Saturday, October 13, 2007

Compensation for Traffic Accident

Compensation for Traffic Accident

In 2006, about 8,400 accidents happened on the roads involving injuries to people. 190 people died, 104 were seriously injured and 9,600 suffered other injuries.

How do the victims claim for compensation for their medical expenses, loss of wages and permanent disablement?

In most cases, the victim has to look for an lawyer to submit the injury claim. The case can take many years to settle. The legal fees can take away about one third of the total compensation.

Some insurance companies offer to make direct settlement with the injured person. However, there is a suspicion that the compensation may be inadequate. The victim may prefer to engage a lawyer to settle the claim on his or her behalf.

Is there a better way to handle the settlement of injuries caused by traffic accidents?

Sweden has operated an alternative system for about 70 years. The results have been quite satisfactory.

A person who suffers injury caused by a traffic accident can claim for compensation according to the Swedish Traffic Damage Act.

To ensure that the compensation is reasonable and as just and uniform as possible, the law required the insurance company to consult the Swedish Road Traffic Injuries Commission for an advisory opinion before reaching a final settlement with the claimant.

The commission issues its opinion on compensation for personal injury and also for loss of support (i.e. compensation to family on death of the breadwinner).

Where the case is taken to court, the commission will, on request, issue its opinion concerning personal injury.

The courts, lawyers and insurance companies regularly complied with the practice of the commission. About 5,300 cases are tried by the commission in 2006.

It is compulsory for the insurance companies to consult the commission on compensation for loss of support, for loss of income where the medical disability is 10 per cent or more or has exceeded a certain sum or compensation for the personal injury and associated costs.

If the case is to be heard by the commission, the insurance company supplies the commission with the complete dossier, all available documents and a brief summary including the standpoints of both parties. The claimant can look at the summary and is free to add any further commentary to the views.

The majority of the cases are presented to the commission by a legal advisor employed by the commission. If different opinions prevail in a case, the commission’s opinion is given after voting. The commission has access to highly qualified medical experts who may be consulted on medical matters.

The commission’s opinion in a case is sent to the insurance company which in turn forwards it to the claimant. As the opinion is only advisory the parties may settle the case in accordance with the commission’s recommendation, agree on some other solution or bring the case to court.

In more than ninety per cent of the cases that have been tried by the commission the parties agree to settle in accordance with the commission’s recommendation.

The rules regarding the commission and changes to the rules have been approved by the government. The chairman of the commission is appointed by the government and the other members are appointed by the Swedish Financial Supervisory Authority.
The chairman or deputy chairman chair meetings of the commission. They are highly qualified lawyers from the judiciary. They may not be employed by an insurance company.

Twelve members of the commission are laymen representing professional organizations and another twelve members represent the insurance companies. A representative of an insurance company may not participate in the discussion or vote in a case in which his company is involved.

Normally the commission meets with six members; two members from each member category. Less complicated cases may be decided by one member from each member category. In a few cases one chairman alone may decide what the commission’s recommendation should be. The insurance companies covers the costs of the commission.

The system has worked very well over a long period of time. Some of the advantages are:

- Makes court proceedings unnecessary in most cases
- Provides earlier settlement of the compensation
- Establishes a uniform standard of compensation
- The claimant has access to an independent professional opinion, free of charge

The Swedish system of compensation is based on “no-fault”. The injured persons are entitled to receive compensation without having to prove the fault of the driver of the vehicle. This has helped to simplify the settlement of the compensation.

The Commission operates with a set of tables. Compensation is based on such parameters as degree and type of disablement, age, income and other factors. The Commission does not make public the average amount they have awarded.

The findings of the Commission are generally slightly higher than the amount offered by the insurance company. In 2006, the Commission awarded the same amount in 74% of the cases, up to 10% more for 10.4% of cases, 10 to 25% more for 9.5% of cases, and less for 6.1% of the cases. There proportions have remained quite steady in recent years.

If a claimant is not happy with the outcome, the claimant can still have the option to go to court.

I hope that the award of compensation for traffic accidents in Singapore can be reviewed to provide payment to accident victims more promptly and at lower legal cost. It will provide relief to the victims and the family members. This can be based on the model in Sweden.

Tan Kin Lian
The writer was the former chief executive of NTUC Income.

