Saturday, June 12, 2010

Benefit Illustration

A benefit illustration has to be given for each life insurance policy that is recommended to a consumer. More than 100,000 life insurance policies are sold each year. The number of benefit illustrations given out must be at least two times of the number of policies sold. This makes the benefit illustration to be widely used.

Many people criticised the benefit illustration to be too complicated. As a result, consumers do not bother to read or understand them. It is the duty of the insurance adviser to explain the content of the benefit illustration, but most advisers do not do this duty. This is evidenced by the large number of insurance buyers who do not understand the key features of the policy and the key points in the benefit illustration.

There are only two important points that the insurance buyer should be aware:

a) distribution cost
b) effect of deduction

These two key figures determine whether the insurance buyer is paying too much for the insurance or getting too little back as investment return.

If consumers know what to look for, and how to interpret these figures, they can avoid paying thousands of dollars away unncessarily. These key points are explained in my book, Practical Guide on Financial Planning, which can be bought online here for only $12. The book also contained advice on how to identify and avoid bad financial products.

Land Banking - speech at Hong Lim Park, 12 June 2010

Speech by Tan Kin Lian on land banking.

Friday, June 11, 2010

Land banking report in TODAY

Hi Mr. Tan,

Ex-NTUC Income chief executive Tan Kin Lian, who has blogged extensively about land banking, told MediaCorp that any product sold as an investment should be regulated - especially if it is advertised through the media to the general public.


Singapore Property Market

According to this report, a correction is expected in the private residential market. However, another report showed that HDB resale price continue to increase by about 3% each quarter.

Land banking - Gathering at Hong Lim Park, 12 June 9.30 am

Countdown for tomorrow ....

The time of the gathering (for land banking investors) has been changed to 9.30 am on Saturday 12 June.

09.30am - 10.00am: Registration and Networking
10.00am - 10.15am: Start of presentation: Short Intro on the aims and purpose of our actions
10.15am - 11.00am: Talk by Guest Speaker, Mr Tan Kin Lian
11.00am - 11.15am: FAQs between Audience and Mr Tan
11.15am - 11.30am: Signing of Petition for Regulatory Action
11.30am - 12noon: Drinks

Thursday, June 10, 2010

Land banking

Read this educational article.

Hottest issues in Singapore

What are the hottest issues in Singapore to be faced in the coming general election? Based on the first 100 people who replied to my survey (with each respondent choosing up to 3 issues), the ranking of the issues is:

Rising cost of living and stagnant income - 74%
Too many foreigners in Singapore - 68%
High cost of HDB Flats - 60%
High salaries of ministers - 54%
Rising unemployment of PMETs and no retrenchment benefits - 36%
Unemployment of older workers 25%
Low wages (no minimum wage) - 25%
High GST and levies - 24%

Unemployment (of PMET, older workers) and low wages have now become "hotter" than GST and levies.
Tan Kin Lian

Effect of deduction and distribution cost

Dear Mr Tan,
My mother just bought a Whole Life insurance that is payable for 24 years. She also tag on a Critical Illness rider.

After reading your numerous posts on how expensive life policies are, I would like to seek your comments on the benefit illustration given to my mother. She is currently still in the 14-days free-look period.
The benefit illustration shows that the distribution cost is almost two years of premium and the effect of deduction is more than 40% of the value of accumulated premium. They are both too high, giving poor value to the policyholder.

Please read my book, Practical Guide on Financial Planning to understand these two important measures.
The book provides the benchmark on what is an acceptable level for the effect of deduction for various durations of the policy. You can buy the book at


Learning Chinese

Hi Tan,

I know this email is out of the blue, but I just posted an article on my blog entitled “100 Useful Tools to Teach Your Child Chinese” Anyway I figured I’d bring it to your attention in case you thought it interesting enough to drop a quick mention on your site about it as I’m trying to increase readership of my blog.

Samantha Miller

Legal fees for aborted loan

Hi Kin Lian
I have signed an OTP to buy a flat and proceed to get a bank loan for it. I have subsequently ask for a AIP(approval in principle) loan approval from a bank. It was stated that the loan is void if HDB disapprove the sale.

The sale was disapproved by HDB and I immediately informed the bank. I was assured that it will be void with no further actions needed from my side. However 2 months later, I was told that I have to pay the law firm, which the bank engage to lodge a caveat 1 month after I faxed in the HDB letter.  Can you advise if this is a common practice? Who should be paying for the law firm fee?

I have checked with the bank, however they claim that I should pay for it. I'm still contesting it and I'm asking them to state the clause though it was not mentioned to me beforehand.  You might want to highlight to the readers when they are taking up loans from a bank.

I think that the bank should bear it unless there can show you a clause in the agreement that states clearly that you are required to pay the fee. If they incur the expenses after the loan has been rejected, then they should bear the cost as it was their mistake.

