Ask for relevant information

Dear Mr. Tan

I read your blog today on the "Bonus that reflect the actual experience" and "A poor yield on single premium endowment expired in 2 month time" with a projected return of 3.06%.

Will it be a scenario that the 10 year Growth plan compare to a 5 year plan bought in the same period - 10 year may only get a little bit higher return upon maturity since smoothing start in April this year.Let us take two policies as an example.

5 year plan for $50K from 01 May 2003 and matured on 30 April 2008 for $58,100-00 @ 3.06% against a 10 year plan buying at the same year.
(details removed)

REPLY

I suggest that you write to ask NTUC Income on the following:

a) What is the cash value of your policy now, if you terminate it

b) What is the yield on the cash value

c) What is the projected maturity value of the policy?

d) What is the yield at that time.

e) What is the yield earned by the Life Insurance fund during the years that your policy has been in force, and the projected yield up to the maturity date.

Perhaps you will be able to get a better idea when Income gives the above information to you.

Bonus that reflect the actual experience

Siewkhim asked if NTUC Income has responded to my question about adjusting the bonus to reflect the "actual experience".

I had sent a question regarding the maturity value of the 5-year Growth policy belonging to my wife that will be maturing in August. I pointed out that the maturity value is far short of and does not reflect the "actual experience" during the past five years. I have received a reply that my issue will be attended to "officially". I have not received any further communication after two weeks.

This is the style adopted in most organisations of Singapore. Keep the customer waiting. Do not engage in any conversation. When you are finally ready, give an official reply and defend it strongly. It reflects a disrepect for the rights of the customer.

As this is a complicated matter, I will wait for another one or two weeks, before I take it up at a higher level.

I also intend to raise the issue of the bonuses and cash values of other existing policies that are far short of the "actual experience". A few of my personal policies fall in this category.

Outsourcing of work

Some government agencies identify their non-core activities and engaged in outsourcing the work. Some examples are cleaning of premises and answering of telephone calls.

Most people are familiar with the tendering approach, as follows:

> specify the standard of work
> award the work to the contractor that gives the lowest cost.

The consequence is that the contractor will find the cheapest source of labour, including foreign workers. Eventually, the standard of service deteriorates. Wages continue to be depressed.

There is another way of approaching this outsourcing of non-core work, as follows:

> specify the contract price, including the wages to be paid to the workers
> award the work to the contractor that is able to give the best standard of service.

If a specified wage is given, the focus is to select the best candidates for the job. This will ensure better standard and quality of service. The contractor's task is to ensure that the human and other resources are organised efficiently to meet the rapid changes in the business environment.

I hope that more attention can be paid to this new method of outsourcing, which is based on quality of service, rather than reducing cost.

Saving regular to buy a Life Annuity

Dear Mr. Tan,
From what i know most insurance company annunity plan premium are lump sum. Do you know any company (beside Z) that premium can be paid monthly till age 65.

REPLY
In my view, it is better to invest in a low cost investment fund to get a good return on your savings until your retirement age (which can be at, before or after age 65 ).

You can take the savings to buy a life annuity (by paying a lump sum premium) at that time. This gives you the greatest flexibility and a better yield.

Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/life.html

Switching to a new rider for Shield plan

Dear Mr. Tan,
I just received a notice from X advising existing policy holders of the Plus Rider to switch to the Assist Rider. The rationale being that it will assist policyholders to save more in the long run. Medical cost according to their notice has increased as much as 30%. The difference between the Plus Rider and the Assist Rider is that the Plus Rider ensures that the patient does not have to co-pay whereas the Assist Rider would require the patient to pay up to $2000 or 10% of whatever is claimable. The Plus Rider will no longer be available to new policy holders.

What is your view? Would you switch to this? Do I have to take a healthcheck in order to renew my policy or are existing applicants automatically ensured coverage?

REPLY
You have the choice of discontinuing the rider or switching to the new rider. I hope that this FAQ can help you to make your decision:
http://www.tankinlian.com/faq/shield.html

You are not required to do a healtheck to switch to the new rider.

Is it time to invest in the stockmarket?

JUST A PERSONAL OPINION.

If you are a long term investor, it is about the right time. The global stockmarkets have corrected down by about 20 percent. It is almost one year, since the subprime crisis surfaced. Most of the bad news have been discounted. The recovery is likely to occur over the next three months to six months (just a guess). It may be earlier.

Something may happen that will trigger a recovery. By that time, the market may move up quite rapidly, and you miss miss the boat. So, as a long term investor, it may be time to start investing.

Investing to get a retirement income

Dear Mr. Tan,
You have always talked with much sense & wisdom. I would like to seek your views.

