Singapore scored 20th in this survey. It ranked 3rd in Asia behind Japan and South Korea but is ahead of the other countries.
Most of the countries ahead of Singapore are in Europe, but they also include the America, Canada, Australia and New Zealand.
Tuesday, August 17, 2010
Risk Management for Young People
I am asked to give a talk about risk management for young people. The audience are undergraduates. The organizer asked me to talk more generally about risk management and not focus on life insurance (as this was the practice of other speakers). I agree to the suggestion, as I believe that life insurance is not a good way of risk management for young people. You can read the key points of my speech here.
You can read other FAQs in www.tankinlian.com/ask.aspx.
You can read other FAQs in www.tankinlian.com/ask.aspx.
Recruiting and retention bonus
An insurance company is paying a lot of money to recruit new agents (up to 135% of the previous year's income as signing bonus) and to retain their existing agents.
Why is it necessary for the insurance company to be paying so much money, on top of the high commission rates that are already earned by the agents? Where does the money come from? The simple answer is - the money comes from the policyholders.
I have seen many benefit illustrations that show the about 40% of the value of accumulated premium taken away after 25 years. For example, if the accumulated premium is $500,000, about $200,000 being taken away, leaving only $300,000 to the policyholder. The $200,000 is a lot of money for the insurance company to pay high commission to the agent, to pay high signing and retention bonus and still leave a lot of money from their profits. But it is money taken from the naive and unsuspecting policyholders, leaving them with a net yield that is not sufficient to cover inflation.
If each policyholder "donate" $200,000 to the insurance company and the insurance company is able to sell 10,000 policies in a year, guess how much money is available to pay as signing bonus?
It was reported that MAS issued a statement, "We expect insurers to observe a high standard in their recruitment". Beyond this statement of good intent, I wonder if MAS does investigate how the policyholder's monies are being spent?
Tan Kin Lian
You can learn how to read the benefit illustration here;
Why is it necessary for the insurance company to be paying so much money, on top of the high commission rates that are already earned by the agents? Where does the money come from? The simple answer is - the money comes from the policyholders.
I have seen many benefit illustrations that show the about 40% of the value of accumulated premium taken away after 25 years. For example, if the accumulated premium is $500,000, about $200,000 being taken away, leaving only $300,000 to the policyholder. The $200,000 is a lot of money for the insurance company to pay high commission to the agent, to pay high signing and retention bonus and still leave a lot of money from their profits. But it is money taken from the naive and unsuspecting policyholders, leaving them with a net yield that is not sufficient to cover inflation.
If each policyholder "donate" $200,000 to the insurance company and the insurance company is able to sell 10,000 policies in a year, guess how much money is available to pay as signing bonus?
It was reported that MAS issued a statement, "We expect insurers to observe a high standard in their recruitment". Beyond this statement of good intent, I wonder if MAS does investigate how the policyholder's monies are being spent?
Tan Kin Lian
You can learn how to read the benefit illustration here;
Motor accident
Mr Tan,
My car was hit by a lorry while I was fetching my son from his childcare centre. During the accident, my car was parked outside the childcare centre (hazard light is on). I was about to buckle the seat belt for my son on the passenger side when the lorry hit my car on the right rear.
However, I was informed by the workshop later that the driver has given a different account of the accident. He claimed that I cut into his lane and caused his vehicle to hit my car. Now I am facing problem on claiming from his insurance company due to this discrepancy.
REPLY
Are you able to find someone who can be a witness to this accident? This will be useful, if you have to dispute the other report of the accident. Anyway, if the lorry hit you in the rear, the lorry is liable for the accident, even if the lorry driver claimed that you stopped your car suddenly.
My car was hit by a lorry while I was fetching my son from his childcare centre. During the accident, my car was parked outside the childcare centre (hazard light is on). I was about to buckle the seat belt for my son on the passenger side when the lorry hit my car on the right rear.
However, I was informed by the workshop later that the driver has given a different account of the accident. He claimed that I cut into his lane and caused his vehicle to hit my car. Now I am facing problem on claiming from his insurance company due to this discrepancy.
REPLY
Are you able to find someone who can be a witness to this accident? This will be useful, if you have to dispute the other report of the accident. Anyway, if the lorry hit you in the rear, the lorry is liable for the accident, even if the lorry driver claimed that you stopped your car suddenly.