Root cause of the global financial crisis

The problems occuring in many countries are inter-related. Starting with the meltdown of the housing bubble in the US and Europe, we now see the problems with the government deficits in Greece and other countries. The crisis has been temporarily managed with the huge injection of public funds, but this increases the public debt and many observers expect that things will get worse in the months ahead.

What causes all of these problems? Was it deregulation? Was it deficit spending by governments? What is a possible solution? Please share your views?

Wednesday, June 09, 2010

Hot issues in coming general election

What are the hot issues in the coming general election? Share your views in  this survey.

General Election 2010

The general election is widely expected to be held in the second half of 2010. Which party will you vote? Take part in this survey (now closed).
Here are the updated results of the survey, based on 100 replies. The results are quite close to the earlier report based on 58 replies. I have now added the general comments of 19 respondents.

Disclaimer: My blog attracts a higher proportion of people who are unhappy with the government. The results of this survey reflects this group, and may not reflect the general population.

Universal Life policy

A consumer sent to me the benefit illustration of a universal life policy. I found the features of this policy to be as follows:

1. The policy requires an investment of a lump sum of $186,000
2. The distribution cost of the policy is $32,000. This is the money that is taken from the premium to pay commission to the agent and the profit of the company. It is a large sum of money to give away.
3. There is a guaranteed interest rate of 3% per annum, but I am not sure how safe or long is the guarantee. In any case, this is not really attractive, especially after considering the deduction of the distribution cost.
4. The policyholder has to incur a monthly expense charge of $500 or $6,000 a year. This seems to be rather high.
5. There is a monthly deduction for the life insurance cover at a rate that is stated in the policy data. This is not shown in the benefit illustration. I am not sure if this charge is reasonable or high.
6. Based on the benefit illustration, the cash value based on guaranteed interest rate of 3% per annum actually decline over the years. The deductions are higher than the guaranteed intereset of 3% giving a negative return.
7. The cash value under the projected interest rate of 5% will show a gain on your investment after 6 years. This  projection (which is not guaranteed) is unrealistic.

See Practical Guide on Financial Planning

Education and reflection

My friend stopped work for one year to study for an masters degree in a UK university. Here are his thoughts as he reflected on his father (who had since passed away)


Looking further backward, I didn't really study well when I was a student in both primary school & lower secondary school - because I was too playful. This is my regret.
If my father is still around, he will be quite surprised to know the route that I have chosen and came this far.
He is wise. From his point of view, university education is probably a luxury and he probably never expected me to graduate from a university.

He was correct in pointing out that the most important education was probably during primary and secondary schooling because if the student was brilliant, he or she could gain all the necessary and sufficient knowledge and character to succeed as in business.

He once told me that, the years spent by the top 10 richest Chinese businessmen in Malaysia was less than 15 years. The most important criteria were attitude, determination, willingness to work hard, confidence, self-esteem, respect of elders and teachers.

Treat others like you would like to be treated and have a willingness to serve or help others. These characteristics would made him a successful businessman by bringing valuable products to serve a particular market.


Office position

I am looking for a person to work part or full time in my office for administrative and accounts work. If you are interested, please reply to

Do not follow a bad idea

Hi Mr Tan, I found the insurance information listed on your website very informative and useful. I met up with the insurance agent who has come up with the insurance plan. I am not sure whether I am paying a high premium after looking through his proposal.

I find there are quite a few plans that cover disability so I am concerned whether there is any duplication. I am not to keen to put my savings in an investment-linked policy but my friends, brother all purchase the ILP. It could be good to have one. I would like to seek your advise whether there are anything else that I should take note of.


The distribution cost is nearly two years of your savings. The effect of deduction is more than 30% of the value of accumulated premium. These are too high. Read my book, Practical Guide on Financial Planning for an explanation of these concepts.

Do not follow your brother and friends into making the same mistake with a high cost investment-linked policy.

World Peace Index - ranking of countries

Hi Mr. Tan,

The latest Global Peace Index by The Institute for Economics and Peace:

Some rankings:
1) New Zealand
2) Iceland
3) Japan
18) Switzerland
19) Australia
22) Malaysia
30) Singapore
31) United Kingdom
85) United States of America

Tuesday, June 08, 2010

A vision for an egalitarian economy

In recent years, Singaporeans have experienced a higher cost of living, widening wage gap, stagnant incomes and insecurity of jobs. This is reflected in a falling birth rate, which has become among the lowest in the world. Something is wrong.

What is the alternative? I read a few articles from the website of the Singapore Democratic Party. Here is a summary of their key proposals. You can read more details in separate articles in their website. I find their proposals to be quite sensible.

