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.
Wednesday, June 18, 2008
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".
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/
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.
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.
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