Friday, October 12, 2007

Traffic Accident – How to claim on your Insurance

If you drive a car and you meet with an accident, you face a dilemma. Which party is at fault? Do you want to settle the liability on the spot, or leave it to your insurance company to handle?

In the case of a minor accident, it is best that both parties agree to have a private settlement and not to make any claim on the insurance policy. One party may agree to pay a sum of money to the other party to repair any damage.

The private settlement should be recorded in writing and be signed by an independent witness. Some insurance companies have issued a simple form that can be used to record a private settlement. If you do not have this form, a simple agreement can be written. In fact, if both parties are honorable, a verbal agreement will be adequate.

Some years ago, another car hit my car in the car park. The driver was a young lady, who was obviously an inexperienced driver. Her father called me on the mobile phone and agreed to bear the repair cost of my car.

In case they do not keep their word, I reported the accident to my insurance company but indicated that I had made a private settlement. The other party paid the repair bill, which amounted to more than $1,000. The accident never became an insurance claim.

If you make a private settlement, both parties will keep their No Claim Discount.

If private settlement cannot be reached, you have to make an insurance claim. Both parties can, on the spot, record down the circumstances of the accident and the extent of the damages to the vehicle. Photographs can be taken. If most or all of the facts are agreed, the insurance companies for both vehicles can settle the claim quite easily.

The insurance companies have issued a form called the Singapore Accident Statement, which can be used for this purpose.

Only a small percentage of motorists used the Singapore Accident Statement. This is due to the lack of awareness and to the disputes over the facts of the accident.

Insurance companies are partly to blame. Many years ago, I saw an advisory from an insurance company to its policyholders never to admit liability for an accident. This could be a reason for the many disputes involved in motor accidents.

A better advisory is for the policyholder to use the best judgment and agree to the facts of the accident.

If you cannot reach a private settlement or get a Singapore Accident Statement agreed on the spot, with photographs of damages, what is the next best approach for you to take?

You have to make a report the accident to your insurance company as soon as possible. You have to bring the vehicle to the reporting center, so that photographs of the damages can be taken. These will be useful to settle the repair cost, and also to establish the party that bears the liability for the accident.

Some insurance companies used the service of Idac centers (i.e. independent damage assessment centers). These Idac centers have long operating hours, up to a late time at night, and are located in various parts of Singapore. Most motorists find the reporting at an Idac center to be quite convenient.

After reporting, some insurance companies ask you to send your vehicle to their authorized workshops to carry out the repair. Some allow you to find your own workshop.

Some undertake to arrange the repair for you and ensure that the repair is carried out to a satisfactory repair standard.

It is best for the policyholder to let the insurance company arrange the repair. They can find a suitable workshop to repair the damages at a fair price. They can ensure that the repair is carried out to the quality standard. The policyholder is freed from the hassle of arranging the repair. In some cases, they are given a courtesy car to use during the period of the repair.

By reporting at an Idac center, you will have a good record of the damages. This may be useful to defend against an inflated or aggravated claim that may be submitted by the other party against you.

In past years, many insurance companies did not have a system of prior assessment of damages. They allowed their policyholders to send their vehicle to any workshop. The workshop submits a report of the damages and estimate of the repair cost.

This has led to inflated claims. Some workshops aggravated the damages to the vehicle to submit a large repair bill.

The workshop entices the customer by giving some incentive, such as replacing the old tires, or to repaint the vehicle. The repair bill can easily be more than three times of the fair repair cost.

Some workshops use touts to look for the accident cases and bring the vehicle to their workshop.

Inflated claims will result in higher premiums to be paid by all motorists, including those that did not make any claim.

If you wish to make a third party claim against the other vehicle, which you deem to be at fault in the accident, you should submit your claim directly to the insurance company of the other vehicle.

You should not let your workshop handle your third party claim, as they may inflate the repair cost. They will be using your name to lodge the fraudulent claim. This may cause legal problem to you, as you may be held to be a party to the fraud. It is best to avoid this potential problem. Indeed, it is quite common for third party claims to be inflated or fraudulent.

Bad idea to drive to CBD

I drove to CBD for a meeting at Cecil Court. I had a lot of trouble to find the car park in the building. There were two many one way street. After turning a few rounds, I decided to park at Market Street car park.

After 4 hours, I had to pay a parking fee of $16. It was expensive and a hassle to drive. It was a bad idea to drive to CDB.

