Tan Kin Lian's Blog: Risk and how to manage them

Saturday, January 02, 2010

Risk and how to manage them

Many people think of risk as "something can go wrong". Actually, risk is defined as variation from the expected.

Everyone has to die one day, so this is expected and is not a risk. The risk is that one may die at a young age, and have dependents that cannot support themselves.

As we grow older, we expect to be sick more often and to incur higher medical bills. This is not a risk, as it is expected. The risk is that the medical bills may be too high and beyond our means.

This risk can be managed by making better decisions. The medical specialists have a vested interest to get the patient to spend a lot of money on treatment, even if the chance of recovery is slim. There could be better ways of dealing with the illness that is not so costly.

Buying expensive medical insurance is not really a good way to deal with this risk, as the insured may be misled into taking expensive treatment that is not effective, and may have to bear a significant portion of the bill through the co-payments.

Many health care risks can be managed through having adequate savings, and making an informed decision on how to choose the right doctors and treatment. For most people, it is better to go to subsidized wards, as the risk of given expensive, unnecessary treatment, is minimised. The high cost can be covered by basic Medishield. This will allow us to avoid the situation in America where health care takes up 16% of the GDP.

Tan Kin Lian

7 comments:

Anonymous said...: To the insurance agents every skeleton must be insured. Not only that an event 60/70 years down the road must be also be insured.We are already seeing products that insure up to 3rd generation.
The agents will tell you your 1 year old child needs a head start becuase he might not be insurable when he is 70 years old or he might get a dread illness or he is more vulnerable to illness.
When it is an H&S plan he must be covered by the highest plan and deductible and coinsurance also covered, just in case.
Your grandmother needs a critical illness cover just in case she might get cancer or kidney failure or she might get arthritis of the joints or parkinson disease at age 90.
Your 1 year old child needs a educational plan of $20K to send him to harvard university in 20 years time.
This plan got saving. Term no money back so no good for you.
This is risk management as insurance agents know and learned from the insurance college and passed the tikam tikam examns.; January 02, 2010 12:13 PM
Anonymous said...: In recent times, after many people have lost their savings to dubious investments and scams, people have offered this advice:

You should take care of your own finances, do not trust it to someone else because he will maximise his own profits first and will not take care of your interest.

My view is to apply the same principle in the area of health and treatments:

Take care of your own health and do not trust it to someone else.

I do not just trust blindly what the doctor says. In fact, as much as possible, I avoid the so called western mainstream doctors and chemical based pharmacology. I do my own research into healthy living. I seek out natural alternative remedies and treatments. I take responsibility for my own health and do not just trust it to the doctor.; January 02, 2010 3:15 PM
Garrett said...: I entirely disagree with Mr Tan statements. Medical expenses is something that can drive people *bankrupt* in non-socialized countries like Singapore. Most people will not be able to manage the risks of large medical expenses, since large prolonged medical expenses do chalk up sum in the region of 6 figures.

I disagree with the co-payment issue. Maybe in the PAST it was with all those itemized limit nonsense, but right now "as-charged" private shield plan have riders to cap the annual "out-of-pocket" expenses. Current private shield plan with rider have a maximum "out-of-pocket" expense capped at $3000/yr. I think this very reasonable, even for the average-wage earner out there.

I disagree with going for subsidized wards as
1) Future means-testing may mean that average-income earners will no longer be eligible for Ward C and maybe even Ward B2!
2) Subsidized wards receive poorer treatment and service, such as longer waiting time to see the doctor for major operations.
3) You cannot pick and choose your doctor or specialist, this may be an issue when you need a doctor that only practices in a Private Hospital. What then?

The problem with America is not totally due to too much unnecessary treatments. Problem with American healthcare is their H&S insurance covers from a first-dollar basis. A deductible of $1000 is considered high. Most of their health insurance have ZERO deductible and out-of-pocket expenses that is limited to a few hundred dollars. Also, their healthcare insurance cover trivial things like family doctors visit, which IMO is totally unnecessary as it drives up cost. This is why medical cost is so inflated in the USA as consumers don't feel the pinch. However, when there a non-trivial deductible sum like existing shield plans, people will naturally be more conscious of price.; January 02, 2010 5:13 PM
Anonymous said...: Buyers and sellers have conflict of interest. The buyers want the best buy at value for money but the sellers want to squeeze as much out of the buyers. This is also happening in the life insurance business. The agents want to push products with highest commission and the buyers expect the best buy but ended up fleeced nevertheless.
There is no risk management. Risk management is only an excuse, a cover up by the insurance agents.
Unlike a doctor there is no upfront promotion of products. Products are presecribeb.; January 02, 2010 5:22 PM
Anonymous said...: Doctors, or family physicians at least, still are one of the few socially-responsible high-income professionals in our society today.

The same can't be said for specialists, and commission-based professionals though. It's really upsetting what the world is becoming.; January 02, 2010 5:41 PM
Singapore Short Stories said...: One must take some risks in life as not taking risk may be the greatest risk!

We must manage risks.; January 03, 2010 12:27 AM
Anonymous said...: The world has changed since 1990s.
Everything is measured and everything is a cost.
There is constant search for profit, at low cost and high gains, as though there is no time.
There is a sense of "lets hurry!" or else the competition will get there before us!

Constant drive to arrive first
Constant drive to achieve the "best"
Constant drive to earn and live a life of luxury.

We have forgotten the difference between needs versus wants.

We think we need when we already have.

In terms of technological innovations, we have remained almost static. The internal combustion engine has not changed.
The internet has brought distances to a close, but yet, we have insufficient time.

The pursuit of profit and luxury is the focus. This will create huge problems... because it is a want and not a need.

Management of risk is not a need in these modern times. It is a fallacy and an idea that is perpetuated by commerce for the sake of profit.

Permutations & calculations tweaked to show and convince that there is a need. There are assumptions that we could lose lots of money just to convince.

Perhaps 75 years ago, there is compelling reasons to manage risk especially in health and transport.
But not today.The risk of dying in an air disaster is lower than 75 years ago. The risk of dying from malaria is lower than 75 years ago.

Doing nothing, you will probably live beyond 75years.

Accept death as ultimate.
Accept accidents as accidents
Accept that genes affect your health.

We will all live much happier and satisfied lives.; January 03, 2010 9:32 AM