Saturday, November 28, 2015

Army style is bad for SMRT

A SMRT maintenance engineer told me.
E - SMRT cannot solve the breakdown problem by following army style.
TKL - What do you mean?
E - When a helicopter breaks down, it affects only the helicopter. When a train system breaks down, it affects many people.
TKL - What exactly is the army style that caused problem to SMRT?
E - Command and control. They bring in people at the top who gives orders, without knowing what needs to be done. So, the maintenance people said, "Okay, you tell me what to do".
TKL - Oh!

I wonder if things are really that bad, or it is just one unhappy engineer?

Restructure the bus services - express and feeder services

Here is my proposal to restructure the bus services in Singapore.

Current System
We now have 375 bus services in Singapore using 4,621 bus stops located on average 0.4 km apart. A typical bus service has 50 stops. The travelling time between each stop is about 2 minutes. A typical bus journey from terminal to terminal may take about 100 minutes or nearly 2 hours. (Some of the figures are based on my guess).

Proposed System
Under the proposed system, we will convert 900 bus stops to be express stops served by the express services. These express stops are located every 2 km apart. The express services stop at the express stops only. This will reduce the travelling time and can make better use of the dedicated bus lanes.

We will probably need only 80 express services to provide connections to the 900 express stops. Although the remaining 295 service can be feeder services, it is possible to combine them and reduce the number. I guess that 160 feeder services should be sufficient to cater to the needs of commuters.

With a 40% reduction in the number of services, the waiting time to take an express or feeder bus is likely to be reduced by at least 40% as there will be more buses for each service. The waiting time for an express bus can be reduced from 10 minutes to 6 minutes and for a feeder bus from 5 to 3 minutes.

The overall travelling time can probably be reduced by 30% under the new system as the express service will make less stops and the intermediate stops will be served by feeder services. Although this may require 1 or 2 more transfers, the waiting time may not be increased as the buses will arrive more frequently.

Planning the new system
We have the data of the travelling pattern to plan the new system. The data shows the number of people boarding and alighting at each bus stop during each time segment (say, every half hour). If we group the bus stops according to the nearest express stop, we will be able to measure the estimate for each of the express services for different times of the day. The travel time of the buses can be planned accordingly.

The planning can be made dynamic with the travel data for each week used to plan the scheduling for the following week.

Friday, November 27, 2015

Do not look at Uber as a problem, it is the solution

The MRT train keeps breaking down at regular intervals. There is nothing that can be done, as the system is clearly over loaded.

The solution is to bring commuters to other forms of transport. How can this be achieved? The roads are already congested. It will be difficult to add more buses, and it will also be costly.

There is a solution. Guess what it is. It requires the LTA and the government to "think out of the box". Sorry, this solution is not found in the SOP.

We need to make better use of our private cars to provide transport. Most cars now has only a driver. We should encourage car pooling. there is non-clarity now on whether car pooling is or is not allowed (e.g. there is payment of a fee) and if insurance is affected. The LTA must provide the regulation to give clarity.

We should also encourage the use of booking of private cars for transport, i.e. the Uber or Grabcar platform. We should increase the supply of this service to bring down the cost. Many owners of old cars will be willing to provide this service to earn an extra income.

The use of Uber will impact the taxi service. But, the taxi drivers can become Uber drivers, so their livelihood is not affected. The taxi companies will make less profit but they already made sufficient profit it the past.

We need to make better use of our existing roads and vehicles to expand the supply of public transport service.

In short, instead of looking at Uber as a problem, the LTA should look at Uber as the solution!

Thursday, November 26, 2015

Claim for Loss of Use of Car

Dear Mr Tan,

I asked my insurer to help me to make a third party claim for the repair of my car and for loss of use. I get this reply from them.

"We believe there is a slight mis-understanding regards Aviva's role relating to your motor policy. The insurer (Aviva) does not have legal rights over your personal losses. Aviva has legal rights only to recover the repair cost it paid as it was stated under the rights of recovery in your motor policy.
Your motor policy only covers payment to the repairs of your vehicle upon an accident and/or liability against another party as a result of your action arising out of that accident. The recovery of your loss was always out of goodwill to our insured."

