Saturday, November 7, 2009

Make insurance available on fair terms

In some countries, e.g. Australia, it is mandatory for health insurance companies to provide insurance to all eligible persons, regardless of their health condition. This also applies to a few European countries. In some of these countries, the insurance premium has to be community rated, and is the same regardless of age - quite likely within a large age band. The purpose of insurance is to make it available and to cover everyone through the principles of pooling.

In the USA and many other countries, it is possible for a motorist, who is unable to get motor insurance from the market, to get insurance from the "residual market". They have to pay a higher premium, but insurance is at least available. The residual market is a pool for those who cannot buy insurance from the normal market. In this pool, the risks are shared by the insurance companies equally or in proportion to their market share.

Singaporeans are used to the "free market" and lack of consumer protection that they are not aware that there are other arrangement that makes insurance available to all at fair rates. They can only think about underwriting for profits. They do not care about the people who cannot buy insurance,unless they are the people who are personally penalised by the system.

A journalist wrote that people who cannot get insurance due to bad claims record should not be driving on the roads. This is easy to say, but does not help the person who is penalised unfairly due to same bad luck. Reckless drivers are banned from driving, but this is decided by the court, and not by "commercial reasons" adopted by insurance companies.

America is addressing the issue of "difficulty to get insurance" by making reforms to their system. The Obama Administration wants to make insurance available through an insurance exchange, and also for a government owned enterprise to offer insurance to compete with the private sector, i.e. the "public option". This recognises the failure of the "free market" in making insurance available to people at fair rates.

Some people misinterpreted my views (stating that I am against the principles of underwriting). They are ignorant of the wider issues. Some are deliberately mischievous in misrepresenting my views.

My view is this - insurance should be underwritten, but cannot be carried too far as to deny consumers the right to get insurance at fair rates. Most commercial companies, working on commercial terms, will not be socially responsible. This is why insurance, along with other important matters in the economic life, should be properly regulated and cannot be left to the profit-driven "free market".

Tan Kin Lian

Easysearch Job Portal

This new portal will be launched on 1 December 2009.

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Difficult to get insurance

One big flaw of the free market system is the difficulty of sick people to get insurance. The insurance companies do not want sick people to insure with them. They only want healthy people. Read this article.
We have a similar problem in Singapore with motor insurance. If you have two or more accidents in a year, you will find it difficult to get an insurance company to cover you. This is a complaint written in the newspapers.
These two examples shows the flaw of the free market system that only aims at making profit. Who wants to cover the people that are likely to make a claim?

Tan Kin Lian

Encourage electronic cheques

Printed in Straits Times Forum Page on 7 November

In spite of the technological advances, many people still write cheques to pay their bills, especially for the irregular payments. This manual mode of payment is inefficient, costly and time consuming.

I urge the Infocomm Development Authority and the Monetary Authority of Singapore to introduce a convenient way for the public to pay their bills electronically, and make it as simple as writing a physical cheque. This should be done through a common platform that serves all the banks, instead of asking each bank to develop its own application.

The payor should log into his bank account and write an e-cheque by indicating the party and amount to be paid, and details of the payment. If there is a mistake, the payor should be allowed to cancel the e-cheque within one day.

The payees should have the facility to log into the platform to view the details of the electronic payments that are credited to their accounts, similar to clearing their incoming physical mail. They can accept or reject the payment. For example, they may wish to reject a payment that does not have sufficient details to identify the transaction.

The use of a common platform will make the new system adopted more widely in a short time. It will also reduce the implementation cost of the participating banks.

The current form of internet banking was not designed to serve the needs of commercial organisations, which explains why so few organisations ask their customers to pay through internet banking. I believe that a new system, as described above, will overcome the current shortcomings.

Tan Kin Lian

GST and inefficiency in our economy

Someone argued that as many countries (except Malaysia, Hong Kong and Brunei) have adopted Goods and Services tax, this must be a good tax.

I argue that GST is a bad tax for Singapore for the following reasons:
a) There is no need for GST as the government has sufficient tax revenue from other sources
b) It is more efficient to collect any needed tax revenue from income and corporate tax rather than GST
c) GST requires an additional expensive layer of administration and imposes compliance cost to business
d) Singapore does not provide the costly welfare benefits (e.g. pension, unemployment) that is provided in other high tax countries
e) It is a bad idea to lower income and corporate tax and replace by GST - just to attract some high income foreigners to move their tax base to Singapore.

We should not have followed other countries blindly in adopting GST. We could have stayed with our system of taxation and be a more efficient economy.

Tan Kin Lian