Motor insurance - regulator can play a part

14 March 2009

Editor
Forum Page
Straits Times

I refer to the letters by Raganathan Vivek “Why should we pay for insurer’s laxity” and Sia Chong Yew “It’s high time motor insurers put their house in order”.

I agree with the views of these writers. Motor insurers should be more active in combating inflated claims instead of passing the higher cost to consumers through premium increases.

During the 30 years that I headed NTUC Income, my colleagues paid special attention to deal with the inflated claims. We were able to keep the premiums at a more affordable level. We considered it to be our duty to the consumers and be profitable at the same time.

I wish to point out that, apart from the motor insurers, the regulatory authority can play a part as well. Most inflated claims are made by third parties claiming for the repair cost, injury and medical expenses. These claims are lodged with the insurance company a long time after the accident, making it difficult for the claim adjustor to assess the actual and fair amounts of compensation.

To make matters worse, the claims are lodged through lawyers, which increased the total claim payments by an estimated 30%.

This matter can be resolved by a simpler regulatory change. Make it compulsory for a third party to lodge the third party claim with the insurance company within 24 hours of the accident. The insurance company should be given the opportunity to inspect the vehicle and settle the claim directly and promptly. The third party should engage a lawyer only in the event of a dispute on liability.

This practice is adopted in many countries, either as a regulator requirement or as a market practice. It is surprising that Singapore continues to have many third party claims settled in an inefficient and expensive manner through the legal system.

I hope that the relevant authority, i.e. the Monetary Authority of Singapore or the Land Transport Authority, will make the necessary change to the regulation to address this problem. This will reduce the inflated claims by several hundred millions of dollars and lower the cost of motor insurance to consumers.

Tan Kin Lian

Motor Insurance premiums set to rise

Last week, it was reported that the motor insurers lost more than $200 million in 2008 and that the insurance premiums are set to rise significantly in 2009.

Last May, the General Insurance Association of Singapore announced bold measures to tackle this matter. They involved measures that could cause much inconvenience to motorists, but the Association promised that these measures would arrest the problem. 

Today Paper asked me to write an article on this matter last May. It is published in the paper. I was sceptical about the masures. Perhaps, someone can asked the Assocation to comment on the failure of their measures?

Tan Kin Lian

Bird Nest Stadium in Beijing

The Beijing National Stadium, more commonly described as the Bird Nest, cost USD 423 million to build.

Someone commented that the stadium was not used after the Beijing Olympics. Is this wasteful?

What could China do with the same money?
1. Invest in US Treasuries to earn interest at 4%?
2. Build houses for the people in China to live in?
3. Give the money to third world countries as aid?

I believe that the money is well spent, as it builds the infrastructure that can be used for the next 30 years. It also gave jobs for the workers who are involved in the construction. If not, these workers might be idle.

Of course, the workers can be used to build houses for the people to live in, but this is already catered by the private sector. I believe that it is the duty of the Government to build the long term infrastructure of the country.

Life insurance quotation gives misleading information

A policyholder bought a 21 year anticipated endowment policy with an annual payment of $14,500. The quotation clearly stated that a sumof $20,000 is paid every 3 years and the payment on maturity is $80,000 plus RB/SB of $264,800 giving a total payout of $344,800.  There was no explanation about the RB/SB and that it is not guaranteed. The policyholder was misled by the agent into believing that the payment is guaranteed.

The policy is now approaching the maturity date. The policyholder is now told that the actual maturity payout is only $232,400, comprising of $80,000 plus RB/SB of 152,400 (i.e. decrease of $102,400) from the quotation. The policyholder was shocked to see this amount of reduction.

I advised the policyholder to file a complaint to FIDREC and, if not resolved, to take a legal case.

MY VIEW: 

Now I know why this insurance company was so successful in its sales over the past years. The agents were able to sell large policies by providing misleading quotations to the customers. Most of these customers are not well educated and trusted the verbal explanation of the agents. When they learned the truth years later, it was too late. 

The root cause of this problem is the excessive commission paid to the agent and the poor supervision of the insurance company on the conduct of their agents. I hope that this unhealthy practice is properly addressed.

Low cash value on termination

Dear Sir,
I have a PRUCASH policy that started in 2002. The annual premium is $3934. The coverage is very low at $50,000 because it is meant to be an endowment plan. The annual cashback is $2500.

I've only recently educated myself through your website and other sources on how insurance and savings should really work and realised how big a mistake I made when I bought that policy.
The cash value now is about $16000, whereas my premiums paid to date is about $27000.
If I surrender my policy now, I'll "lose" around $9000.

What is my best course of action?Should I continue with the policy and take out the cashback yearly to invest in a low-cost ETF? Or should I terminate the policy and invest in an ETF with the entire sum? The difference in yields required for me to make up that $9000 loss seems to be quite huge.

REPLY
You should ask the insurance company to explain why you had to lose so much money, if you terminate it now. They owe an explanation to you.

To make a decision on whether to continue or terminate the policy, you should ask for additional information. Please read the relevant document in my website, www.tankinlian.com/faq

Interested in Part Time Work

Dear Sir/Madam:
I’m X, a permanent resident, looking for any part time job (clinic asst, office attendant, call center, packer). A copy of my resume is enclosed for your references. My email address is Y or mobile number Z.

REPLY
Please register in the portal, www.easyapps.sg/ptw

A prospective employer will contact you. As this is just set up, it may take some time before you get a response. Wish you all the best.

To register
Click on Worker Tab, select the postal sector and type of work, click on View (to see other candidates) and then Register.

Flaw in MAS Fast Track Process

Dear Mr. Tan,

I came across this paragraph in the Q&A issued by MAS regarding the Fast-Track process:

"Under the fast tract process, the FI is required to help me prepare a written statement, taking guidance from a checklist of questions (which incorporates inputs from FIDReC. Similarly, the representative/RM who sold me the product is also required to give a written statement, again taking guidance from a checklist (incorporating inputs provided to FIDReC).

To me, this fast tract process seems rather odd and does not make much sense. Here is a situation where I am complaining against the FI, and under this fast tract process, the FI is required to help me prepare a written statement .........

Why should the FI in this instance help me. I would have thought that the FI would try make my statement as weak as possible and at the same time make use of my statement to defend their position against my complaint.

JL

REPLY
I agree with your view. I suggest that you bring this point up with MAS.