I have been told by my insurance agent that with my impending retirement, it is good to invest in Investment Linked Policies (ILPs). Let the investments grow and sell little bit by little bit, when I need money.

But with market turbulence and falling equity prices, I have a feeling that this may not be the way to invest. What is your opinion here. Please help out with your opinion.
E

REPLY

Please read these FAQs and see if they are helpful in your decision:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/seniors.html

If you are investing for the long term, say 10 years or longer, it is all right to invest now. You can ignore the market turbulence in the meantime. It is difficult for you to catch the right time to invest anyway. In a turbulent time right now, you have the chance to buy the equities at a lower price and make a bigger gain when the market recovers.

It is all right to invest in a ILP and have a monthly withdrawal to get your retirement income. You should choose a single premium ILP (where the upfront charges are 2% or less, and the annual fee is less than 1%).

Wish you all the best.

Financial planning and inflation

For the first time in 20 years, we have to deal with high rates of inflation. Are you saving enough and earning a sufficient return to cope with inflation?

Here are some simple tips on how to deal with this matter. Read this FAQ:
http://www.tankinlian.com/articles/financial.html

Put People First

I hope that our business policies are made on the concept of "put people first", rather than "make more profit".

By putting people first, the business can still earn a good profit margin. They will get the loyalty of their customers.

Some businesses make more profit by overcharging customers or degrade the service to customers. They may reduce their expenses, but they add more cost to the customers. Some examples are:

1. SMRT reduces the number of trains during off-peak hours. The commuters have to wait longer for a train. The train will be nearly fully packed, even during the off-peak period. By adding more train, SMRT will increase its cost marginally, but it will improve the comfort level of the commuters significantly.

2. Businesses make customers waste a lot of time in navigating through their automated call center systems. It reduces the expenses to the businesses marginally, but add a lot of wasted time and telephone bills for the customers.

3. Businesses make customers wait a long time at their customer service counters. If they increase the manpower to serve customers, they may increase their cost marginally, but reduce the waiting time for customers. Wasted time is costly to customers.

If there is genuine competition, businesses will put their best effort to "put people first", so that they win over the loyalty of their customers. Unfortunately, in Singapore, many businesses are operated by near monopolies. In competitive situations, these businesses apply unfair methods to lock their customers into term contracts and then treat the customers badly during the lock-in period.

I hope that there is a stronger voice to speak for the consumers in Singapore.

Suggestions are not welcomed

Dear mr Tan
You have given so much practical suggestion for improvement for our public transport such as for MRT, taxi etc - I presume you have also been in direct contact with the concerned parties. Do they respond at all or accept any of your suggestions? Are they allowed to read your posting or allowed to reply?

I think the authorities concerned should make it a point to browse through your blog and other websites which are frequently suggesting improvement. They should actively encouraged those citizens who so freely give out ideas for improvement without any charges or selfish intention. Perhaps I am too naive to think in such way.
monsoon

REPLY
I have given a lot of suggestions to different levels of the Land Transport Authority and Ministry for Transport. Are they listening?

Read my article on "Suggestions are not welcomed".
http://theonlinecitizen.com/2008/06/suggestions-are-not-welcomed/

Often, I do not get any reply. This is our Singapore.

A divine right

A very attractive young girl was about to enter the church in a topless dress when the vicar ran towards her.

"I'm very sorry, miss," said the vicar, "but I cannot possibly allow you to go into Church like that."

"But I have a divine right," protested the young girl.

"Yes," agreed the vicar, "buy you have a divine left too, but I still cannot let you into my church like that."

Encourage more people to take public transport

Editor
Forum Page
Straits Times

During the past year, I take the MRT train regularly to visit most places in Singapore. I find the train to be more convenient that driving a car. I avoid paying high ERP and parking charges and driving in congested roads.

I wish to give the following suggestions to make it more convenient for commuters to take the MRT train:

1. Have a digital display above each door of the train to announce the previous, current and next train station as the train moves along the journey. The names of the stations can be displayed in English and Chinese. This system is used in the Taipei system and is helpful for passengers.

2. Have a green light at each door, to indicate the left or right door that will open at the next station. This system is adopted in Hong Kong.

3. Mark the space near the door with a yellow box. Passengers standing in this box should make way for disembarking passengers.

4. Display a map prominently at the exit of the MRT station, showing all buildings and bus services serving each bus stop within 2 kilometers of the station. This will make it easy for a commuter to take a connecting bus to their final destination.

5. Allow independent operators to use a light bus to run a feeder service to serve the catchment around each MRT station. This service can be operated at a low cost, with a short waiting time.