I am not legal trained but I do have a fair understanding of the law as a layman.

If the insurer has no legal binding contract with the third party regarding my loss of use, then why does the insurer meddle or dictate the amount of loss of use? How can the insurer say for a certain capacity of vehicle, such and such is the loss of use? Is this an agreed amount throughout the industry?

If it is, then why do taxi drivers have added privilege with regard to loss of use? Taxi drivers' loss includes rental of vehicle plus personal losses. If I were to become an uber driver, would my loss of use be increased since I function like a taxi driver? I hope you can advise me accordingly.

Under the policy, Aviva is contractually obliged to repair your car. They have the legal right, called subrogation, to sue the other parties to recover the amount that they have paid for the repair of your car.

The policy does not provide for loss of use, so Aviva cannot pay you for loss of use and recover it from the other party.

You have to take action on your own to make this claim on the other party.

It is a different matter when the other insurer negotiate with you on the amount for the loss of use. Usually, they will recognize the actual loss that you have incurred, e.g. rental of a car, taxi fare, etc. If you make a reasonable amount of claim, they are likely to agree with you.

I hope that this explains the position clearly.

Wednesday, November 25, 2015

De-privatizing the public transport system

Singapore has been operating a privatized public transport system for the past 30 years. It has been unsuccessful,. The transport operators, i.e. SMRT and SBS, were profit-oriented. They increased their profit by reducing maintenance expenses, leading to frequent breakdowns in the train system. They are reluctant to operate bus routes that are unprofitable.

The public are unhappy with the decline in service and deterioration in the public transport system. They are now in favor of the government taking back ownership of the system. Someone has coined the term "de-privatization" to describe this action.

The government has already started to de-privatize the public transport system. The recent award of the Loyang bus services to the UK operator, Go-Transport, is the first step in this complicated exercise.

Under the de-privatized model, the operator collects the fares and pass them to the government agency, i.e. the Land Transport Authority. The LTA sub-contracts the operation of the transport services to the operator for a fixed fee under a term contract of say 5 years.

The contractor has to meet the operating and service standards specified in the contract and receive the agreed fees. By operating efficiently, they aim to make a profit. But they are not affected by the actual revenue, the setting of the fares or the planning of the routes. These activities remain under the control of LTA.

Contracting model
Singapore organizations has a wealth of experience with the contracting model. The building of HDB flats and MRT stations are carried out under the contracting model. The contractor tenders a price based on the performance standards of the contract. The contract is awarded by the principal to the successful tenderer.

The principal has the ability to monitor the performance of the contract. The contractors are also experienced in handling their part of the contract. There is also an established mechanism for handling disputes in the contracts.

Is this the right strategy?
The contracting model that is being implemented now has operated successfully in the case of London Transport. I believe that it is the right model for Singapore as well.

We should not expect everything to operate smoothly in the initial years. But it should operate better than the current privatized model. We can expect problems to arise with the new contracting model, but they can be sorted out and improved with experience.

We can look forward to a better public transport system. Of course, we need the Land Transport Authority to be competent in managing the new model. We hope that they have the right people to manage the change and to run the new model.

Tuesday, November 24, 2015

What's Wrong #16 - Lodging a police report

Many years ago, it was possible for the public to lodge a police report at any police station on any crime or offence.

This procedure seemed to have changed in recent years. If the public goes to lodge a police report about some traffic matters, they are told to go to the Land Transport Authority. If the matter concerns the environment, they have to report to another agency.

I read a newspaper report that someone reported to the police about car racing in the early hours of the morning. The police directed him to the Land Transport Authority that is in charge of traffic matters. The LTA directed him to the environment agency as it is noise pollution. 

What's wrong?
Many people find this new practice to be confusing. They do not know where to make the report. I have heard anecdotes about people being directed from one place to another.

Most of the responsible agencies do not have a network of stations where the public can go to make a report. 

How to put it right
The police station should be the place to make the report. The report can be referred to the responsible agency for follow up. 

There is an added advantage. Under the law, a person will be committing an offence if he lodges a false report to the police. This law will make the public mindful about lodging a genuine report. This law may not be available to the other agencies. 