Banks cash top-up scheme

Dear Mr Tan,

I am a regular reader of your blog. I have found it informative and helpful. Many have found the space you have provided a very useful forum. Thank you.

I would like to find out whether there are others like me, finding banks "top-up" schemes unfair and tiring. Because only fresh funds can enjoy higher interest rate, you need to transfer funds and for all the trouble you can only enjoy the higher rate for a short period of time. Initially only Standard Chartered Bank has such scheme. Now UOB and other banks follow suit. I find such schemes very meaningless.

I hope that you can raise this problem in your blog so that others who feel the same way can come together to do something.

My comments
I agree that banks should treat their existing customers fairly. They should not get the customer to go through a lot of trouble just to enjoy a decent rate of interest that is offered to new customers for their deposits.

Take photos of damages

Here is my advice to a motorist who is involved in an accident. In all cases take photographs of the damages to both vehicles, using your mobile phone. Send the photos and the particulars of both drivers to your insurance company. Take this action, even if both parties agree not to make any claim, especially if the damage is quite minor. The photos will protect you against any inflated claims that may be lodged against you in the future.

Tan Kin Lian

An unfair life insurance policy

A policyholder sent to me a benefit illustration of a 20 year endowment policy bought four years ago. This policy provide a sum assured of $100,000 and requires an annual premium of $6,000. It pays an annual cash dividend which can be re-invested to earn an interest rate (illustrated at 3% per annum).

The first year's premium is entirely taken away. For each subsequent year, the cash value increases by about $5,000. This means that the cost of insurance is $1,000 to insure $100,000.  The cost of this cover under a group insurance should be less than $100 a year.

If the policyholder keeps the policy to maturity at the end of 20 years, the benefit illustration shows a return of about 3% per annum, but a large portion of this return is not guaranteeed and may not be realised. If the policyholder terminates the policy at any time, including the 19th year, a large part of the potential gain is forfeited. The cash value in most years is less than the total premium that has been invested.

This type of policy goes against the concept of fairness. Why should a large part of the gain be taken away on the 19th year? Surely, in the case of a participating policy, there is the principle that the policyholder should be entitled to 90% of the surplus, rather than have this share to be confiscated.

It is time for our regulator to look into this type of practices that are quite unfair for consumers. Although the features of this policy is shown in the benefit illustration, the consumers (including those who are well educated) cannot be savvy enough to know about these catches.

I encourage all consumers to join FISCA (, to attend the FISCA talk on financial planning, and to buy my book, Practical Guide on Financial Planning. Be educated, so that you do not fall frey to bad financial products in the future (even if you cannot do much about the bad products that you have been sold in the past).

Tan Kin Lian

FIFA World Cup

Many people are still angry at the high price of $90 to watch the FIFA World Cup on cable television. They compared it to the price 4 years ago, which was just a fraction of this price.

It is sad to see that the cost of this item has increased many fold, due to the wrong kind of competition, i.e. competing for the rights to broadcast the matches, rather than to bring down the price for consumers.

The lesson has now been learnt, and changes have been made for the future, i.e. to require content owners to broadcast on several platforms. 

Back to the World Cup. If the price of $90 is divided by the number of matches, the cost per match is relatively low and can be shared by several members of the family. Even friends can be invited. Compare this with the cost of watching one match at stadium, which must be more than $100.

It will be a good idea for several neighbours to share the price of $90 and to arrange to watch the games together. It will foster the spirit of neighbourliness.

Tan Kin Lian

Price of security

Singapore used to be a safe, peaceful and orderly place. People respect the law. There are sufficient law enforcement officers who are dedicated to their jobs and are respected.

This situation has changed. We hardly see a policman on the road today. Many people prefer comfortable jobs in offices, especially the banks, rather than be a policeman on the beat. There must be an increase in crime in recent years, although they are not reflected in the statistics. Are the statistics reliable?

We have seen an increse in cheating cases involving motor insurance claims and sales of unregulated financial products. Thre are insufficient manpower in the law enforcement agencies to investigate these cases.

On the other hand, we have many older people who remain unemployed for many years. The younger people have taken over their jobs in the offices. But, there are insufficient people who want to be policemen.

The home affairs ministry may celebrate their ability to meet the key performance indicator of reducing manpower cost (which may earn a performance bonus for the people in charge), but this is at the expense of security in our society.

The recent incident of grafitti on the MRT train is an example of how bad things have become. What if there was a bomb planted in the train?

Something is wrong with the priorities in our society.

Tan Kin Lian

Monday, June 07, 2010

Inflated claim

Many motorists have encountered this experience. The car in front stopped suddenly. The car at the bank knocked into the bumper. It was a small scratch. Both parties agreed not to file any claims.