Investing in gold
Sir,
I am from India. I read your blog on net and saw your site also.your profile seem to be very interesting and excellent.
May I ask, is it safe to invest in gold in India? Can I invest all of my money in this field?
REPLY
My suggestion is to have a diversified investment portfolio. You can have not more than 20% of your total savings in gold. Maybe, 10% is the right proportion.
For the remaining savings, you should invest in a diversified fund. Read my book on financial planning (www.easysearch.sg/ishop) or www.tankinlian.com/ask.aspx
I am from India. I read your blog on net and saw your site also.your profile seem to be very interesting and excellent.
May I ask, is it safe to invest in gold in India? Can I invest all of my money in this field?
REPLY
My suggestion is to have a diversified investment portfolio. You can have not more than 20% of your total savings in gold. Maybe, 10% is the right proportion.
For the remaining savings, you should invest in a diversified fund. Read my book on financial planning (www.easysearch.sg/ishop) or www.tankinlian.com/ask.aspx
The good and bad of life insurance
Someone asked me why I am against life insurance, when I spent 30 years in this industry.
Life insurance is inherently good. It provides financial security through the pooling of risk of premature death and encourages thrift and savings. Life insurance becomes bad when it is used to take advantage of the ignorance of consumers by locking them into a bad product and milking them over a lifetime.
When I run an insurance company, I offered to consumers the opportunity to get a financial product that gives them a good yield for their savings. This was made possible through operating with low expenses and declaring high rates of bonuses from the surplus of the insurance fund.
During the earlier years, the regulators were quite strict in ensuring that the life insurance policyholders were treated fairly in the distribution of the bonuses. They inspected the insurance companies and asked them to justify their practices. The regulatory practice changed around the last 1990s under the "regulate with a light touch" regime. They allowed more leeway for insurance companies to run their operations.
This change of regulation was a big mistake. The insurance companies introduced new products that were quite unfair to consumers. The regulators allowed these practices, so long as they charges are disclosed in the benefit illustrations. Some of these products were clearly ripping off consumers.
The insurance companies also cut their bonuses on the pretext of low investment yields, but were slow in restoring the bonuses when the yields improve. This is unfair to consumers. and would not have been allowed in the earlier years. The insurance companies started to increase their marketing and other expenses, often at the expense of their existing policyholders.
This bad practices were the factors that made me now speak against most types of life insurance policies, except term insurance. I have also decided to intensify my efforts to educate the public to avoid these bad products. I hope that all young people, especially those who has just started work, learn about how to handle their own financial planning (see Practical Guide on Financial Planning) and getting locked into a long term savings plan that give them a poor yield.
Read the FAQs in www.tankinlian.com and attend the educational talks organised by FISCA (www.fisca.sg).
Tan Kin Lian
Life insurance is inherently good. It provides financial security through the pooling of risk of premature death and encourages thrift and savings. Life insurance becomes bad when it is used to take advantage of the ignorance of consumers by locking them into a bad product and milking them over a lifetime.
When I run an insurance company, I offered to consumers the opportunity to get a financial product that gives them a good yield for their savings. This was made possible through operating with low expenses and declaring high rates of bonuses from the surplus of the insurance fund.
During the earlier years, the regulators were quite strict in ensuring that the life insurance policyholders were treated fairly in the distribution of the bonuses. They inspected the insurance companies and asked them to justify their practices. The regulatory practice changed around the last 1990s under the "regulate with a light touch" regime. They allowed more leeway for insurance companies to run their operations.
This change of regulation was a big mistake. The insurance companies introduced new products that were quite unfair to consumers. The regulators allowed these practices, so long as they charges are disclosed in the benefit illustrations. Some of these products were clearly ripping off consumers.
The insurance companies also cut their bonuses on the pretext of low investment yields, but were slow in restoring the bonuses when the yields improve. This is unfair to consumers. and would not have been allowed in the earlier years. The insurance companies started to increase their marketing and other expenses, often at the expense of their existing policyholders.
This bad practices were the factors that made me now speak against most types of life insurance policies, except term insurance. I have also decided to intensify my efforts to educate the public to avoid these bad products. I hope that all young people, especially those who has just started work, learn about how to handle their own financial planning (see Practical Guide on Financial Planning) and getting locked into a long term savings plan that give them a poor yield.
Read the FAQs in www.tankinlian.com and attend the educational talks organised by FISCA (www.fisca.sg).
Tan Kin Lian
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