I REFER to last Thursday's reply by the Monetary Authority of Singapore (MAS), 'Interests of policyholders protected: MAS', in which MAS stated that my letter ('Transparency in insurance: Policyholders underpaid', Aug 6) suggested that insurers have built up 'orphaned money' by under-declaring bonuses to participating policyholders.
I never suggested that. In fact, I said orphaned money comes from a different source: policyholders who leave the fund early, before their policy matures.
Life insurers acknowledge that early surrenders receive less than their full asset share. The underpayments accumulate and form a slush fund commonly known as 'orphaned money'.
MAS claims I believe life insurers under-declare bonuses in order to build up orphaned money, but this would be difficult and I doubt it happens.
Bonuses are cut only in downturns, when the policyholders' fund has suffered losses. They would need to be cut in good times for the bonuses to add to orphaned money. This has probably never occurred.
Whether orphaned money exists depends on just one thing: Do life insurers pay less than the proportionate ownership - called asset share - to policyholders who leave the fund before their policy matures? To give a frame of reference, it would be like a unit trust paying less than the net asset value when investors sell.
If MAS or the life insurers say, 'We pay early surrenders their full asset share and always have', then that is the end of it. I have made an error, orphaned money does not now exist, it never has and I apologise.
The MAS reply, however, talks about the 90:10 insurance rule and the risk-based capital regime. These do not address the question of whether the full asset share is paid to policyholders when they exit the fund. That is the only way to know if orphaned money exists.
It would be easy for MAS or life insurers to disclose if they pay the full asset share. They are the only ones who can answer the question as they are the only ones with the data.
If orphaned money exists, then we can move on to the second step of determining how much it is and where it is held since - at present - no Singapore life insurer carries an account labelled, 'orphaned money'.
Larry Haverkamp
12 comments:
It is very obvious MAS is protecting the insurers .The spokeswoman probably had no head or tail when she came to the defence of the insurers. It was a stupid thing to do and it was very unusual for MAS to react so quickly.
Consumers must understand what it entails when you buy par products like whole life and endowment. When your policy lapses, surrendered prematurely you always leave something behind which the insurers will not tell you but will pocket it.The insurers laugh all the way to the bank because this money no need to be "hedged' under the RBC requirement.They are not liability nor part of the life fund but fund for the ceos to use in what ever way they like. Although you have been told time and again by the insurers and by your trusted and beloved agent that you need whole life protection and saving to keep for the whole of your life but unknown to you SECRETLY they want and wish that your policies lapse or terminated prematurely so that their liability is off. Your so called trusted insurance agents didn't tell you because they are either stupid , dumb or their mouth stuffed full with huge commission to shut up.
There are many many things your trusted agents have NOT told you and don't want to tell you because if they do you would not buy these scam products.Please wake up..... The insurers are betting with you
(1)that you will lapse within the first 2 years because many of you cannot tahan the premium
(2)as many as 60% of you will surrender in the first 7 years
(3)as many as 90% of you will surrender when you hit 60 years old
(4) as many as only 1% will keep beyond 65 years old.
From these figures you see how lucrative the business of par products are for the insurers.
You now understand why these companies LOVE to sell or die die must sell this type of products. On top of it they have many greedy unethical , will do anything if they are paid high commission to dump on you consumers, to lie and to con you consumers because it is worth the risk or no risk because you consumers are dumb, too trusting, ignorant,; a lot of you are smart alek; don't know what or why you buy these products.
Another crap I like to highlight here is the 'caveat' that insurers will state that "insurance is a long committment and early termination is loss(something to this effect) is a big crap which they just stated for show...
to borrow the now famous word , it is a "highfalutin" crap
The Watchman
There is this tendency for govt bureacracy to ask for evidence when a member of the public question them over a matter of public interest. Recently I was concerned over the plight of poor Singaporeans who, though given an opportunity to use their medisave for chronic diseases, in theory would not be able to use it as there is a minimum amount to be paid before medisave can be used. Instead of answering my question by providing the statistics of claims, I was instead asked to provide evidence that poor Singaporeans did not receive help. It is indeed ironical that the ministry is the one having the statistics, not releasing them and then asking for the public to show proof when the proof is in their hands all the time. So much for transparency and accountability though they always say they are transparent and accountable!
No wonder NTUC Income was unfazed when I complain to them about the poor service and the stark difference between their written service committment and the actual reality. No wonder their CEO did not bother to reply to policyholders when it was brought to his attention either through the phone or email. The insurer stands to gain when I prematurely terminated my policies. So this is why they are happy that old policyholders terminate their policies and instead of giving good service to existing policyholders they are more content with using the money earned through the orphan funds to advertise and service new customers. This present arrangement encourages this culture of ignoring old customers and courting new customers. It is time something be done to change the system so that it does not pay to ignore the old while welcoming the new!
Hello Mr Tan KL, with your deep knowledge in the insurance business, you are speaking for us policy holders, especially the big lost when one surrenders a policy (due to financial downturn). Thank you.
Read the MONEY page survey by a professor .
It is not a well kept secret that Singaporeans are grossly under insured.
The question to ask is WHY are Singaporeans under insured despite what the insurance agents' so called mission to see everyone insured and the claim of the nobility of their job?
Yes everyone is insured but with $10K or $20K coverage whole life or endowment. What can they do? Maybe to buy a coffin for themselves.
The evidence is in the LIA's recent report, amount of insurance sold was only $49K and death claim was $39K..and the answer is the insurance agents stole your coverage by pushing you useless whole life and endowment product to short change you.