The first four suggestions are low cost and easy to implement. It will make it more convenient and enjoyable for commuters to take public transport, instead of driving a car.

Tan Kin Lian

Give adequate wages to low income workers

I wrote an article with this title in Online Citizen. It is drawing a lot of discussion and comments.

http://theonlinecitizen.com/2008/06/give-adequate-wages-to-low-income-workers/#comments

Tolerance for mistakes

I posted this comment in www.theonlinecitizen.com regarding the case of a father who went through the immigration checkpoint using his son's passport (by mistake).

I am appalled at the attitude of Singaporeans to mistakes that must occur from time to time.
The photograph on the passport is usually taken a few years ago. It may be difficult for the immigration officer to detect the difference between a father and son from the photograph. It is sometimes diffiult to judge a person's age from his physical appearance.

If our immigration officers have to screen through 350.000 Singaporeans and visitors each day, an error rate of 1% of 1% means that 35 people will have to be missed daily.

Is there a big security risk? I doubt it. If I am a criminal trying to flee Singapore, there are better and easier ways to leave this place than using a wrong passport.

I do not like to see over-reaction that will lead to stricter measures that will create a lot of inconvenience to ordinary people who has to travel.

I do not tolerate complacency. I am very irrated to see customer service officers chatting among themselves, rather than serving the customer. This also applies to immigration officers. They should pay attention to their work, rather than chat among themselves to relieve the boredom. I hope that the supervisors can instill this discipline.

Let us accept mistakes as they occur and do not try to exaggerate their impact. We are not a perfect society. Let us focus on the more important things in life.

Jubilee Series 8 Notes

Hi Mr. Tan
What do you think of the above investment?
> Standard Chartered Bank is pleased to offer you higher fixed rate interest on your deposits and investments.
> The Jubilee Series 8 Notes, which pays 3.15% p.a%, interest payable quarterly,
EC

REPLY
There is an analysis of this product in this blog:
http://www.lioninvestor.com/merrill-lynch-jubilee-series-8-notes/

I usually advise people to avoid structured products.Read this FAQ:
http://www.tankinlian.com/faq/sinvest.html

Are restructured products fair to small investors?

Are structured products fair to small investors? The evidence is "no". Many people have been disappointed with the poor yield on structured products. What can be done to deal with this problem?

Here are my views:
http://www.tankinlian.com/articles/structuredi.html

Lucky draw on a donkey.

Here is one of my favourite jokes which has some relevance to insurance.

A young man bought a donkey for $100 from a farmer. The donkey died. The owner thought of a way to get his money back. He arranged a lucky draw for the donkey, sold 100 tickets at $2 and collected $200.

The winner of the draw came to collect the donkey, found that the donkey was dead and made a complaint. The owner refunded back his $2.

The moral? Some insurance companies collect your premium. When you make a claim, the reject the claim (or refund back your premium) on the grounds of non-disclosure or other reasons. Look for an insurance company that is honorable in paying claims, and in treating customers fairly.

Waiting for Permission

Four young men - American, French, Indonesian and Singaporean were shipwrecked on an island. The local girls were friendly.

After a while, the American, French and Indonesian found their partners. The Singaporean was waiting for permission from his boss back in Singapore.

Waiting to be introduced

An Englishman, an Irishman, a Scotsman and an American, hitherto complete strangers to each other, were shipwrecked on a desert island. The natives were friendly and in a short time the American was doing show business, the Scot was running a store, the Irishman was training an army, while the Englishman was waiting to be introduced.

Wasteful competition

SMRT offers a free bus ride from Dhoby Ghaut station to Chinatown on Sundays and Public Holidays.

Why? I seems to be SMRT's way of diverting passengers from their competitor (ComfortDelgro) which operates the North East Line serving Chinatown.

Why is SMRT so wasteful, in creating unnecessary capacity? It will be better for SMRT to save this expenditure and reduce the train fares for their customers.

I hope that the Public Transport Council will disallow SMRT from raising their train fares, if they can afford to be wasteful.

Disembarking the MRT train

The passenger has to disembark the MRT train using the right or left door, depending on the station. Although I am a regular traveller, I have to look out of the windows to see which side has the platform.

It will be useful for the train to display a green light on the door that will open at the next station. This helps the passenger to get ready to use the right door.

New poll on Restructure of Bonus

Someone has started a new poll on the restructure of bonus in this forum:
http://forum.channelnewsasia.com/viewtopic.php?t=157026&highlight=ntuc

Like a bird

"Doctor, I'm worried about my wife. She thinks she's a bird".

"Well, you better bring her to see me."

"I can't. She's flown south for the winter."

