case scenario is approximately 1.225% per annum over eight years and 1.58% over ten years.

This is way below the 6.5% per annum a normal investment-link product with NTUC income would be likely to yield.

When the product was introduced to us, the bank officer said that it was very likely for the product to be redeemed early. After 2 years, I really doubt that it will ever happen.

Is there any way out for us? With $20,000 invested, the value is now only $15,810. During the first year, we collected some interest, but I cannot remember the exact amount.

Please should I do? Can CASE help?



I will ask an expert to study this product.

I find it difficult to understand the design of most structured products, including this product.

My conclusion is that the financial expert working for the bank is able to design the product to give a good profit margin for the bank. This is usually done at the expense of the customer.

Wednesday, September 06, 2006

Vehicle Breakdown Assistance Service

NTUC Income offers a service to our motor policyholders. If their vehicle breaks down, they can call our hotline 6788-8788. We will send a service van to provide assistance to the motorist.

During the first 6 months of this year, a total of 2,700 motorists called us for assistance.

The assistance is provided by our partners, namely STAR Automotive Centre, Automobile Association of Singapore and Comfort Delgro Engineering Pte Ltd. This service is provided free to the motorist. On average, it takes about 60 minutes for the service van to appear on the scene.

Our customer service survey indicated that 95% of the motorists are happy with the service provided by our partners. If they require repair, the work will be done by our partner. They give a discount to our policyholders for towing charge.

FAQ: Are the projections realistic?

Several policyholders have complained about the reduction in the actual payouts on maturity, which were much lower than the amounts that were projected at the time that the policy was sold.

1. Who is responsible for the projection?

It is the responsibility of the insurer and the actuary to ensure that the projection is realistic. It has to take into account the likely investment yield in the future, and the expenses, mortality and other charges that are incurred by the insurer.

2. What do you consider to be unrealistic?

An insurance fund is invested in a mix of equities, bonds and other investments. The actuary has to study the past return on these investments over a period of several years, and make a realistic projection of the yield in the future.

Some insurers use a higher invetment yield for their projection. This can be unrealistically high.

3. Did NTUC Income make a realistic projection?

We consider it our duty to make a realistic projection. In the early 1990s, we were using a gross investment yield of 6.5%, which was realistic based on the conditions at that time.

In subsequent years, we faced the Asian financial crisis and the low interest environment. We found that the projected yield of 6.5% was unsustainable. We reduced the projections on two subsequent occasions. With the lower projection, we reduced the bonus rates for existing policies and used the lower bonus rates for projecting the yield on new policies.

We have since increased our bonus rates for three subsequent years. This was possible because of the improved investment climate.

Currently, our projected gross yield is 5.25%. The net yield, after deducting expenses, mortality and other charges, is between 4% to 4.5%.

4. How can policyholders ensure that they are not misled by unrealistic projections?

All insurers in Singapore now use the same gross investment yield of 5.25%. The risk of unrealistic projection has been largely removed.

5. What about high projections on terminal bonus?

Some insurers project a high rate of terminal bonus on certain products. They are not funded and not supported by the actual investment return.

They jack up the cash value and bonuses at certain long durations, usually at 20 years and later. The policyholder may be misled by these unrealistic projected values.

Some of these projected terminal bonuses are shown at several hundred percent of the accumulated bonus. This is excessive. It will take the policyholders 20 years to find out if the projected bonuses will be paid.

6. Can I rely on the projection of terminal bonus?

NTUC Income has been paying out a special bonus (or terminal bonus) of 25% for the past many years. Many policyholders have received this rate of special bonus on their matured policies. We have maintained this rate of special bonus through good and bad years.

We have been using this modest rate of special bonus in our projection (in contrast to several hundred percent used by some other insurers).

We have a track record of paying out these terminal bonus. You can trust us.

Some other insurers vary their terminal bonus according to the investment condition in each year. In some years, they removed the terminal bonus entirely. You cannot rely on their projections of terminal bonuses, as they are unreliable.

7. How can consumers check that the projections are realistic?

The consumer should be wary about new products which project high rates of annual and terminal bonuses, when there are no past track record. This is especially the case for terminal bonuses that are payable only after 20 years or longer.

8. What is the problem with the "Prime Life" product?

Many years ago, several insurers have introduced a "Prime Life" product that projects terminal bonus of several hundred percent on reaching 20 years or later. Prior to 20 years, the terminal bonus is nil.

NTUC Income refuses to introduced this type of product. We consider it to be not sound. It is also not equitable for the insurer should hold back the surplus for 20 years (if the surplus had indeed been earned) and give it out in a large terminal bonus after 20 years. This goes against the principle of a participating life insurance contract.