It is very clear that consumers CANNOT afford to buy enough coverage with whole life product.
The agents know it too but that is not his or hers interest. Their interest is to sell you a high commission product. Their interest is to make sure you lapse after some years and become 'under insured or without insurance so that they can sell you again whole life under a different name like limited payment with fancifool name. Do you consumers see the ruse of the agents?
MAS must intervene. There is enough proof that commission is causing conflict of interest, mis-selling and unethical pratices.
There is enough proof that insurance agents are pushing products and avoid fact finding ,need anaylsis and circumventing section 27.
There is enough proof that insurance agents are not qualified and competent and do not meet the fit and proper requirement of the FAA.
Unless these issues are addressed Singaporeans will continue to be short changed and CONNED by insurance agents.
The Watchman
Telling the insurers to review the commission structure is NOT good enough, MAS must order the removal of commission from all products and replaced by a more equitable remuneration like fees.In the address in a seminar, MAS adnmitted that Sinaporeans are grossly under insured. BUt waht is MAS going to do? MAS msut realise that the insurance agents caused it because of greed and unethical selling. MAS must punish them.MAS must put in place a compulsory guidelines for agents to approach consumers' needs too.Failing whcih agents are to be penalised by fine and revocation of license. This is what is meant by buisness.
NTUC Income used to be very transparent during Mr. TanKL's time. The quotation showed return rates for their wholelife and endwoment products . That was honesty. Mr. Tan can truly brag that "honesty is the best policy".Now what happened? And yet you find ntuc new management now used old rates of return as if theirs and dare to brag that "honesty is the best policy" when they dare NOT disclose the rate of return for their products instead use the greedy agents to bullshit and to beat round the bush about the return.
Shy to show or waht? the return too low to look decent or waht? Where got transparent?
Their so called financial consultants can't even calculate the return. Why call themselves financial consultants when they don't know how to use a financial calculator? It is insulting, isn't it? Might as well call themselves financial insultants. You can see product pushers disguised and who push product with commission. It is good that MAS is telling the insurers to change the commission to something else and see waht these insultants can do waht.
Ya, ntuc agents don't know. I asked one and she was kind of eh, eh eh uneasy. How can they call themselves financial consultant? The title misleads the public. I heard there are some who are called senior or executive financial consultants. I think it is better to call themselves sales rep, salesmanager or sales executive instead. At least poeple will know they are salespeople pushing products and will not get disappointed rather than to be cheated by wolves disguised as sheep. These people are no professionals by any definition.
They should be called koyok peddlers like those at pasar malam or waterloo street temple vicinity.
These agents should set up stalls there.
I have just received a "Bonus and Dividend Rates Announcement" from my insurer AIA.
The projected surrender value of my policy at age 74 is now 15% less...due to the downturn so it says. So for a 100K value, it will now be 85K! It can tell me a lower value but what I can do. Have to accept...
You need not be held for ransom. You can surrender and take losses if your policy is just a few years old instead of lingering your agony. It is not going to be the last and the figure is only projected.
Are you holding it till 74? I bet you won't. And it is not wise to hold because the mortality charge is going to kill your cash value. You DEFINITELY will not get what you see.
Lastly you don't need it till 74 unless you have dependents or you are leaving a legacy but $100K isn't much if you factor in the inflation.
The next thing you can do is to check whether your agent mis-sold you or misrepresnted the product. If $100K is all you have and you still have dependents you are grossly under insured.If you didn't have dependents when you were sold this product , this product is a wrong product. You can give it up.
All this has to do with the incompetence of the agent or conflict of interest.You can protest to AIA or lodge with MAS against the agent for failing the reasonableness of recommendation.
Don't be resigned. You have your right to responsible financial planning and the agent failed in this respect. You have to fight for your right .
Consumers must wake up to see that this type of products are scams and only benefit the agents and the company. Don't fall into the trap again.
MAS has recommeded that commission structure be changed to reflect the true value of advice, if any, by insurance agents. MAS must not let the insurance companies take their time but to give them a time frame of 1 year to come out with a fairer way.
Commission is long known to have caused unfair and unethical practices and short changed the consumers.
Fee is a fairer way . Consumers know upfront the charges and can decide whether to engage the adviser. Another advantage of fee is consumers get advice and NOT sold a useless product upfront. Fee can be much lower than commission and yet get value for money whereas product pushing ends up in agents' favour because the likelihood that the product is one with high commission and also may not be the right product. This results in consumers being lulled into a false sense of security or peace of mind. The survey by LIA confirms this . The finding shows singaporeans are grossly under insured. This also shows consumers don't know about insurance , the correct insurance and how much is enough. Singaporeans are actually walking about with a time bomb and have put their family in danger. This is because of the greed and selfishness of the insurance agents who don't put the consumers' interest first but theirs' by dumping on consumers products with high commission.
So you see commission is the cause of all evils and unethical practices.
Consumers can make the change by insisting on your right to competent advice. Salesmen don't advice and many insurance agents are salesmen hiding behind misleading titles.
Beware of agents with marks like mdrt, cot or tot. They are dangerous because those marks tell you how much commission they earned and NOT how many people they have helped. How did they earn so much? The obvious is peddling and pushing products with high commission. Avoid them or put them to the test. In all likelihood these greedy agents will push products upfront . You should know these products can NEVER meet your needs adequately as they are expensive and you can't afford enough.These products are very poor in protection and as saving plan.
Avoid the salesmen hard pushing at roadshows. Many are young and unqualified product pushing salesmen and women.It serves you well to heed this warning.
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