Unable to comment on specific products

Hi, Mr. Tan,
I have signed up for the following life insurances:

1. Life Protector Plus is uniquely designed to give you maximum and permanent life protection at a very affordable rate. It provies up to 140% extra coverage in addition to your chosen sum insured till age 65. Protection for loss of life, terminal illness and total and permanent disability (TPD). In the event of TPD, a lump sum benefit will be paid. Choice of supplementary benefits available for additional benefits and protection.

2. Nest Egg is a regular premium participating endowment plan which allows me to participate in the performance of the participating fund in the form of bonuses that are not guaranteed.There will be no bonus paid on death or TPD claim. IRR for a sum assured 50k, cover term of 20years and premium term is 15 years is 3.6%

Are these products suitable for me?
P

REPLY
I am not able to comment on these two specific products. Generally, I dislike them due to the high upfront cost to pay commission to the agent.

I advise consumers to buy term insurance and invest the difference in a low cost investment fund.

Read these FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/savings.html

Living Policy give poor value

Someone asked me why I now advise against the Living policy - when I previously encouraged its sale as CEO of Income.

When Income kept its expenses low and distributed its bonuses fairly to policyholders, its Living policies and other products gave good value, compared to similar products in the market.

I bought two Living policies during the past years. Recently, I found to my great disappointment, that the cash value on one of the policy has still not reached the breakeven point after 12 years. This was due to the bonus cut during the crisis years.

Although the investment yield has improved significantly (with an average yield of 7.8%), the bonus cuts have still not been restored.

In fact, the cash value is far short of the "asset share" of my policy. The asset share is computed based on the premiums paid and investment income earned, less the actual expenses of the policy.

If insurance companies continue to treat their policyholders unfairly, incur high expenses and give a poor cash value that is is far below the "actual experience", I have to advise people to avoid all life insurance products - except for term insurance.

Life insurance is not a means for agents to earn high commissions and insurance companies to earn high profits, by giving a poor deal to customers.

Sand and stone

TWO FRIENDS WERE WALKING THROUGH THE DESERT.
DURING SOME POINT OF THE JOURNEY, THEY HAD AN ARGUMENT,
AND ONE FRIEND SLAPPED THE OTHER ONE IN THE FACE.

THE ONE WHO GOT SLAPPED WAS HURT,
BUT WITHOUT SAYING ANYTHING,WROTE IN THE SAND
'TODAY MY BEST FRIEND SLAPPED ME IN THE FACE'.

THEY KEPT ON WALKING,UNTIL THEY FOUND AN OASIS,
WHERE THEY DECIDED TO TAKE A BATH.

THE ONE WHO HAD BEEN SLAPPED GOT STUCK IN THE MIRE
AND STARTED DROWNING, BUT THE FRIEND SAVED HIM.

AFTER HE RECOVERED FROM THE NEAR DROWNING,HE WROTE ON A STONE:
'TODAY MY BEST FRIEND SAVED MY LIFE'.

THE FRIEND WHO HAD SLAPPED AND SAVED HIS BEST FRIEND ASKED HIM,
'AFTER I HURT YOU, YOU WROTE IN THE SAND
AND NOW,YOU WRITE ON A STONE, WHY?'

THE FRIEND REPLIED
'WHEN SOMEONE HURTS US WE SHOULD WRITE IT DOWN IN SAND,
WHERE WINDS OF FORGIVENESS CAN ERASE IT AWAY.
BUT, WHEN SOMEONE DOES SOMETHING GOOD FOR US,
WE MUST ENGRAVE IT IN STONE WHERE NO WIND CAN EVER ERASE IT'.

LEARN TO WRITE YOUR HURTS IN THE SAND
AND TO CARVE YOUR BENEFITS IN STONE.

THEY SAY IT TAKES A MINUTE TO FIND A SPECIAL PERSON,
AN HOUR TO APPRECIATE THEM,
A DAY TO LOVE THEM,
BUT THEN AN ENTIRE LIFE TO FORGET THEM.

Insurance for kidney failure patient

Hi Mr. Tan,

Hope that you can advise me. I am a kidney failure patient. and have two young children. What kind of insurance policy should I take up for them using my name or my wife's name? And also what type of insurance should I get for myself in my condition.
CH

REPLY
I hope that you are personally covered under Medishield or a private Shield plan. It is important that you have this cover for your own medical expenses.