Many consumers bought this product from other insurers. They trusted that the insurers will pay out the projected terminal bonuses. They have been disappointed.

Tuesday, September 05, 2006

Our premium rates can be up to 30% lower!

6 September 2006

Forum Page
Straits Times

I refer to the article by your senior correspondent, Christopher Tan, "No. 1 car insurer risks being overtaken", (ST, 1 Sep).

Christopher Tan's article has not given a fair and complete description of the changes in the motor insurance market during the past year. He has also failed to present the relevant points in our reply to him. I wish to ask for my points to be printed.

There were two significant changes in the car market during the past year.

There was a large increase in the purchase of new cars, due to the drop in COE (Certificate of Entitlement) prices. A total of 61,069 new private cars were sold during the past six months, representing an increase of about 12 per cent over the previous period.

Many car distributors made it compulsory for the motor insurance to be placed with their tied insurance company. It is offered as a package with the sale of the new car. The owner is not given a choice of selecting their insurer. The distributor jacks up the cost of the car to include the cost of insurance.

Previously, most distributors gave the choice to their customers to choose their insurer, but offered a large discount if they select their tied insurer. Now, this choice has been taken away.

Many long-standing customers of NTUC Income were forced to take the insurance with the tied insurer when they buy a new car. They were not even told about the premium rate for the insurance.

These two changes account for a large proportion of our temporary drop in market share.

I believe that this practice is anti-competition. I will let CASE or the relevant authority consider if it contravenes the new Competition Act.

I encourage the owners of the new cars to shop around for the premium rate when their insurance policy comes up for renewal during the second and subsequent years.

From our market study, the premium rate charged by the tied insurers could be up to 30 per cent higher than premium rate charged by NTUC Income. The actual difference may vary according to the model of vehicle and to competitive forces.

NTUC Income will be advertising our competitive premium rates for most popular models of cars. We hope to set a benchmark for the benefit of the consumers.

The report stated that we were not able to retain our customers. This is incorrect. Our renewal rate has been consistently above 75 per cent which is one of the highest in the industry.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Shop around for your motor premium rates

6 September 2006

Dear Motorist

Shop around to get the best motor premium rates

Many car distributors have made it compulsory for the motor insurance for the first year to be placed with their tied insurance company. It is offered as a package with the sale of the new car. The owner is not given a choice of selecting their insurer.

From our market study, the premium rate charged by the tied insurers could be up to 30% higher than the premium rate charged by NTUC Income. The actual difference may vary according to the vehicle model and to competitive forces.

I encourage the owners of the new cars to shop around for the premium rate when their insurance policy comes up for renewal during the second and subsequent years.

Our premium rates for the popular models of cars are shown below. You can also get a quotation from our website at

NTUC Income has enjoyed the strong loyalty of our policyholders due to our competitive rates and good service. Our renewal rate has been consistently above 75% which is one of the highest in the industry.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Did you get a satisfactory return on your matured policy?

Did you get a satisfactory return on your matured policy, taken with another insurance company (not NTUC Income)?

If you want to find out, you can send the following data to me:

year taken
type of policy, eg endowment, whole life
age at entry
year matured
maturity benefit

We will tell you about the amount that you would have obtained for a similar policy taken for the same period with NTUC Income. You can decide, if the amount that you have obtained is "satisfactory".

Send you request to

Tied arrangement is illegal in New Zealand

I told an insurance CEO from New Zealand about the practice in Singapore, where the car distributor has a tied arrangement with an insurance company and the car purchaser is force to take insurance from this tied insurer.

My visitor said that this type of arrangement is illegal in New Zealand. The car owner must be given the choice of the insurer that they wish to go to.

Did you get a good deal on your financial product?

Many customers were misled into buying a financial product. They were told the good points, but not the bad points. When they realise the full picture, they were not allowed to withdraw. They were locked into the product.

Many of the structured products belong to this category. It could also include insurance products with high charges.

Did you experience this? If so, you can send the details to me. I will pass them to the Consumer Association (CASE) and see if there is anything that they can do.

Send to

Customer comes to us after the first year


I think tied arrangements such as the one that Borneo Motors had with AIG is unfair to buyers of vehicles. In an open market environment, the customer should be given his own choice of insurer.

Unfortunately, due to the fact that we (my wife and I) wanted to buy the car from Borneo Motors, we had no choice but to insure our car with AIG when we signed the purchase agreement.

However, we reverted to NTUC INCOME once the first year's insurance expired. The reason is that NTUC INCOME offers a better deal.

