A policyholders send to me a benefit illustration of an investment linked policy. I was surprised to find the poor yield given to the policyholder. (Note: I have reduced the figures proportionately to below avoid the identification of the policyholder).
The policyholder pays $1,000 a month. At the end of 20 years, the accumulated premium (at the projected 9%) should have been $668,000. The projected non-guaranteed payout to the policyholder was only $280,000 (42% of $668,000). The effect of deduction was $388,000 (58%). More than half of the accumulated amount was taken away.
Based on the above figures, the actual yield to the policyholder was 1.5%. This is a reduction of 7.5% from the projected yield of 9%. Based on the lower projected yield of 5%, the net yield was 0.8% and the reduction was 4.2%. (I do not understand why the reduction in yield should be so far apart).
I asked the policyholder to call me, and to know what he understood about the product. He appeared to be quite confused about how it worked. He said that the adviser mentioned something about the saving component and the investment component which was not clear to him. He did not understand the effect of deduction.
He complained about the high distribution cost (of $24,000), which was not explained to him at the point of sale. I advised the policyholder to seek the assistance of FISCA (www.fisca.sg) to prepare a letter of complaint.
I cannot understand how such kind of product can be allowed to be sold to the public and how the insurance company can justify that it is offering "fair dealing outcome" to their customers, as required by MAS regulations.
Tan Kin Lian
Friday, October 16, 2009
Blow the whistle on hidden charges
Here is a letter by Su Kim Teck printed in the Strait Times.
I have written a reply to the Straits Times to address the key points in the letter. In this blog I will only touch on the point why I did not "blow the whistle" earlier on the hidden charges.
First, I wish to point out that this type of personal attack is not necessary for the debate. As the Straits Times found it appropriate to print it, I have to give my reply.
My explanation is:
a) I did raise this issue earlier, but they did not reach the public domain
b) It would not be appropriate for me to criticize the marketing methods of the other insurance companies openly
c) Perhaps NTUC Income was also involved in adopting some of the "market practice" at that time.
When NTUC Income introduced its investment linked policy during my time, it kept its upfront charges to a total of 45% of the annual premium (compared to 160% of most other insurance companies) and made it quite explicit. Another product was introduced that kept the charges to a fixed amount (at a rather modest level).
Tan Kin Lian
I have written a reply to the Straits Times to address the key points in the letter. In this blog I will only touch on the point why I did not "blow the whistle" earlier on the hidden charges.
First, I wish to point out that this type of personal attack is not necessary for the debate. As the Straits Times found it appropriate to print it, I have to give my reply.
My explanation is:
a) I did raise this issue earlier, but they did not reach the public domain
b) It would not be appropriate for me to criticize the marketing methods of the other insurance companies openly
c) Perhaps NTUC Income was also involved in adopting some of the "market practice" at that time.
When NTUC Income introduced its investment linked policy during my time, it kept its upfront charges to a total of 45% of the annual premium (compared to 160% of most other insurance companies) and made it quite explicit. Another product was introduced that kept the charges to a fixed amount (at a rather modest level).
Tan Kin Lian
Trust in the Government
QUOTE
When governments state that certain events have not happened, and yet we have the victims before us to testify that they did, governments lose their and their credibility and authority.
We see before us today governments that lack the real authority that can only come from the support their people give them, and have to make up for that lack by the use of force.
They do not have the support of the people because they are not trusted by their own people. We hear many fine words seeking national unity, cooperation and harmony; yet, almost in the same breath orders are given to military units to shoot civilians, round up civilian protesters many of whom either simply disappear or are subject to inhumane torture.
Governments which govern by the use of force are able to remain in power by the use of force. And there is no going back because force begets force, and the perpetrators of crimes live in fear that they might become victims of their own evil deeds
UNQOTE
Bishop Carlos Felipe Ximenes Belo
Reconciliation Speech of 24/2/99 at St Mary's Cathedral Hall, Sydney, NSW
When governments state that certain events have not happened, and yet we have the victims before us to testify that they did, governments lose their and their credibility and authority.
We see before us today governments that lack the real authority that can only come from the support their people give them, and have to make up for that lack by the use of force.
They do not have the support of the people because they are not trusted by their own people. We hear many fine words seeking national unity, cooperation and harmony; yet, almost in the same breath orders are given to military units to shoot civilians, round up civilian protesters many of whom either simply disappear or are subject to inhumane torture.
Governments which govern by the use of force are able to remain in power by the use of force. And there is no going back because force begets force, and the perpetrators of crimes live in fear that they might become victims of their own evil deeds
UNQOTE
Bishop Carlos Felipe Ximenes Belo
Reconciliation Speech of 24/2/99 at St Mary's Cathedral Hall, Sydney, NSW
Heavy penalty on single premium policy
I have seen the single premium whole life product issued by at least two large life insurance companies.
It is quite unfair for the insurance company to penalise the policyholder by 25% of the single premium on early termination and to take almost 10 years to reach the break-even point. The actual cost of the life insurance protection is quite low. There is no need for this heavy penalty.
I hope that the MAS will consider the fairness of this product. After all, they did ask the top management and board to be responsible for "fair dealing outcomes" for their policyholders.
I cannot stretch my imagination to believe that such terms can be considered to be fair. It may be legal, i.e. written in the contract under "caveat emptor", but it is not fair to impose such terms on unwary customers.