You can buy a Medishield plan for your children. There is no need to buy life insurance for them. You should have savings to take care of your future needs. Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/fptips.html

You will find it difficult to get life insurance due to your medical condition. Perhaps you can buy personal accident insurance. Read this FAQ:
http://www.tankinlian.com/faq/pa.html

Call the hotlines for a lower quote on Motor Insurance

Hi Kin Lian,

Just to share with you my personal experience on the above. Faithfully, I drive safely for my personal and passengers' safety and earn no claim discount on my insurance premium. It reached the maximum of 50% within the first few years of owning/driving a car.

After 25 years of paying insurance premium, I feel like one of the loyal contributors to the pool for the sake of other not-so careful motorists and unfortunate injured persons. Insurers love to have us as we just pay and don't have to claim. But they don't differentiate us from other motorists.

Insurers made losses from motor insurance of which I did not have anything to do with it, yet I have to bear with adjustments in premium that they enforce to all insured parties.

Beside giving up owning a car, do you have any advice for me to look into for the sake of saving in motor insurance premium?
PT

REPLY
If your insurer increase the premium, you can look for another insurer who may be able to offer you a lower premium. The hotline numbers are shown in the FAQ:
http://www.tankinlian.com/faq/motord.html

Suggestions are not welcomed

I wish Singaporeans to be more open to new ideas. They should be comfortable about interacting with other people who gives suggestions.

Why are Singaporeans so afraid of new ideas? How can they be overcomed? You can read my views in

www.theonlinecitizen.com
http://theonlinecitizen.com/2008/06/suggestions-are-not-welcomed/#comment-12182

Out of the Box

I write an article each week in the Online Citizen, www.theonlinecitizen.com. It appears in the column, "Out of the Box" You can visit this website to read about my views on life in Singapore..

Someone suggested that I should print a book of my articles. I am considering this suggestion.

Harassment by third party lawyers - action by CASE

Many motorists have received letters from third party lawyers that can be considered to be "harassing". The letters were written in legal language and were threatening. As the motorists have reported the accident to their insurance company, there is no need for the third party lawyer to harrass the motorist. They should write to the insurance company directly and sort out the claim.

I am a life member of Consumer Association of Singapore (CASE). I have asked CASE to take it up with the Law Society and they agreed. I hope that CASE and the Law Society can work out a protocol, so that the ordinary motorists will not be unnecessarily harrassed on third party claims in the future.

Bonus should be based on actual experience

Dear Mr. Tan,
Sorry if my posting seem to attack you, but i just want to clear the issue of the statement you said about me of " taking consumer for a ride".

I did mention that as a consumer, if the insurance company can provide me the projected maturity return at the end, I will be happy. (Higher return seem like a dream, lower return I will not trust that company anymore).

I do not support the insurance companies but accept that it thing we can't change. I never bought growth plan from ntuc income before, therefore want to find out whether did you previously as CEO of NTUC provide consumer higher than the projected return. (I know you gave good return for regular endowment).

Finally, I'm not an agent or manager from Income, but ex-agent from your competitor.
vfocus

REPLY
During my 30 years as CEO, Income give a good return to policyholders as follows:
> expenses are kept low
> 98% of the surplus are distributed as annual and special bonus to policyholders

During the 1980s and early 1990s, the bonus rates were increased every few years - made possible by the good investment yield. From 1998 to 2003, the bonus rates were reduced due to the low interest rate environment and two financial crisis.

Since 2004, the investment yields have been exceptionally good. In my view, the surplus is more than adequate to restore the bonus cuts in recent years.

This approach should be applied to all participating policies, i.e. regular and single premium policies. All participating policies should be treated fairly.

Do not terminate your policies

An Income agent said that several of his policyholders have terminated their policies as they have lost trust in Income. I wish to advise policyholders not to terminate your policies for this reason, as you will be incurring a large loss due to the high upfront charge.

The chairman of Income have given three assurances regarding the restructure of the bonus. His speech is posted in Income's website:
http://www.income.com.sg/aboutus/2008Bonus/chairman.asp

Para 17 and 18 of his speech are reproduced below:

17. Some policyholders have raised specific concerns on the special bonus in blogs. Allow me to address them.

> While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated. As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.

> Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.

> I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund.

18. I hope I have managed to give you a better understanding and appreciation of the position regarding the bonus restructuring. We will not hurt policyholders and shareholders. And we shall also not allow NTUC Income to be hurt.

I have written to Income that the payout on a 5 year Growth policy that is reaching maturity this year is rather low and does not meet the standard of "fair and consistent with the experience of the Life Fund". This probably applies to many other Growth policies that is maturing in the near future.

Let us give some time to Income to sort out this problem.

I will also be writing to Income to suggest that higher bonuses be allocated to existing policies (even if they are in non-guaranteed form) to reflect the good experience of the Life Fund in the recent years. I hope that the final outcome will give a better return for Income policyholders.