More importantly, we would like to have an agent we can relate to and who has been providing us good service for many years now. It's a natural choice for us.



Monday, September 04, 2006

Most stockmarkets went up 8% during 2 1/2 months

Most stockmarkets reach their low point in mid June. Around that time, we advised our investors to top up their investments.

During the next 2 1/2 months, several stockmarkets went up:

- Singapore, Malaysia, USA by about 8%
- Japan, Hong Kong, Korea by 12% to 16%

Most of our investors who topped up our investors gained by an average of 4%. This is due to:

- some of our funds have a proportion invested in bonds, which did not show the same gain
- some of our investors topped up later, and benefitted partially from the gain

Nevertheless, the gain of 4% is quite satisfactory. We have many happy policyholders.

Our Flexi Link offers the best deal in town

The upfront charge (or spread) for investing in our funds (ie managed by NTUC Income) is 3.5%. The investor buy at a price that is loaded by 3.5% over the net asset value.

This is lower than the spread of 5% charged by most other unit trusts and insurance funds. They charge at additional 1% or 2% for the insurance cover. So their total charge is 6% or 7%.

Some unit trust have a lower charge of 2.5%. Some investors asked NTUC Income to reduce our spread to match these unit trusts.

During our promotion (which is on-going now), we offer bonus units of 1% or 2%, depending on the amount of investment. This effectively reduces our spread to 2.5% or even as low as 1.5%.

Our annual charge is now less than 1% for most funds. Other unit trusts or insurance funds charge 1.5% to 2%. They may have other hidden costs that is deducted from their yield. Over 10 to 20 years, the difference in the annual charge can be STAGGERING.

Invest your CPF and cash funds in our Flexi-link plan. It offers the best deal in town.

What is a professional?

A professional is a person who uses his or her expert knowledge for the benefit of the client.

Some examples of professionals are:

- doctors
- lawyers
- insurance and financial advisers

A professional should normally charge based on the time spent, and the charging rate is clearly disclosed and accepted by the client.

Some people act in a non-professional way. They use their knowledge to make profit at the expense of their client. Examples are:

- a doctor who prescribes unnecessary treatment (to jack up the medical fees)
- a lawyer who drags a case to chalk up more time to charge the client
- a financial adviser who recommends a product to earn a higher commission.

The risk of non-professional conduct is greater for insurance and financial advisers, because the commission is hidden in the product, and the product is designed to be quite complex and potentially misleading.

Many people in the advanced countries have been disillustioned with the practices of the financial advisers. More people now invest in simple and low charge product, and keep most of the gain for themselves.

Here is my advice. Learn about the simple fact of the financial product. Shop around and compared. Do not rely solely on your financial or insurance adviser. Read the FAQ of a similar product from NTUC Income.

Our FAQs can be found here:

Look for
- Flexi-link (to invest your CPF or cash funds)
- Ideal (to invest your regular savings)
- Ideal for your Child (to save for your child's education)
- Growth (to invest your CPF or cash funds)

In each FAQ, we show the difference in the charges between NTUC Income and other insurance companies. The difference can be STAGGERING.

Shop around and get the best deal. It is for your own good.

Sunday, September 03, 2006

More parents now buy Ideal plan for their child's education

In the past, parents buy an education or foundation policy to save for their child. These are endowment plans, that give a fairly attractive return on maturity.

In recent years, more parents are taking an Ideal plan to save for their child. The proportion of parents buying the Ideal plan has now reached 20%, which is more than 3 times of the proportion two years ago.

I expect the proportion to increase over the next two years, as more parents become aware about this option.

The Ideal plan has the following advantages:

- potential of earning a better return
- more flexibility in the savings and the maturity date
- lower charges, giving a better return to the parent.

Our Ideal plan is much better than the education savings plan offered by other insurance companies (that pays high commission to their agents).

I advice parents to approach our insurance advisers or consultants (at our business center) to ask about the "Ideal plan for your Child".

You can also read the FAQ at

Enjoy the wonderful free service of the National Library


You have borrowed a book from the National Library. Due to lack of time, you decide to renew. You are told that a $0.50 fee per book is payable.

I feel the renewal should be free if it's a first one for the said book and there are no prior resevations by another.



The National Library is doing a wonderful service to offer so many books to be borrowed for free.

They have to meet their expenses. Now, they are imposing some user charges, such as renewing a book or a "fine" for returning the book late.

Going forward, I think that the library users (especially adults) should expect to pay a membership fee. It is good value for money.

In the meantime, when membership is free, let us accept the other user charges. We are still getting good value for money.

Tan Kin Lian

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