I would have preferred to take a train, if there was a good feeder service. I hope that the public transport system can be improved.

Ramadhan in Jakarta

I was in Jakarta during the past four days. The traffic was light. Many people returned to their home town, i.e. not in Jakarta, to celebrate Ramadhan.

It was the first time that I found no traffic congestion in most parts of Jarkarta, although some of the roads are still croweded.

I visited several large malls in Jakarta. They are well patronised. They are of similar quality to the malls in Singapore.

Prices of property in Jakarta are still quite inexpensive, compared to most other cities in South East Asia. The economy is growing well.

Non Guaranteed Rates

Dear Mr Tan

From your years of experience, do you have any statistics which indicate how far insurance companies (e.g NTUC income) deviate in their charges of yearly premiums compared to what had been indicated to the customer at the time of sale years back?

I am considering to buy a policy with non-guaranteed premium compared to one with guarateed premium, since the one with non-guranteed premium seem to be cheaper.

I worry that some years down the road they just jack up the premium... sales gimmick right from the start!!!!


When I managed NTUC Income in the past, I hold strongly the principle of fairness to policyholders.

Some other insurance companies were more interested to more profit at the expense of their policyholders. It is a difficult judgement between fairness and profits ( i.e. self interest).

I am not able to comment on the behaviour of other CEOs.

In your case, you should ask this question to the company that you intend to buy the product with non-guaranteed rates. See if they have any statement regarding how they intend to adjust the rates in the future.

Non Guaranteed Benefits

Dear Mr Tan

Is there any governing body that will monitor how far insurance companies depart, historically, from the "non-guaranteed" bonus payouts?

If I were to establish an insurance company, the first thing I would do is to inflate the "non-guaranteed" values hugely, it is sure-draw and attract the gullible.

There is nothing to lose, after all I just say they are "projected" "nonguaranteed", these kind of stuffs should be made illegal, how can you sell something on such basis.


You can refer this question to the regulatory authority, that is, the Monetary Authority of Singapore.

It is important that the insurance company exercise fairness in giving out the non-guaranteed benefits. The appointed actuary is required to look after this matter.

Does insurance policy cover terrorism?

Dear Mr Tan

Many insurance policies exclude payments for death/hospitalisation due to terrorist activities. This is unfair.

If I have lunch at Macdonald on a perfectly normal day and a terrorist suicide bomber detonated a bomb and killed me, or maimed me, the insurance policies exclude such incident from death benefit and hospitalisation claims.

As far as I am concerned, such incident is no different from being killed by a flying brick while crossing Punggol Track 22 Road. Why am i paying insurance premium if I am not covered?


Life insurance policies do not exclude death due to terrorist attack. In this event, the sum insured plus bonus are paid in full.

Terrorist attacks are usually excluded from personal accident insurance, as the premium rate is very low. In a terrorist attack, many people are likely to be killed or injured at one time. This is different from being hit by a flying brick on an islated road.

Some personal accident policies do cover terrorist attack, to a limited or full extent.

Medication to relieve pain from gout

I had pain in my foot due probably to gout caused by high uric acid. I visited a hospital in Jakarta. The doctor prescribed Zoletrol to me.

I told him that I was prescribed with Difnal diclofenac in Singapore. He referred to a drug book and told me that Difnal is a pain killer.

I checked Google and found the following:

Diclofenac (marketed as Voltaren, Voltarol, Diclon, Dicloflex Difen, Difene, Cataflam, Pennsaid, Rhumalgan, Modifenac, Abitren, Arthrotec and Zolterol, with various drug dose combinations) is a non-steroidal anti-inflammatory drug (NSAID) taken to reduce inflammation and an analgesic reducing pain in conditions such as in arthritis or acute injury. It can also be used to reduce menstrual pain, dysmenorrhea.

Diclofenac is available as a generic drug in a number of formulations. Over the counter (OTC) use is approved in some countries for minor aches and pains and fever associated with common infections.

I also found that Difnal is another brand name for diclofenac.

Lesson: Learn about the drugs that you are prescribed with. You can check with Google. Usually, it refers to Wikipedia.

Buy an immediate life annuity with $200,000

Dear Mr Tan,

I like to buy a Life Annuity without refund from NTUC Income with my hard cash of $200,000. I am single without dependent and wish to have a higher payment monthly.