Offensive Postings

There are a few postings from zhummmeng that are offensive to insurance agents and to NTUC Income. I am not able to edit the views to remove the offensive words, so I have to block the entire posting.

I have also blocked a posting by vfocus that attacked me personally. If vfocus (who is probably an agent or manager for Income) uses his real identity, I will be happy to post his comments and give a reply. It is not ethical for a person to attack another person under the cloak of anonymity.

Adrian Khiat expresses some views which disagree with my views. He uses his real name and does not have to attack me personally. I respect Adrian Khiat and allows his views to be posted.

Harrassment by lawyer acting for third party

Dear Mr. Tan,
It my pleasure to see such a senior and high ranking person who is willing to contribute your knowledge and experience to help public continuously after your retirement. You offer an excellent channel for ordinary people such as me to seek help on problems related to insurance.

In February, my car grazed another car at a turning point in a car park. Both of us have made reports to our insurance company accordingly.

After that, I received three letters, pertaining to the claim issues, from a lawyer appointed by the third party. The first letter is to me, the second is to my insurance company and copied to me. However, the third one in June is to me and inform me that they have filed a civil claim loss and damage. The proceedings is against me.

My insurance agent always told me those are all normal procedures until the last letter while she asked me to collect the Writ myself and then pass to insurance company. I am not sure whether it is the right way for me to do so, is there any legal impact?

Should the appointed solicitors of the insurance company accept service of the Writ of Summons on my behalf instead of me? What are the possible consequences if the issue is escalated to Court? Can I get back my insurance premium if I have to present in the Court and compensate the third party? Who should pay the legal charges?
BH

REPLY
Your insurance company is required to handle the third party claim. After you have informed your insurer about the accident and notified the third party about the identity of your insurer, there should be no need for the lawyer acting third party to harrass you with these matters. I suggest that you should lodge a complaint with the Law Society and let them decide if the lawyer is acting in a professional manner.

It is all right for you to accept the writ and pass it to your insurer to handle the third party claim. Your insurance company will pay the legal expenses as well.

Products that give poor value to consumers

Some life insurance companies design complicated products that are difficult for the consumer to analyse.

It is easy for the agent to get the consumer to buy the product, as the agent can make a misleading presentation of the product. In some cases, the product is designed to take advantage of the ignorant customer.

After buying the product, the consumer is stuck with it for 20 years or longer, as they have already incurred a large upfront cost.

I hope that the regulator will look after the interest of the consumers and disallow these types of poor value products from being marketed to the general public.

My advice to consumers: Avoid all these types of complicated products, as they are likely to give you a poor return. Do not trust any company that market these types of products.

A complicated product, with low yield

Dear Mr Tan,
I brought a 25 years anticipated endowment plan from P in Year 2003. This plan with monthly premium of S$137.67 allows annual cashback of S$1,000 (from 2nd year onwards).

The guaranteed surrender value start from S$1,000 on the 2nd year and increased up to S$1,413 on the 15th year, and then decreased to S$1,000 on the 25th matured year.

The Non-guaranteed surrender value start from S$110 on the 3rd year and increased up to S$24,811 on the 25th matured year (based on 2.78% projected investment yield to maturity).

I have done a quick calculation as follows:

Annual Premium = $1,652.04
Total Premium paid for 25 years = S$41,301
Total Cashback received (from 2nd years onwards) = S$24,000
Guaranteed maturity benefit = S$1,000 (5% of sum assured)
Total guaranteed benefit with total cashback received = S$25,000
Total Non-guaranteed maturity benefit: S$24,811 (based on 2.78% projected investment yield to maturity)

After 25 years, if the 2.78% projected investment yield to maturity is met, I will only received a total of S$8,510 after deducted the total premium paid, or even lower if the actual investment yield decreases.

After coming to 5 years of enforcing this plan, I have realised that I may have make a wrong choice to buy this policy as the returns seems rather low. I would like to seek your advice on the followings:

1) Do you think I should continue with this plan till 25 years?
2) What plans are there with better guaranteed returns?
TY

REPLY
I find it difficult to analyse this complicated product. The maturity benefit is uncertain, as a large part is not guaranteed. I also do not know what is the loss that you have to face, if you decide to terminate the policy now.

If you decide to terminate the policy, you can buy a decreasing term insurance policy for the insurance protection and invest the difference in a low cost investment fund. Read this FAQ:
http://www.tankinlian.com/faq/savings.html

Business Ethics

In olden Chinese society, the respected occupations were the government officials, teachers, doctors, farmers and craftsmen. The merchants were considered to be near the bottom of the ranking. Why were the merchants given so low a ranking in the past?