Later, the motorist of the rear car received a claim, usually through a lawyer, for a sum that is way above the actual damages. It seemed that the damages have been inflated. If you do not settle the claim, the lawyer would file a legal suit and take you to court.

What would you do, if you received an exaggerated claim? Share your views here.

Tan Kin Lian

Land banking - Gathering on 12 June

The leaders of the investor group are arranging a gathering of investors as follows:

Date: Saturday 12 June 2010
Time: 10.30 am
Place: Speaker's Corner, Hong Lim Park

They wish to organise the investors to seek the recovery of their investments on the land banking products. If you are involved in this product, you can attend the gathering and submit your particulars and make contact with the other investors. The gathering can decide on collective action.

They have invited me to speak at this gathering. The organisers will be alerting the media for this gathering to be publicised and covered.

Please take part in this survey.

Morality and money

Would a reputable lawyer advise a client to write a contract that is "within the law" but in essence is cheating the public?

Many people consider this situation to be all right for the following reasons:

- it is all about making money, i.e. legal fees
- their duty is to the client (who pays their fees)
- if the law is not clear, it is acceptable for the lawyer to take advantage of the unclarity.

I wonder if the lawyer has a duty that is above making money? Do they have a moral duty to ensure that the society is honest and fair?

I remember an episode in the move "Godfather" where the inhouse lawyer consider it to be his duty to protect the mafia family from being prosecuted under the law, but in all other respects, what the mafia family does is not his concern. Has this type of thinking invaded our society?

The shady practices used to be the work of small time lawyers who seek quick profit. In recent years, these types of practices appear to be acceptable to reputable firms, who have become motivated by greed.

Tan Kin Lian

School holidays

I estimate that 20% of Singaporeans are on holiday during June. This is reflected by less cars on the road and less vistors to my blog in June. If you access to some official statistics, please share them here.

A fine society

Singapore used to be a "fine" society. There is a fine for littering and for jay-walking (i.e. crossing the road against traffic regulations". This has been relaxed for the past one or two decades. Nowadays, jay-walking is no longer enforced.

The environmental agency is now taking action to enforce littering. It is time to take action to enforce other aspects of our law, such as jay-walking and cheating. We need to revert back to our fine and orderly society.

Tan Kin Lian

Inflated repair cost

I'm a 23 yrs old guy who got into an car accident few months back. the accident happened like this, it was red light and when it showed green light the car infront started to move. I was moving at low speed as well and before i knew it, he braked. I managed to brake in time but unfortunately I kissed the back of his bumper and there was no scratches no dent.

I passed him my NRIC, name and contact. However, I did not take down his particulars and did not take any pictures or report to the police about this incident because I thought it was a small matter. Today, he sent me a letter claiming over $6,000 in repair and over $2,000over on 16 days of car rental.

I saw your internet forum about car fraud. How can I prove that the original damage was small? I did offer him to go to workshop to sort this out together but he refused. As there wasn't anyone in my car, I got no witness and evidence. How could i use his evidence against him?

You can pass the case to your insurance company to handle. you can make a report that it was a small dent and that both parties agreed not to report the accident and make a claim.

Life time savings

I posted a story of a non-working woman who invested all of her savings in a 21 year endowment policy. She would have paid $18,000 in premium and obtained a return of $16,000 on maturity. This gave a negative return. Part of the premium went into paying for a rider to provide additiona insurance protection, but this was over-priced.

She obtained a meagre return of less than 1% per annum on the savings portion of the premium. The insurance company would probably have earned an average yield of 5% per annum. More than 80% of the gains went into the commission, expenses and profit. The meagre return could not even cover the inflation during the years. To this woman, it represented most of her lifetime savings, which has been denied of a fair return for a financial plan that was traditionally supposed to be trustworthy.

When I think about the million of policyholders who have suffered this fate, I wonder about the harm that the life insruance industry and the advisers had done to the people. Perhaps this applied to only some of the companies and agents, and that the other companies could have offered a more decent return. But, to my knowledge, quite a large number of people have suffered from the poor return.

Even life insurance companies that offered decent return in the past could change their strategy to focus on making profit for their shareholders and agents. Their policyholders would be placed in a helpless situation, unless the regulator steps forward to protect the interest of the public. In some countries, the regulators were appalled by the type of predactory practices and have taken steps to control the excesses.

Tan Kin Lian

Sunday, June 06, 2010

A matter of chance

Here is a puzzle. You have to guess a number from 1 to 4. Each day the correct answer is drawn. You have 1 out of 4 chance of getting it right. You repeat this exercise for 6 days. What is the probability (chance) of getting the right number for 6 days, 5 days, 4 days, 3 days, 2 days, 1 day and 0 day? Please show in percentages to 2 decimal places. The total must add up to 100%

Send your answer to The first correct answer will win my Tangram book.

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