May I find out from you what will be my monthly payout? I need this monthly sum to tie over my personal expenses, household bill and HDB loan. I do not intend to put this $200,000 in fixed desposit or do investment which I am not familiar.

Moreover, I am quite a generous and spendthrift person. I am afraid one day all my savings will be parted due to poor financial planning.

I approached an agent from NTUC Income in Aug 2007. She told me that there is no such Life Annuity without refund in NTUC Income. She offered me the Guaranteed Life Annuity (immediate cash). However, this is not what I want. Hence, I did not commit it.

Fortunately, I read your article on The Straits Times dated 24 Sep 07 and is very pleased that you have offered your advices for us to seek help and clarification.

I know you are a very reliable and reputable ex-CEO of NTUC Income. I trust you will help me to check and let me know how much I will get from NTUC Income per month pay-out (Life Annuity without refund) if I cash in my $200,000.


As NTUC Income does not offer a "no refund" annuity, the next best option is to buy a Guaranteed Life annuity with a 5 or 10 year guarantee.

I will ask the manager of the business center, to contact you and advise the payout for this annuity.

It is a participating annuity which gives you a bonus each year (the rate of bonus is not guaranteed) and it will enhance your monthly payment.

You can start the annuity at your current age while you are still working part time. If you do not spend all of the money, you can save it in a bank account.

Investing in Australian and New Zealand deposits


I like to ask your opinion about foreign currency deposit. They promise about 8% on Australian or NZ deposits placed for 6 months.

It seems to me that conversion back and forth to local currency, plus exchange rate fluctuations over a mere 6 months, would not wipe out the benefits of such high interest rate offered?

It seems quite safe to get at least 4% even in the worst case? Has someone ever done any retrospective desk study to prove the profitability and viability of such schemes on an average situation basis.


The exchange rate between Singapore dollar and Australian or New Zealand dollar can fluctuate by more than 5% over a 6 month period. It can wipe out the difference in interest rate between the two currencies. If Australian or New Zealand dollar appreciate, it will add to your return even further

Currently, these two currencies are at a high level, compared to other currencies. It may be risky to invest in them now, unless you are sure that it can maintain its current value or even go higher.

I have written on this matter in one of my blog posting. Go to my blog, and search for "foreign currency".

The wealthy need medical insurance

Dear Mr Tan,

I have read your article in MyPaper. I felt there were several important factors that you did not take into account when giving the advice to your wealthy client.

I feel that as a person giving financial advice in the papers, which is also read by people with absolutely no financial background, it is important for you to justify your stance and to explain clearly the mitigating factors in this situation.

1. The person mentioned may have assets amounting to several million but they could be tied down in investments that are difficult to liquidate, for instance in properties. As such, he might not have sufficient cash at hand should a medical emergency arise if he does not have any medical insurance.

2. By not buying medical insurance, the person must now always have a fairly decent sum of cash at hand, pehaps $100,000. This would mean opportunity costs as the person could have generated interest had he placed his money into investments. In a decent mutual fund or stock portfolio with a return rate of 15%, this would mean losing $15,000 per year in potential interest. (I obtained this figure because the average annual stock market return is 15% for the past consecutive years, and I obtained the interest rate figure for mutual fund based on a Straits Times article on funds)

3. The person mentioned is likely to be even more affected if he is a retired/non-working individual who is dependent on the return from his assets. Should he not have sufficient cash at hand and is forced to liquidate one or two of his investements to pay for medical fees, he then loses a source of income. In the worst scenario should he be diagnosed with a condition that requires monthly medical payments (like diabetes), his financial situation is made worse as his income has fallen and his expenses have increased.

4. When a medical emergency arises, the person (and perhaps the family) will not be in a sound mind to make financial decisions. Having medical insurance would lift this burden from him.

It is hence a wiser decision to buy medical insurance and pay at most a hundred a month, rather than be caught unprepared when the situation arises.

Just for the record, I would like to clarify that I am NOT a financial advisor and this letter is not written to support the general insurance industry.


Thank you for expressing an alternative piece of view. I think that there are many people who agree with you, whle there are others who agree with me.

Sunday, October 07, 2007

Independent financial service

Hi Mr Tan,

I was looking to set up a website that provide independent advisory services, comparing across personal insurance products.