Unfair for insurer to reject a claim due to non-reporting by their insured policyholder

Dear Mr Tan,
I am writing to request your expert advice on motor insurance terms and conditions, since you were previously NTUC's CEO.

I met with an accident this May. The third party was at fault. The entire incident was captured on video and the video together with my report was filed to claim from the insurer of the third party, which was NTUC.

NTUC claimed that their insured had not reported the accident to date and that makes them not liable for the claim from me. They have repudiated the claim. Based on this, I made a claim against my own policy and my insurer has managed to counter claim from the third party directly on my behalf, except for my loss of use, which my insurer will pursue.

I would like your expert advice on this clause which allows the insurer to repudiate the claim despite the aggrieved party having sufficient proof to make a rightful claim. This may be an industry practice for insurers to repudiate non-reported claims, but is this fair to motorists? Motorists are made to buy insurance for the very purpose it serves, but if that purpose can simply be negated by a simple and fraudulent technicality such as 'non-reporting', then motorists will beg the question, 'Why bother buying insurance in the first place?'

I am going to write in to the current CEO of NTUC. I hope to get some advice from you first before doing so. What can be done for the industry to acknowledge legitimate claims despite the insurer's own client failing to comply with the insurer's own terms and conditions? The industry practice has to change in my opinion.

I agree with your view.

When I was CEO of NTUC, I instructed the claims manager that it is not fair for them to repudiate a claim due to non-reporting by the insured policyholder, unless there are justifiable reasons. 

There is the possibility that the accident never occurred, or a case of mistaken identity, or the insured policyholder rejects liability for the accdient. In these cases, the insurance company could rightly reject the claim for non-reporting. 

In your case, you were able to provide evidence to identify the car concerned. It is not fair for the insurer to repudiate the claim and cause problem to the third party claimant. 

To avoid this trouble, it is best for you to leave the claim to your insurance company. A good insurance company will allow you to keep the No Claim Discount, if the accident is clearly not your fault.

What's Wrong #15 - Police did not investigate

A few years ago, I lodged a report with the Commercial Affairs Department jointly with another person. We made a complaint against a person who was alleged to be cheating the public by offering forex training courses at high fees. We submitted documents to show that the representations made by him in his advertisements were fraudulent.

We followed up closely with the investigating officer over several months. We asked him for updates into the investigations. His reply was "still under investigation". He was not able to give any concrete information to us.

After six months or so, we received a reply that the matter had been closed, due to lack of evidence.

We insisted on meeting the investigating officer. I asked him, "Did you call up the person mentioned in our complaint for questioning? He said, "no". I asked him again, "You mean that you investigated for six months without even meeting this person to ask for his explanation to our allegations?". He said. "Yes". I know for a fact that he did not call me or my co-complainant for further clarification on our complaint.

One year later, I helped a group of people to lodge another complaint another person who allegedly cheated them on some investment. The outcome of the case was the same. The investigating officer reported after six months or so, that there was "no case".

In both cases, I strongly suspected that the investigating officer just prepare the paper reports and did the paper research. They probably did not call the complainants for further clarification or the persons complained against for their explanation.

What's wrong?
The police did not do the basic steps needed to investigate the complaint.

After a while, the parties who are committing fraud to cheat the public will get the impression that no action will be taken. They will continue to perpetuate one fraud after another.

They will close down one company who has a bad record of complaints and set up a new company to continue their fraudulent activities. Some of these fraudsters had continued their operations for more than a decade.

How to put it right
The investigating officer should call up the parties complained against to get their explanations on the allegations against them. He should also keep in regular touch with the complainants to get further clarification from them and to give them the assurance that their complaints are getting the required attention.

Monday, November 23, 2015

P2P Lending Platform

About Kelvin Teo, Chief Executive and Co-founder of Funding Societies

Kelvin Teo started Funding Societies while he was completing his MBA at Harvard Business School. Prior to starting Funding Societies, Kelvin graduated as the valedictorian of the Business School at National University of Singapore (NUS). Since college, he has been passionate about entrepreneurship, studying technopreneurship in University of Pennsylvania.

