Policy wordings

In many states in America, the policy wordings used by insurance companies have to be approved by the regulator. I find this to be a good practice. The regulator can check that the wordings are clear and are fair to consumers. It will minimize disputes that have to be resolved in court. It is also a good practice for insurance companies to use standard wordings for the common types of coverage, rather than be allowed to write their own wordings.

I hope that this practice can be adopted in Singapore and that the regulator can play an active role in achieving this outcome - to ensure fair treatment of consumers.

Tan Kin Lian

Fair settlement of claims

Many claims officers think that their responsibility is to reduce the claim payments and save money for the insurance company. They may not be aware that they also have a duty to ensure fair settlement of claims. Some states in America have laws that forbid unfair claim practices, such as:


–Refusing to pay claims without conducting a reasonable investigation
–Not attempting to provide prompt, fair, and equitable settlements
–Offering lower settlements to compel insureds to institute lawsuits to recover amounts due

This is taken from the text book that I use to teach Risk Management & Insurance at a local university.

Tan Kin Lian

Talk at Yishun Public Library

I am giving a talk at Yishun Public Library on Saturday 23 January 3 to 4 pm on the subject "Coping Financially in Difficult Times". More details are available here. I invite my readers to attend this talk.

LED lighting

According to this report, LED lighting has the potential to reduce energy consumption significantly.

Misleading illustrations

Some life insurance products were designed to provide an annual cash bonus. The underlying return on the policy is poor, usually less than 2% p.a., due to the high expenses and profit margin. To enjoy the cash bonus, the consumer has to pay an additional premium that is usually more than 10% of the cash bonus. For example, to get a cash bonus of $2,000, the additional premium could be $2,200 a year. The consumer is not aware about this type of structure.

To hide the poor return, the insurance agent tells the customer that the cash bonus can be re-invested in an investment linked fund to earn 5% or 9% per annum. This is stated to be not guaranteed, but the consumer does not know that the projections are over-optimistic.

By illustrating with this high projected return, the benefit illustration will show a higher return on the policy, perhaps 4% or more. If it was possible to earn 9% per annum, the consumer should invest the entire premium into the investment linked fund, rather than just the cash bonus.

I hope that the authority will ban this type of projection, as it is misleading to the consumer.

Tan Kin Lian