The New Paper - Truth of Life Insurance Payout

The New Paper has a special report on "The truth of Life Insurance Payout" in its
September 6 edition.

I recommend to all policyholders to read this special report. It shows that the amounts paid out to policyholders on a surrendered or matured policy is far short of the "asset share" of the policy. Many policyhoders are being paid far less than a "fair amount".

If you fall in this category, I suggest that you should write to the Monetary Authority of Singapore to ask them to take up the matter with your insurance company.

I have written to the Consumer Association to raise the following matter with MAS:

1. Is the amount paid to the policyholder of a surrendered or matured policy quite close to the "individual liability” in respect of the policy? Is the insurance company allowed to pay out an amount that is far short of this “individual liability”? The individual liability is required to be computed by the insurance company for each policy and reported in total in the annual return to MAS.

2. In the interest of transparency and fairness, can MAS require the insurance company to disclose the "individual liability", upon the request of the policyholder of a terminated policy, so that the policyholder is aware of the amount of the "individual liability" that is held back from him?

3. Is it fair for a policyholder, on surrender of a policy, to be getting back less than the premiums paid after 10 years or longer, when the insurance company is able to retain up to 40% of the "individual liability" from the policyholder?

4. Why is it not possible for Singapore to adopt the practice in Malaysia and other countries, which requires the insurance company to pay out the “asset share” on a terminated policy after it has been held for more than a certain period? The “asset share” is similar to the “individual liability” reported in the annual return to MAS. This payout appears to be fairer and is much higher than the cash value now given to a policyholder in Singapore.

5. Can MAS ask the insurance company to disclose the total cash value of all policies, to allow it to be compared with the “sum of the individual liability in respect of each policy” as reported in the annual return? This will allow the public to know the amount that is held back by the insurance company, if all the policies were terminated.

Life insurance products can give good value

Some people argued that whole life, whole life limited premium and other life insurance products can meet the needs of certain categories of people and can be considered as good products.

This is correct.

Life insurance products can be designed to be good for consumers. They become bad products when they are designed to pay high commission to the agent and give poor value to the consumer. This high cost is not disclosed to the consumer.

Unfortunately, most of the products in the Singapore market are designed to be high cost, good for the agent and bad for the consumer. Up to two years of the premium are taken away to pay the commission and marketing expenses. If the monthly premium is $300, the amount of the hard earng savings taken away from the policyholder can be as much as $7,200.

This is a lot of money to be taken away from the unsuspecting policyholder, and is not told to the policyholder at the point of sale. This fact is hidden in the Benefit Illustration among 20 pages of confusing information.

If the charges are kept at a reasonable level, say a maximum of half year's premium (which is still a lot of money) and this is clearly disclosed to the policyholder, then a whole life, endowment or investment linked policy can be considered to be a good product and is suitable for most people.

Annual General Meeting of NTUC Income

Two readers of my blog, SiewKhim and Falcon, have posted comments asking me to raise issues on behalf of policyholders at the next annual general meeting of NTUC Income.

I have posted a request for them to send their e-mail address to me, so that a meeting can be arranged.

I did not receive any response from SiewKhim. Falcon wrote an e-mail to me, but did not reply to my e-mail.

I like to ask them to contact me at kinlian@gmail.com.