Under his leadership, Funding Societies has raised funds, recruited a team, launched the platform, originated S$1million in loans and introduced the first escrow Trustee arrangement in Singapore for platform fund handling within 6 months. His vision is to build a world-class marketplace with best practices observed in US and customized for the societies of Southeast Asia.

The Most Overlooked Principle of Investment in a Weak Economy
In my years as a consultant, I have advised and been mentored by many brilliant individuals including the CEO of major corporations and household names. Risk / return ratio was always the centrepiece of major decisions. While regulators and financial institutions are taking up more responsibility in the post-crisis world with Dodd-Frank and Basel III, we as individual investors should view investment return with a risk lens too, for risk is the shadow of return, the two sides of the same coin.

Many are attracted by the idea of “guaranteed investment return” or “maximum return minimum investment.” A Google search of these keywords gives us 3.2 million and 216 million results respectively.

However, these pursuits are inspirational but not aspirational. In financial markets and many commercial activities, if one wants to achieve higher returns on average, one often has to assume more risk. The key question is then not “How can I make the most return?” but rather “How can I make the most return at a risk I’m comfortable with?”

Four Common Approaches in Risk Management
In the practice of risk management, there are 4 common approaches towards risk i.e., avoid, transfer,
mitigate and keep. Most would inadvertently take the approach of avoid or keep i.e., avoid investment risk and not invest at all, or invest and face the full risk. In fact, based on an internal survey Funding Societies has conducted with 500 members of the public, 50% of the respondents across all segments keep their funds in saving accounts and do not invest. 19% of respondents consider returns but not safety of capital as critical investment criteria. Avoid and keep are common not because of ignorance, but because of convenience.

Importance of Diversification
Investing has to be deliberate. For most, we believe the right approach is to mitigate risk by systematically diversifying investment. While a focus strategy may be suitable for experts who dedicate hours into analyzing and monitoring investments, diversification is tremendously valuable for regular investors who prefer to “invest and forget”. Effective diversification is not only about making more investments, but also investing in areas less correlated with each other by geography, industry and asset class etc. This is especially true in a weak economic environment that is fraught with uncertainty.

I have personally invested in equity, investment fund, real estate and alternative investment, with of
course always 6 months of savings as contingency. I began with Asia equity and bond investment funds to achieve diversification even with limited capital. As I accumulated more capital, I ventured into US equity and Singapore real estate for further diversification. Diversification has helped me through many financial crises. By strategically allocating funds into a portfolio suitable for me, I only have to check my investments once a month and still enjoy reasonable returns.

P2P Lending Platform – A New Way to Diversify Your Investments
The recent rise in alternative investments such as peer-to-peer (P2P) lending in US, UK, Australia and China provides a new, proven opportunity for higher return and diversification. While higher return clearly comes with higher risk, it is at a level suitable for working professionals like me, especially given the shorter term and hassle-free nature of P2P lending. Investing on P2P lending has become my new favorite. A few P2P lending platforms have since launched in Singapore. An example is Funding Societies that focuses on small-medium enterprise (SME) loans.

Of course, diversification takes capital, cost and effort. Undue diversification could spread us too thin
across investments. The key is to select uncorrelated investments. The less correlated the investments
are, the better the diversification effect. One may ask: how do we know whether the investments are
correlated? Without going into a statistical model or correlation matrix, basic intuition is a good start.

As risk guru Michel Crouhy aptly summarized, “The future cannot be predicted. However, the financial risk that arises from uncertainty can be managed.” We need to be deliberate in our risk / return decisions and be diligent in diversification because if we don’t decide them for ourselves, the market will decide for us.

How the investors were enticed

Mary (who was cheated in the argawood investment) told me that she was approached by a telemarketer. She attended a seminar. She made her own investigation before investing. There was another argawood company that showed profit for the investment.
I told her that this was their mode of operation. The promoter set up a company on a small scale and allowed the initial investors to make a profit. After that, they were able to attract many investors for their bigger scale operations. Even the initial investors who made a profit put more money into the later operations. The later investors got stuck with non yielding trees. 

This is similar to the land banking plots. The earlier investors were able to sell their plots for a small profit (probably to buyers who were connected with the promoters). They were excited and made bigger investments. They also get their friends to come in.
It is the same story with the gold investments. The earlier investors were paid an attractive return. They came back to make bigger investments. The pattern is the same for all of these types of "scams".

