Tuesday, July 1, 2008

A Gracious Society

Read my article in The Online Citizen:

http://theonlinecitizen.com/2008/07/important-to-build-a-gracious-society/#comments

Public Transport in Singapore

I have created a new blog to share views about improving the public transport system in Singapore.

www.singaporepublictransport.blogspot.com

Low yield on maturing Growth policy

Dear Mr Tan,

I compared the yield for the equivalent policies maturing in 2006 and 2007, as well as the yield in the original benefit illustration. This is not out of line with the maturity yield in 2008, considering that in 2006 and 2007, the long term yields were also quite good. The maturity yield in 2008 of 3.06% p.a. is also higher than the yield shown in the original benefit illustration. I set these out below:

2006 maturity 3.01% p.a.
2007 maturity 2.76% p.a.
2008 maturity 3.06% p.a.
Yield in original benefit illustration 1.65% p.a.

In 2008, we focused on the maintaining yields whilst changing the mix of annual and special bonus going forward. Under the old bonus structure it is an impossible strain on the fund to increase the yield by the extent indicated. To increase the yield by 2% p.a. to the policyholder requires an annual bonus of roughly 10% which will cost $400m when applied uniformly to all Growth policies. This is the more than the cost of bonus for the entire fund of $293m. As a result, the old bonus structure would have delivered the same yields in 2008 by default. A flexible special bonus is the way to go.

The new bonus structure is the first stage of the change. Following this with more flexible special bonus will allow maturity values to reflect asset shares more closely in subsequent bonus declarations. Indeed the Board has made the assurance on fairness of payouts and more work will need to be done to support this assurance. This will be tackled in 2009 as the second phase of the change.

I would like to highlight an additional consideration in 2008. Markets were very turbulent because of the sub-prime crisis at the time the bonus declaration was made. Much of the capital appreciation enjoyed in the 2007 has been reversed. They are still are very turbulent. It would not have been prudent to make an significant increase in bonuses and raise expectations at such a time of uncertainty.

Regards,

Ken Ng
Chief Actuary
NTUC Income

REPLY

Dear Ken Ng,

When the policy was issued in 2003, the investment yield was very low and the bonus rate had been drastically reduced due to the previous crisis year. The benefit illustration were made based on the reduced bonus at that time.

In subsequent years, the investment yield had been significantly higher than projected. Under such circumstances, it would be appropriate for the bonus to be increased to reflect "the actual experience", as promised by your chairman in his speech at the recent annual general meeting.

I believe that the yield of 3.06% is far short of the actual experience over the past five years. The actual investment yields during 2006 and 2007 had been exceptionally high.

During 2006, there was a modest adjustment in the bonus rates, but it has does not reflect fully a fair rate of return. I would expect the good performance for 2007 to have justified a further significant increase in bonus (including a once-off bonus), but instead it was virtually kept unchanged.

As I have pointed out in my earlier letter, the actual yield of 3.06% is far short of the average yield of 7.8% earned by the Life Fund over the past 10 years, and far short of the actual yield earned during the last five years (from 2003 to 2007), which is possibly higher than 7.8%. For a maturing policy, you should give a fair return of return to reflect the "actual experience", instead of keeping a large part of the surplus in the Life Fund. The retention of the excess surplus in the Life Fund does not benefit the maturing policyholder and cannot be justified on the grounds of fairness.

I calculate that the difference in payout based on the amount that you are paying out, and the amount that is "fair and consistent with the actual experience", is more than $10,000 in this case. This is not an insignificant amount of money and cannot be just ignored. If you disagree with my calculation, I suggest that you refer this matter to an independent actuary to make the calculation.

I wish also to convey this message on behalf of many other policyholders, especially for policies that have or will be maturing this year and the next few years, who have not been given a fair payout based on the "actual experience".


I hope that you will agree to review this matter. Perhaps this matter can be referred to an impartial, independent party to arbitrate.


Tan Kin Lian


Losing faith

Mr Tan,
Recently, I received an open letter from the current NTUC Income CEO Mr Tan Suee Chieh explaining how the restructuring of bonus will "benefit" us. I am particularly disappointed that the letter did not really explain how.
To be honest, I am losing faith in NTUC Income ever since you have retired from the CEO position. Its policies have become less attractive and I am prepared to pull out totally if they continue to be less transparent.
I will be following your blog closely to see how you engage them. Thanks for your effort.

DC

REPLY
I suggest that you should convey your opinion directly to Tan Suee Chieh and get him to address your concern. It is his duty to address your concern.

Delay in handling a theft claim

Dear Mr Tan,
My car was stolen in May 08 at HDB carpark (open space). Currently under police investigation. My car was insured under X.

On the day of discover my car was missing, I had called up X's hotline and seeked their advise on the reporting procedures. I went to the branch and submitted my police report and given details to the counter staff. I had also requested the staff to get the officer-in-charge of my claims to call me in briefing me the process of claims.

After 6 days I filled the report, I have not receive any phone call from claim dept. I rang up the claim dept and shock to me that there was "NO RECORDS" of my filling as was told by the staff who receive my call. I was very frustrated and demand them to check it out.

One day later, the customer support staff advised me to re-submit my police report to her as "the investigation of the loss of my documents was still in progress".

After emailed my document to the claim dept and I had again requested the officer in charge to brief me on the claim process. After two days of my email, again I recieve NIL call. I called up again and was told that "the routing of document may need 3-4 working days".

I started to show my anger and demanded the staff to check on my submission immediately. After a day, I only receive a call from customer support officer with brief message on " waiting for 3 months after police close the case and also the COE/OMV rebates from LTA have to surrender to X". The claim officer in charge couldn;t even bother to call me directly and just passed the message via another person.

I'm very disappointed on the responsibility and response of X in this entire process as they just take their own sweet time in handling my case,

In view of the above situation, I have lost my confidence in X in giving me a "fair estimation of my car market value" of my stolen car. As the claim will be effected after 3 months, I have no ideals on how to prepare myself in avoiding an "unfair" compensation to my loss.

Hope Mr Tan could enlighten me with advise and guide me on this claim. Hope to hear from you soon.

REPLY
You can write to ask X to give you a FAQ to explain how the market value of the vehicle is determined. If you find that the claim has not been handled promptly and fairly, you can lodge a complaint with the service quality manager.

If this is not settled satisfactorily, you can file a complaint with FiDREC.
http://www.fidrec.com.sg/website/faq.html