Today, the merchants (i.e. businessmen, entrepreneurs, traders, bankers) are the most lucrative occupations. They earn large amounts of money, especially in financial services and corporate dealings.

Even the professionals (i.e. doctors, lawyers, accountants and teachers) want to be converted into businesses to make more money.

The drive to "make more profit" has resulted in a deterioration of business ethics. Nowaways, businesses find it all right to "skim off the consumers" to increase their profits, so long as they do not break the law. It has become an acceptable business practice to take advantage of the ignorant or weak consumers to maximise profits. .

I believe that there will be a backlash. I hope that the business community will understand that fair treatment of consumers is for the long term benefit of the free market system.

A poor yield on single premium endowment

My wife's single premium endowment will mature in 2 months time. She will get a yield of 3.06% for the past 5 years.

During the past 10 years, the insurance company reported that the averge yield was 7.8%. I found the yield of 3.06% to be unsatisfactory, for a participating policy.

Here are some key figures:

Single premium $50,000
Insurance company earned 7.8% for 5 years, giving a total of $72,800
Maturity benefit: $58,100

By giving a low payout of $58,100, the insurance company kept $14,700 for the 5 years, or $2,940 a year. That is a lot of money to keep from the policyholder for the small insurance protection provided by this policy. The actual expenses for this policy are quite low anyway.

If the insurance company had earned a low return, they would have reduced the payout (i.e. cut the annual and special bonus). As the insurance company had actually earned a high return, they should increase the payout to the policyholder on the maturity, instead of keeping a large part of the unexpected gain in the fund. This is the "promise" of a participating policy.

I have raised this matter with the insurance company. I believe that they payout has not meet the standard of "fair and consistent with the actual experience".

Sudoku

Sudoku is a popular game. It appears in many daily newspapers around the world. It appears in Today and MyPaper in Singapore.

I have asked many people in Singapore. Over 90% said that they are not familiar with the game. I taught them the technique of solving the Sudoku puzzle in 5 minutes. Many of them found the game to be stimulating and interesting.

It takes only 5 minute to learn a skill that can be useful in life. If you are interested to learn this skill, click here:

http://www.tankinlian.com/logic9/

Incontestable Clause

Most life insurance companies have an "Incontestable Clause". It states that the insurance company will not contest any claim after two years, except in the case of fraud. Some insurance professionals claim that they can contest a claim if there is material non-disclosure, on the grounds of fraud.

I hold a different view - that the insurance company has to prove that there is fraudulent intent, in order to reject a claim after two years. I find that insurance professionals are too ready to reject a claim, even on weak grounds.

My position appears to be supported by this chapter from a textbook on "Principles of Risk Management and Insurance" by George Rejda.

The incontestable clause states that the insurer cannot contest the policy after it has been inforce two years during the insured's lifetime. After the policy has been in force for two years, the insurer cannot later contest a death claim on the basis of a material misrepresentation, concealment, or fraud when the policy was first issued. The insurer has two years in which to discover any irregularities in the contrct. With few exceptions, if the insured dies, the death claim must be paid after the contestable period expires.

The purpose of the incontestable clause is to protect the beneficiary if the insurer tries to deny payment of the claim years after the policy was first issued. Because the insured is dead, he or she cannot refute the insurer's allegations. As a result, the beneficiary could be financially harmed if the claim is denied on the grounds of a material misrepresentation or concealment.

The incontestable clause is normally effective against fraud. If the insured makes a fraudlent misstatement to obtain the insurance, the compnay has two years to detect the fraud. Otherwise, the death claim has to be paid.

However, there are certain situations where the fraud is so outrageous that payment of the death claim would be against public interest. In these cases the insurer can contest the claim after the contestable period runs out. They include the following:

> The beneficiary takes out a policy with the intent of murdering the insured.
> The applicant for insurance has someone else take a medical examination.
> An insurable interest does not exist at the inception of the policy.

Rejection of Shield claim

Dear Mr. Tan,
I am writing to you to seek your advice on how I should go about seeking redress with regards to my claim with Y.

I bought the Shield plan from Y. I was hospitalised 9 months later for angioplasty (ballooning). Y had written to state that they are not covering me because my hospital discharge summary indicates the diagnosis as : Primary - Ischaemic Heart Disease, Secondary - Hypertension and Hyperlipidemia and that I did not declare that I had high cholesterol.

I did a health screening with my GP and results showed that my cholesterol level was slightly high. My GP advised me to do more exercise and lead a healthier lifestyle. He deemed it was not necessary for me to be on medication. I carried on my life as usual without making much changes at all as I didn't take the condition seriously.

