When an insurance agent approaches you to tell you that a new policy is better and advise you to give up an existing policy to convert into the new policy, the insurance agent is 99% likely to be cheating you. Do not believe the agent.
Ask the agent to give you a benefit illustration and send it to me at kinlian@gmail.com. I will point out on where the agent has been misleading you, and how much you would lose in your savings by taking this type of advice. It can cost you a few thousand dollars.
One common practice is to replace a whole life policy by a policy with premium paid for 20 years or shorter. The customer does not know that he has to incur a hefty upfront cost a second time. The premium for the shorter period is much higher than a whole life policy. Further more, the existing whole life policy has an option to covert into a paid up policy at any time, i.e. the policyholder retain the flexibility to stop the policy at any time (but the agent does not explain this option to you).
If you are buying a new policy, you can decide on whether to buy pay a lower premium for a lifetime, or a higher premium for a shorter period. (Frankly, both options are not good for consumers, due to the high upfront cost). But, you should NEVER stop an existing whole policy policy to move into a new policy, as you will be incurring a large cost for the second time.
Tan Kin Lian
Sunday, March 7, 2010
Regulating business practice of banks
The US Congress debated the charges and practices of banks relating to credit cards and mortgages. The lofty chamber decided that the banks were acting in a predatory manner (i.e. cheating on the consumers) and decided to pass regulations to forbid some of these practices and to ensure fair treatment of consumers. In the land of free market, the legislators decided that they have to go into the nitty gritty of bank practices, instead of letting the free market sort out these problems.
Lesson - free markets ideas can go too far and result in unfair, predatory practices.
Lesson - free markets ideas can go too far and result in unfair, predatory practices.
Excessive bank charges
2 March 2010
Editor
Forum Page
Straits Times
I refer to the letter from Vincent Chan entitled “Why impose hefty credit car surcharge?” (ST 2 March 2010).
I wish to quote two other examples of hefty charges by banks in Singapore:
a. Recently, I made a payment of USD 1,810 to a factory in China. The bank charge amounted to 53 USD was deducted from the payment. The factory in China, which had earlier agreed to bear the bank charge, complained that the charge was too high.
b. I received a letter from my bank stating that the administration fee for a late payment on credit card is $50. This is in addition to the interest rate of 2% per month that they charge on the rollover balance.
In both cases, the bank charges are exorbitant relative to the marginal cost of the service that is being provided.
As the banks are already making big profit from the huge interest spread, why are they allowed to make more profit from these exorbitant charges?
After a customer has opened an account, it is difficult for the customer to change to another bank. In any case, nearly all banks seem to be operating a cartel in levying hefty charges to boost their profits.
I wonder if the Monetary Authority of Singapore considers it to be their duty to regulate the banks to treat customers fairly, including the levying of reasonable charges for essential banking services?
Tan Kin Lian
Bank charges - excessive is the word
I WISH to add to Mr Tan Kin Lian's lament about excessive fee charges by banks in his letter last Thursday, 'Banks do it too'.
My company's bank statement says:
- Balance brought forward (overdrawn) $3.61
- Service charge $15
- Overdrawn interest charge $10
Now how many per cent interest is that?
Michael Lim
Editor
Forum Page
Straits Times
I refer to the letter from Vincent Chan entitled “Why impose hefty credit car surcharge?” (ST 2 March 2010).
I wish to quote two other examples of hefty charges by banks in Singapore:
a. Recently, I made a payment of USD 1,810 to a factory in China. The bank charge amounted to 53 USD was deducted from the payment. The factory in China, which had earlier agreed to bear the bank charge, complained that the charge was too high.
b. I received a letter from my bank stating that the administration fee for a late payment on credit card is $50. This is in addition to the interest rate of 2% per month that they charge on the rollover balance.
In both cases, the bank charges are exorbitant relative to the marginal cost of the service that is being provided.
As the banks are already making big profit from the huge interest spread, why are they allowed to make more profit from these exorbitant charges?
After a customer has opened an account, it is difficult for the customer to change to another bank. In any case, nearly all banks seem to be operating a cartel in levying hefty charges to boost their profits.
I wonder if the Monetary Authority of Singapore considers it to be their duty to regulate the banks to treat customers fairly, including the levying of reasonable charges for essential banking services?
Tan Kin Lian
Bank charges - excessive is the word
I WISH to add to Mr Tan Kin Lian's lament about excessive fee charges by banks in his letter last Thursday, 'Banks do it too'.
My company's bank statement says:
- Balance brought forward (overdrawn) $3.61
- Service charge $15
- Overdrawn interest charge $10
Now how many per cent interest is that?
Michael Lim
Prime Minister of China
I have high respect for Wen Jiabao, Prime Minister of China. He is humble and in touch with the ordinary people. He governs a country which is 300 times of Singapore, draws a salary of one-tenth of any Singapore minister and is willing to tackle the challenges of income inequality and asset inflation in China. He does not say that these matters can be left to the market to sort out. He sets a good example and is a role model for public service.
Tan Kin Lian
Tan Kin Lian
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