This is targetted at young people who are knowledgeable and wish to take greater control of their own financial planning.

As an experienced professional in the insurance line of business, do you think it is possible to obtain the data for performing independent analysis on similar insurance products?


It will be quite difficult to get the data for this analysis. Some insurance companies may not be willing to cooperate with you.

Dr Money spent a lot of time on this matter. His publised his findings in his website He had a lot of problem due to the complexity of the product (which makes them difficult to compare).

Source for your housing loan

Hi Mr Tan,

I understood that there is a trend towards independent morgage advisers in some countries. The independent advisors source quotes from the banks and provide them for the client to compare and decide.

In the event the client signs a contract, the adviser gets a cut from the company or charges the client a fee.

Do you know of any such companies in Singapore? Can you give me some contacts.


I found this website using Google search. Is this what you are looking for?

Adjustible premiums

Dear Mr Tan,

I am offered a valueplus plan which extends the benefit under Eldeshield from 72 months to 120 months. It looks attractive. The premium is quite low at the younger ages, but increase sharply at the older ages.

Furthermore, the insurance company stated that the premium rates may be subject to adjustment in the future. Is it safe to buy such a plan?


Generally, it is all right to buy an insurance plan that have premium rates that are adjustible according to the actual claim experience. This allows the insurance company to offer competitive rates, as they do not have to guarantee the current rates in the future.

The problem is, will the adjustment be carried out fairly? If the insurance company is profit driven, they may take advantage of this right to adjust the premium to make more profits, at the expense of the consumers.

If there is transparency and consumer oversight over the adjustment, or if the insurance company is operated on a non-profit basis, then this arrangement is all right.

Tip: Insure with an organisation that acts fairly in the interest of consumers.

Time to switch from equity funds?

Mr Tan,

I have bought some Prime and Trust fund from NTUC for sometime already. The funds already in market for many years and the prices are high now and I am thinking to let go and switch to another fund with higher potential in longer period.


1. Should I continue to invest in the current funds? Are they at their peak?

Reply: I do not know. In my case, I decided to keep my investments in the combined growth fund.

2. Should I switch to another fund? Which fund will you recommend?

Reply: If you decide to move out of these funds, you can put them in the money market fund, which earns about 2% to 2.5%.

3. What do you think is the market benchmark to sell?

Reply: I think that the current market is rather high. If you wish to take profit and wait for a further time to re-invest, perhaps now is a good time. But, really, it is difficult to say.

I hope that this FAQ may be helpful to you.

Financing MBA degree

Hello Mr Tan,

I have been reading your blog for quite sometime and find it very enlightening. Thank you for educating the public about personal finance.

I am a fresh graduate from a local university, who has just started work in the financial sector. I would intend to pursue an overseas MBA in the states in perhaps 2-3year's time. Is it more advisable to accumulate money to fund the MBA or take up a loan?

If I were to accumulate money, where can I invest in to generate better returns for financing the MBA?

I have been searching online for information but the MBA education websites are mostly catered for Americans. Is there any website that has more information for Singaporean graduates who would want to fund their studies abroad and the estimated fees for the MBA?


You can read this FAQ about investing your money ....

For your MBA course, see if you can get some info from this website

Many people who spend time and money to pursue a MBA degree. If they do not get the degree from a prestigious university or study full time, they may find the degree to be not well recognised. You should talk to those who have taken the MBA degree in this manner, and see if they can advise you.

If you can get a place at a prestigious American university, such as Harvard, you will find it easy to get a good job from prospective employers. Many of them recruit from the graduates of these top tier universities. I know of a few people who pursued this option. They make very good progress.

Wish you all the best.

Role for insurance advisers

Several people sent e-mails to me to seek my advice on what they should do with their financial planning.

I am not able to provide this advise to them, as will take a lot of my time (which I am not able to spare).

I usually advise them to read the FAQ in my website,

If they need specific advice, I usually refer them to an insurance adviser. The adviser will recommend the following:

1. Buy term insurance
2. Invest in a low cost, well diversified investment fund

The adviser does earn a modest rate of commission on these products, which gives good value to the customer (compared to high cost products available in the market). As the consumer is already aware about the options (after reading my FAQ), the adviser is not likely to push any high cost product.

I hope that this approach will be helpful.

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