I did another health screening a few years later. My GP told me that my cholesterol level had improved slightly. It was not necessary for me to go on medication.

All this while, it has never occurred to me that I have high cholesterol because I was not on medication. As a layman, I sincerely and honestly didn't know the seriousness of having high cholesterol which may lead to heart disease.

When I was asked questions about my health during the proposal, I had declared whatever I know (ie, on medication for high blood pressure which was under control.) In Y's proposal form, there was no question asked about cholesterol. If it is an important factor in risk assessment, I think it is only fair to include this question.
CY

REPLY
I suggest that you write to Y and pose them the facts that you have presented. If they wish to reject your claim due to non-disclosure, it is their duty to prove that you have deliberately hidden a material fact.

As they did not ask about your high cholesteral, and you were not aware about its significance, you have a right to press for your claim to be approved. Let us see what is their reply to this matter.

If you feel that your claim has not been handled fairly, you can lodge a complaint with FiDREC. They will appoint an independent assessor to look into this matter. Their contact is:
http://www.fidrec.com.sg/website/faq.html

Loss of goodwill

A met an Income policyholder at a cocktail party. He told me that in the past, he did not have to think twice about buying insurance from Income, as he was sure that being a cooperative, he would get a lower price and better return.

With the recent change, he is not not sure whether Income will continue to give the same good value. He is worried about the higher expenses and the recent change in bonus to make Income follow the practice of other insurance companies. He would check carefully before he buy a policy from Income.

He said that a lot of goodwill is being lost through the recent changes.

Saving for an early retirement

Dear Mr. Tan,
I am in my mid 20s. I need your advise on planning for retirement, savings and life protection. Frankly speaking, I have checked many products and are confused with what I need. I do not have much spare cash in the past as I have dependants.

My current pay allows me to set aside about 20% for savings. If I have $500 a month, what are the insurance/ savings I should save? Can I plan for a comfortable retirement at 50 years old?

My agent recommended me Vivolife, limited payment for 10 yrs. But I am also not sure if the critical illness portion is guranteed. Based on my savings, should I buy Vivolife? Or go into endowment? Or save up as cash? Or medical?

REPLY
Please read these FAQs
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html

Personal insurances - making the right choice

Here are some tips about making the right choice on your personal insurance, i.e. life, medical and accident insurance.

http://www.tankinlian.com/faq/choice.html

Financial Planning Tips

I have often be asked to give advice for a specific situation. I am not able to find the time to do a proper job.

I often refer my readers to the FAQs contained in my website, as follows:
http://www.tankinlian.com/faq/

The popular FAQs are:

> Financial Planning for the Young
> Financial Planning for Seniors
> Investing your Savings
> Benchmark Premium Rates
> Buy Term Insurance Directly
> Buy Motor Insurance Directly

There are many other FAQs contained in this website that may be relevant to you.

A few financial advisers have indicated that they are willing to provide advice for a flat fee, based on time. I plan to introduce them at a later date, after I have the chance to discuss with them on their proposed mode of operation.

See if you're getting a GOOD DEAL

Are you getting a good deal from your participating policy. Dr. Money has this advice:
http://newpaper.asia1.com.sg/columnists/story/0,4136,167015,00.html?

Read more about Dr. Money's articles in:
http://www.tankinlian.com/drmoney/

He who pays the piper

In recent years, we had several corporate scandals, involving accounting irregularities. The accounting firms were appointed by the management of these companies. These professional firms received large fees and were suspected of not doing their work diligently in discovering the irregularities.

In more recent years, we have the subprime crisis. The rating agencies were appointed by the issuers of the collateralised debt obligations. They are now suspected of having a conflict of interest in giving a favourable rating to these complex structures.

Consultants are appointed by management to give advice on business strategy. These consultants are likey to be selected to give advice that are favourable to the management's thinking.

There must be a better way to have access to independent professional advice, especially on matters involving the public interest. The current approach is not working well. As the saying goes, "He who pays the piper calls the tune".

What is a better way to protect the public interest?

Town Transport in Java

I passed through a few small towns in Java during my trip to Bandung from Jakarta. In each town, there is a service called "Angkutan Kota" or "Town Transport".

This service uses a passenger van that can take 6 to 8 passengers. The service runs along a designated route. The driver can pick and drop passengers anywhere along the route. The fare is from 50 to 80 cents.

This is similar to the light bus service in Hong Kong. I find it to be quite practical and useful. It has several of the advantages of a taxi and is much more affordable.

I hope that Singapore will adopt a similar service to serve the local town and to bring commuters to the MRT station, bus terminus or town center.