Monday, November 16, 2009
Changi Airport can adopt the best practice
Changi Airport may be among the best in the world. It can still learn from the best practice at other airports. Read here.
Paying the right price for insurance
A good insurance product has the following features:
a) reimburse the insured for a loss caused to an unforeseen event
b) provides transparency in coverage
c) charges a fair price.
Medical bills, repair bills and loss of income are unforeseen events. Insurance serves a useful purpose in compensating the insured for the loss.
The coverage should be written in clear terms. It should be understood by both parties. There should not be uncertainty leading to disputes. If the coverage is written in language that is not obvious to the lay person and requires a court to interpret the meaning, it is not transparent.
A fair price is one that covers the cost of claims and provides a reasonable margin for expenses and profit. The claims should represent 70% of the premium, with the remaining 30% set aside for marketing expenses, administration expenses and profit margin. This applies to the risk portion of the premium.
For the savings portion, the margin should not take more than 10% of the premium.
Many insurance product in the market failed to meet the tests of useful purpose, transparency and fair premium. They may be written in a confusing manner (which allows the insurer to interpret differently and deny the claim) or has an excessive margin for expenses and profit (which is hidden from the customer). The product is designed to make it difficult to compare the price.
The insurance agent can over-exaggerate the claims and get the unwitting customer to pay an excessive premium. For example, If the rate of claim is 5% and the average amount of claim is $5,000, the pure premium should be $250. If the margin is 30%, the gross premium should be $357. If the insurance company is charging $500 or more, the premium is too high and the insurance should be avoided. If the agent said that the claim could be $50,000 and get the customer to pay a premium of $1,000,the cost is excessive.
I have often been asked by the public - is this insurance plan a good plan for consumers? My answer is, "it depends on the premium that is charged". If the premium rate is fair and the coverage is transparent, it is a good plan.
However, most insurance plans are designed to give excessive profit to the insurer and pays a high commission rate to make it attractive for the agent to sell the product. After allowing for the high cost, which has to be paid by the customer, most insurance product are not good for consumers.
One possible exception is term insurance as it is tranparent and the consumer can get a quote of similar products for several insurers. The competitive market is likely to drive the premuim rate down to a fair level.
Tan Kin Lian
a) reimburse the insured for a loss caused to an unforeseen event
b) provides transparency in coverage
c) charges a fair price.
Medical bills, repair bills and loss of income are unforeseen events. Insurance serves a useful purpose in compensating the insured for the loss.
The coverage should be written in clear terms. It should be understood by both parties. There should not be uncertainty leading to disputes. If the coverage is written in language that is not obvious to the lay person and requires a court to interpret the meaning, it is not transparent.
A fair price is one that covers the cost of claims and provides a reasonable margin for expenses and profit. The claims should represent 70% of the premium, with the remaining 30% set aside for marketing expenses, administration expenses and profit margin. This applies to the risk portion of the premium.
For the savings portion, the margin should not take more than 10% of the premium.
Many insurance product in the market failed to meet the tests of useful purpose, transparency and fair premium. They may be written in a confusing manner (which allows the insurer to interpret differently and deny the claim) or has an excessive margin for expenses and profit (which is hidden from the customer). The product is designed to make it difficult to compare the price.
The insurance agent can over-exaggerate the claims and get the unwitting customer to pay an excessive premium. For example, If the rate of claim is 5% and the average amount of claim is $5,000, the pure premium should be $250. If the margin is 30%, the gross premium should be $357. If the insurance company is charging $500 or more, the premium is too high and the insurance should be avoided. If the agent said that the claim could be $50,000 and get the customer to pay a premium of $1,000,the cost is excessive.
I have often been asked by the public - is this insurance plan a good plan for consumers? My answer is, "it depends on the premium that is charged". If the premium rate is fair and the coverage is transparent, it is a good plan.
However, most insurance plans are designed to give excessive profit to the insurer and pays a high commission rate to make it attractive for the agent to sell the product. After allowing for the high cost, which has to be paid by the customer, most insurance product are not good for consumers.
One possible exception is term insurance as it is tranparent and the consumer can get a quote of similar products for several insurers. The competitive market is likely to drive the premuim rate down to a fair level.
Tan Kin Lian
APEC Leader's declaration at Singapore 2009
Here is the declaration of the Apec leaders at the Singapore 2009 meeting.
Here are some key paragraphs:
Looking beyond supporting the recovery, we recognise the necessity to develop a new growth paradigm for the changed post-crisis landscape, and an expanded trade and investment agenda that will strengthen regional economic integration (REI) in the Asia-Pacific region. We cannot go back to “growth as usual”. We will put in place next year a comprehensive long-term growth strategy that supports more balanced growth within and across economies, achieves greater inclusiveness in our societies, sustains our environment, and which seeks to raise our growth potential through innovation and a knowledge-based economy.
Supporting Balanced Growth
We support the goals of the G-20 Framework for Strong, Sustainable and Balanced Growth. We join in their commitment to:
* Work together to ensure that our macroeconomic, regulatory and structural policies are collectively consistent with more sustainable and balanced trajectories of growth;
* Promote current account sustainability and open trade and investment to advance global prosperity and growth sustainability;
* Undertake macro prudential and regulatory policies to help prevent credit and asset price cycles from becoming forces of destabilisation; and
* Promote development and poverty reduction as part of the rebalancing of global growth.
Resisting Protectionism
We firmly reject all forms of protectionism and reaffirm our commitment to keep markets open and refrain from raising new barriers to investment or to trade in goods and services, and instruct our Ministers to continue to regularly review our adherence to these commitments. These efforts reinforce the WTO’s own monitoring mechanism, and act as another bulwark against protectionist pressures by ensuring transparency in the measures taken in response to the crisis.
Consequence of widening income gap
Published in New York Times
So the corporate C.E.O.’s and their friends now reap what they have sown. For the last two decades, they have systematically (with tax subsidies at times) stripped middle- and working-class America of the jobs, financial security and health care that they depended on to buy those same companies’ cars, “labor saving” devices, electronic devices and all other manner of stuff.
The cost savings conveniently floated up the pyramid and were split among the executives and their board members, lawyers, accountants, investment bankers and other friends.
Now Middle America is broke and can no longer support those at the top of the pyramid. Or their big bonuses. Or their friends and hangers-on.
It’s going to stay that way until they start to undo what they have done and bring jobs back — real jobs with health care.
Elizabeth A. Letzler
Baldwin, N.Y., Nov. 8, 2009
The writer is a retired former banker and certified financial planner.
CyCab - Driverless Electric Vehicle (2)
I am visiting Paris to see the Cycab, - driverless electric vehicle. After that, I will visit the University of Kent to give a talk to the actuarial students. I will return on Saturday.
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