Tan Kin Lian
It is quite unfair for the insurance company to penalise the policyholder by 25% of the single premium on early termination and to take almost 10 years to reach the break-even point. The actual cost of the life insurance protection is quite low. There is no need for this heavy penalty.
I hope that the MAS will consider the fairness of this product. After all, they did ask the top management and board to be responsible for "fair dealing outcomes" for their policyholders.
I cannot stretch my imagination to believe that such terms can be considered to be fair. It may be legal, i.e. written in the contract under "caveat emptor", but it is not fair to impose such terms on unwary customers.
Tan Kin Lian
Illustration for my financial planning book
I need someone to put in some illustration for my financial planning book. I hope to get some voluntary service (which will be acknowledged) but I am also willing to pay a modest fee. Interested? Please send email to kinlian@gmail.com
Avoid defamation
I like to ask commenters to avoid statements that can be considered to be defamatory. Please avoid using specific names against commercial or government entities.
Be positive in your postings. Identify what is right, rather than focus on what is wrong. Avoid putting any person or organisation in a bad light.
Be positive in your postings. Identify what is right, rather than focus on what is wrong. Avoid putting any person or organisation in a bad light.
Bullying
From Wikipedia
Bullying is repeated acts over time that involves a real or perceived imbalance of power with the more powerful child or group attacking those who are less powerful. (U.S. Dept. of Justice, Fact Sheet #FS-200127)
Bullying can be verbal harassment, physical assault, or other more subtle methods of coercion such as manipulation. Bullying can be defined in many different ways.
Although the UK currently has no legal definition of bullying, some US states have laws against it. Bullying is usually done to coerce others by fear or threat. Bullying can be prevented when children are taught social skills to successfully interact with people. This will help them to be productive adults when interacting with bothersome people. Bullying in school and the workplace is also referred to as peer abuse.
In colloquial speech, bullying often describes a form of harassment perpetrated by an abuser who possesses more physical and/or social power and dominance than the victim. The victim of bullying is sometimes referred to as a target. The harassment can be verbal, physical and/or emotional.
Sometimes bullies will pick on people bigger or smaller than their size. Bullies hurt people verbally and physically.
Bullying is repeated acts over time that involves a real or perceived imbalance of power with the more powerful child or group attacking those who are less powerful. (U.S. Dept. of Justice, Fact Sheet #FS-200127)
Bullying can be verbal harassment, physical assault, or other more subtle methods of coercion such as manipulation. Bullying can be defined in many different ways.
Although the UK currently has no legal definition of bullying, some US states have laws against it. Bullying is usually done to coerce others by fear or threat. Bullying can be prevented when children are taught social skills to successfully interact with people. This will help them to be productive adults when interacting with bothersome people. Bullying in school and the workplace is also referred to as peer abuse.
In colloquial speech, bullying often describes a form of harassment perpetrated by an abuser who possesses more physical and/or social power and dominance than the victim. The victim of bullying is sometimes referred to as a target. The harassment can be verbal, physical and/or emotional.
Sometimes bullies will pick on people bigger or smaller than their size. Bullies hurt people verbally and physically.
Article about Profitable Group
Hi Mr. Tan
Why did you withdraw your blog? Are you a coward?
What are you going to do with the defamatory statements in the Profitable Group website that are attacking you personally? Will you sue them?
Did you do any research before you post the article?
REPLY
My blog article was extracted from the Guardian website. Someone, presumably an investor, sent the article to me, requesting for it to be posted. I checked against the link and found that it was posted in the Guardian website.
Several of the statements refer to land banking in general and not specifically to Profitable Group. There were a few statements referring directly to Profitable Group but they looked quite factual to me. So, I posted the article in my blog.
When Profitable Group said that the article contained untruths, I removed it from my blog immediately. I also offered to post any correction that they wish to send to me. In particular, I asked for any correction that they sent to the Guardian article to be sent to me.
It is not a matter of cowardice. It is a matter of being fair. I do not hold any malice towards Profitable Group or any of its directors and do not wish to damage their reputation through any unintended mistake.
I have seen the statements made by Profitable Group in their website that do appear to attack me personally. I do not intend to take legal action against them for these statements. I will let the public make their own judgement about my character. Let the truth prevails. Let the facts speak for themselves.
Tan Kin Lian
Why did you withdraw your blog? Are you a coward?
What are you going to do with the defamatory statements in the Profitable Group website that are attacking you personally? Will you sue them?
Did you do any research before you post the article?
REPLY
My blog article was extracted from the Guardian website. Someone, presumably an investor, sent the article to me, requesting for it to be posted. I checked against the link and found that it was posted in the Guardian website.
Several of the statements refer to land banking in general and not specifically to Profitable Group. There were a few statements referring directly to Profitable Group but they looked quite factual to me. So, I posted the article in my blog.
When Profitable Group said that the article contained untruths, I removed it from my blog immediately. I also offered to post any correction that they wish to send to me. In particular, I asked for any correction that they sent to the Guardian article to be sent to me.
It is not a matter of cowardice. It is a matter of being fair. I do not hold any malice towards Profitable Group or any of its directors and do not wish to damage their reputation through any unintended mistake.
I have seen the statements made by Profitable Group in their website that do appear to attack me personally. I do not intend to take legal action against them for these statements. I will let the public make their own judgement about my character. Let the truth prevails. Let the facts speak for themselves.
Tan Kin Lian
Subscribe to:
Posts (Atom)