Friday, July 04, 2008

Asset share in 2009

Mr. Ken Ng said that NTUC Income will work on the asset share in 2009 and declare bonuses based on the "actual experience". This is not fair to policies that mature in 2007 and 2008, where the bonuses are far short of the asset share.

It is the duty of the appointed actuary to look at the actual experience to declare a fair rate of bonus. Whether the actuary adopt the asset share or other suitable method, the need for fairness has always been a key consideration in the distribution of bonus.

It is not correct for the appointed actuary or the board of directors to ignore this consideration, as it affects the reasonable expectation of the policyholders and could amount to holding back many thousands of dollars that may be fairly attributed to them. There is the risk of legal action taken by the policyholders.

ADDITIONAL POINT
Mr. Ken Ng asked me to clarify that he became the appointed actuary only in 2007. The bonus declaration for 2006 was recommended by the previous appointed actuary, Nick Rhodes, and supported by me when it was presented to the board of directors in late 2006 (when I was still the CEO).

I replied to Mr. Ken Ng that the bonus declared in 2006 showed a significant increase over 2005. I believe that the bonus for 2007 should show a further increase over 2006, as it can be justified by the excellent investment yield achieved in 2007.

8 comments:

siewkhim said...

Dear Kin Lian,

My understanding is, one of the key role of the Appointed Actuary is to act on behalf of the MAS to safeguard the interest of all participating policyholders with regards to their "reasonable expectation" regarding distribution of bonuses of their policies.

My understanding is the AA has to demonstrate that the distribution of bonuses is equitable and consistent for different generation of policyholders.

However, most AA normally wear the hat given by his master. "He who pays the piper calls the looney tune"

I am convinced that at the end of the nobody is going to give a damn to the policyholders. Just don't get involve with participating policies - the best form of risk management.

David said...

Any bets any policy holder will take legal action against INCOME on this? Yes there is a precedent. Remember the Jonathan Lock case? But I just wonder how many policyholders have the guts like Jonathan Lock.

Falcon said...

I have the guts but not the money nor the expertise. Anyone want to sponsor the money or expertise? How much does it cost anyway. Is $50,000 enough?

siewkhim said...

Dear David,

We have to go for a class action. This happens only in the West. Not Singapore at the moment.

We do not have the financial stamina and the strategic influence to fight with NTUC Income. It will be a mistake to take Income to court because we will be the loser and the court verdict will strengthen Income's conviction that the terminal bonus approach is the way to go and we have no other recourse for remedy.

And remember the word of NTUC income's chairman:

" And we shall not allow NTUC Income to be hurt"

Case close!

Monsoon said...

Sir - I do not know if someone may already thought of it or suggested to Mr Tan. It suddenly dawn upon me that it is time to form a association like SIAS. The best person to take the lead would be Mr Tan - We cannot just grumble on the internet but need to take action before NTUC or other insurance companies come up with more and more policies or changes that are grossly unfair to the consumers. Such an association could also take on the banks with their structured deposits or other products which offer poor deal to the consumers.

zhummmeng said...

Monsoon,
Yes, life insurance consumers association(LICA) to take on errant insurers and insurance agents. Remember unity is strength and safety in numbers and this association will be the pressure group to keep the check and balance on the industry.
Fantastic idea!!!!

Falcon said...

yes, I will support this initiative. Nowadays more and more financial institutions recruit management staff that are shortsighted and care only for immediate meeting of their KPIs in terms of numbers only and do not go for long term relationship with customers. They unwittingly opted for an adversarial relationship rather than a partnership one. Short term they gain because the figures look better than before but long term the organisation loses as loss of goodwill and loss of customer support sets in. But because these financial mavericks are in it for the short term, they normally leave after two or three years and then the organisation is the poorer for it. The modus operandi of these people are simple. Chalk up the figures required and then apply for another higher paying job in another organisation and show the numbers they achieved through financial manipulations and then leave the organisation to face the fallout in later years. Personal gain over the collective good of the organisation and society. We are seeing more and more of these CEOs. Therefore I support the setting up of an independent association to look after the interests of the public.

Raymond T said...

Me too! I support the idea. We should not allow ourselves to be bullied left, right and centre and take it lying down anymore. =(

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