Investment in Agarwood

Mary (not her real name) called me. She was caught in an investment in agarwood. Together with other investors, they had lodged a report with the police that they have been cheated. After 9 months, the police did not take any action. There was no progress. 

One of the person involved in the agarwood company was previously the sales manager of a gold investment company that was also closed down. He had since moved to this new investment company. 

Due to this bad experience, Mary is now convinced the people involved in the agarwood company are professional cheats. They know that they can carry out these activities and the police will not stop them.

Some of the investors came from outside Singapore. They thought that it was safe to invest in Singapore, due to government control, but they are now disappointed. Our reputation is going down the drain.

Hassle of booking an appointment

I called the Singapore National Eye Center to book an appointment. I still had to press 3 buttons before I talk to somebody.

For English, press 1
To book, change or cancel an appointment, press 1
To change or cancel an appointment, press 1 to book a new appointment press 2.

After getting through, I get a message ... "You are the first on the waiting list". Still I have to wait for a while before somebody answers.

I get the impression that the people who designed the IVR system wants to make the public go through many barriers.

It should have been quite easy to have the same staff handle booking, change and cancellation in 2 languages.

Gloomy forecast for property market

Here is a gloomy forecast for the property market in Singapore. I agree with this view, and has been stating a similar view for several years.
Fortunately, the government has the means to reduce the impact of a bursting of the bubble. Their measures so far, have stopping the bubble from getting bigger, but have not brought down the prices yet.
The government thinks that they can hold the market until the global market recovers. But this will take several years. My guess is that they cannot hold the market for that long.
So, the government will have to look for new ways to handle the looming crisis. Good luck to them.

Sunday, November 22, 2015

Fight against global terrorism

When the terrorist attacked the World Trade Center in 2001, it was the American President who wanted to fight global terrorism.
Now it is Russia's turn to lead the fight against global terrorism.…
Looks like musical chairs.

Encash the participating bonus

Dear Mr Tan,
Thank you very much for your constant contribution to the insurance community.  Certainly, your perspective on a lot of the issues discussed provided many with good guidance on how one should approach insurance.

I noticed there is one topic that is seldom discussed and that is the idea of encashing one’s participating policy’s declared bonuses.  I was recently introduced to the idea and after a lot of thinking through, realised that this option provides a policy holder the ability to enjoy the benefit of a ‘partial claim’ without the need to fulfil a claim condition.  I am also unable to find a downside to this approach except for the possibility that the final terminal bonus may be adversely affected.  However, as terminal bonus are never guaranteed,  there is really no way one can verify that.

I would like to seek your insight and wisdom as to what you think are the possible downside of such an approach as compared to initiating a partial surrender, APL or terminating a policy in order to managed one’s obligation to pay the policy premium.  The way I see it, using this bonus encashment method would mean that one could continue to keep his whole life policy alive as it become self-funding as long as the bonus declared are sufficient to cover the premiums.  This is possible when a policy has been held for 20 plus years and has grown substantially in terms of its bonus.

Appreciate if you could enlighten me if my views above are in error.  If my above analyses is correct, then effectively, all participating policies (when the insurance company is honourable enough to declare fair bonus like those declared in the 1990s by NTUC)  would become self-funding after some time and that is a good basis for one to keep their participating insurance policies for lifetime cover.

When you encash your bonus, the insurance company pays you a discounted value. For example, if your bonus is $5,000 and the maturity date is 10 years away, and the discount rate is 5% p.a., you will get only $3,069. You have to decide if it is better to get $3,069 in cash now, or wait and get $5,000 in 10 years time. 

If you encash your bonus, it may reduce your terminal bonus on the maturity date, as the terminal bonus may be calculated on your accumulated bonus. It will not affect your terminal bonus, if it is calculated on the face value of the policy. It depends on the practice of each company. It also depends on the type of policy that you have taken, as the practice may differ with different policies of the same company.

The answer to your question is that it depends on the terms that you are offered for encashing your bonus. It is not possible to rely on a general statement.

Blog Archive