Tan Kin Lian's Blog: Cooperative credentials

Wednesday, July 02, 2008

Cooperative credentials

Dear Mr. Tan,

May I be permitted to make an observation. The new management of Income missed a wonderful opportunity to show that they can embrace the true spirit of being a cooperative and win over the loyalty of over 1 million policyholders that you have built up over the past 30 years.

How? The excellent investment yield in 2006 and 2007 gave them the chance to restore back all of the bonus cuts since the Asian financial crisis. Why did I say this? I read that the investment yield over the past 10 years is 7.8% and that is more than the yield of 6% that was used to project the bonus rates during these years.

I am rather sad that they did not take this opportunity to re-establish their credentials. Instead, they appear to be trying to hide the profits from the policyholders, and give less than what the actual experience would really allow. How disappointing. What are your views, Mr. Tan?

JK

REPLY
I agree with your views. Indeed, if they have restored the past bonus cuts, and they have the surplus to do so, they would have placed NTUC Income is a strong marketing position. This is a reputation that is more valuable than the millions of dollars spent on advertising.

They still have the chance to change their strategy and adopt this "restore the bonus cut". I hope that the board will do so.

6 comments:

Monsoon said...: My wife just got an open letter to policyholders from Tan Suee Chieh, the gist of it is to trust him and accept his assurance he has done right for the policyholder - his action so far speak much louder than his words. we are stuck as policy holders even if we feel like terminating now as we think we should and run.

Tan Suee Chieh has completely no credibility with us. Beyond him, the board who supported him or endorsed what he has done and yet even when requested by Mr Tan, they decide not to give policyholders a choice to keep the annual bonus speaks volume about their inability to comprehend the underlying action that make us trust Mr Tan Kin Lian when he was CEO.

Just like many other organisation in Singapore, the new management stand firm, never admit you are wrong, never apologise or try to redeem whatever goodwill thats left, but soldier on, knowing that policyholders have no choice. After a period of time, like most Singaporean, they come to accept it, just let them grumble in the coffeeshops or on the internet.; July 02, 2008 10:22 PM
Falcon said...: Yes, I agree that this new CEO has no more credibility with us policyholders. However, they, including the board, has underestimated policyholders' resolve in this unfortunate matter. It is no more grumbling in the coffeeshops alone. The reason is because this forms a large part of our savings and include the holistic planning of our retirement and children's education. Furthermore, the pain is vividly relieved on a regular basis as we have to continue to pay for insuring with Income. I do not see any other way but down for NTUC Income now that they have chosen to remain silent and let policyholders fret. The frustration continues to be built up and the longer they remain silent, the more frustrated policyholders like us will become. Just like a boiler that does not have a safety valve, the resulting explosiion can be delayed but is not inevitable. All they need to do is be sincere with us. They have not, judging from their actions which is incongruent with their words. The time-bomb is ticking and will include the NTUC ministers who have apparently ignored the hundreds of thousands hardworking policyholders, who are mainly workers whose interest fall under the NTUC leadership.; July 03, 2008 12:30 PM
siewkhim said...: Dear Kin Lian,

We have been discussing the issue of bonus cuts and its possible restoration for the past many weeks.

I think we have to accept the fact that the restoration of the cuts is not going to happen. Let's face reality, NTUC Income management is more determined not to give in possibly for the following reasons:

(a) NTUC Income expects angry policyholders to terminate their policies. This is God given, because NTUC will be to get rid of these participating policies with huge guarantee accrued annual bonuses from its liability. From RBC standpoint, the charges on this liability will reduce tremendously, enchancing its CAR.

For those who continue, they will get lesser and lesser with the use of terminal bonuses. Eventually, NTUC may delare zero annual bonus rates.

Whichever it goes, the policyholders will be losers.

(b) Using terminal bonus approach will enable NTUC to invest its assets freely without any risk because, non-guarantee terminal bonus is effectively passing the investment risk to the policyholders. When participating policies place more emphasis on terminal bonus, it is just like investment-linked policies. But it is better than investment-linked policies from NTUC's standpoint because all the charges can be hidden.

(c) NTUC Income under your leadership cut bonuses before. There were angry policyholders but overtime, people have short memories, and as you can see, despite the cuts, your new business and in force still grow. I am sure the new management figured that out. With new and fresh marketing blitz and perceived goverment and union connections NTUC will recover its market share now with "investment risk free" participating policies.

Many insurers both in Singapore and Malaysia have cut their bonuses before and these guys have been growing since then.

(d) With the steps taken by NTUC to go on terminal bonus approach, many commercial insurers whose CAR are being threatened will eventually adopt NTUC Income's approach.

NTUC will declare, look everybody is now with us. We have not been wrong. We are already the leader.

(e) My best guess is, eventually participating insurers in Singapore will adopt the terminal bonus appoach with zero annual bonus since from a corporate standpoint, it is better than investment-linked policies since the charges from participating policies are less transparent.

Do you have any comments on my 1cts worth of trying to rationalise why NTUC Income acted as such?

Solution for us: Avoid participating and investment-linked policies.; July 03, 2008 3:07 PM
zhummmeng said...: SiewKim , that is what happened to Equitable Life when no annual bonus was declared. Every cent moved to terminal so that they can suka suka
invest.If they lose they can adopt the Ponzi scheme by sending out their greedy agents to bring in more cash. It has been happening and now it has launched a new 1 year Capital Plus with 2% gaurantee for matured polices to reinvest.It is trying to kill 2 birds with one kick. ONE, to stop the outflow of capital; TWO, to make the bottomline look decent a bit.That is the beauty of terminal bonus; July 03, 2008 6:07 PM
SingaSoft said...: only time will tell...

it is way too early to have solid conclusions now..; July 03, 2008 9:46 PM
zhummmeng said...: singasoft, yes, only time will tell is a cliche.How many have so much time ?And time always fails us because time erases our memories and when the time comes all of them won't be around, dead to answer.
If you don't learn from history, (Equitable Life) it is doomed to repeat.; July 03, 2008 10:13 PM