Strategy - how government approaches a problem

The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, "When you discover that you are riding a dead horse, the best strategy is to dismount." However, in government more advanced strategies are often employed, such as:

1. Buying a stronger whip.
2. Changing riders.
3. Appointing a committee to study the horse.
4. Arranging to visit other countries to see how other cultures ride dead Horses.
5. Lowering the standards so that dead horses can be included.
6. Reclassifying the dead horse as living impaired.
7. Hiring outside contractors to ride the dead horse.
8. Harnessing several dead horses together to increase speed.
9. Providing additional funding and/or training to increase the dead Horse's performance.
10. Doing a productivity study to see if lighter riders would improve the dead horse's performance.
11. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of the economy than live horses.
12. Rewriting the expected performance requirements for all horses.

And, of course...
13. Promoting the dead horse to a supervisory position.

Contributed by A Tan

Case of the $12,000 kidney stone

Read this article.

Adjudication by FIDREC

Dear Mr Tan,
I will be facing a legal counsel from X (the financial institution) and one of the 5 other listed representatives in my adjudication. Further, the RM who sold me the minibond is named as a witness. As mentioned to FIDReC and MAS, I do not understand why for instance, a robber can be named as a witness instead of the 'Accused'. The arrangement has the effect of X sending three representatives including one legal counsel against me alone.

FIDReC stand since March (I sent in my complaint in Nov 2008) when I was told of adjudication procedures has been that I have to accept this arrangement if the Adjudicator did not reject.

I am wondering if others are facing similar unjust arrangement? Did they share their solutions with you? Appreciate if you can provide some advice. Thank you.

REPLY
Many investors have expressed unhappiness with the FIDREC arrangement and the outcome.

I suggest that you bring up this matter to the Consumer Association (CASE) to ask for consumers to be given a fair hearing. CASE is represented on FIDREC. You can send your letter to Mr. Seah Seng Choon at seahsc@case.org.sg

Petition to PM on credit linked notes (7)

Petition.

Signatures as at 1 August: 650

The signing of the online petition has slowed down during the past weeks. An average of 10 people sign each day.

With the recent decision by Great Eastern Life to buy back their structured products, there is some hope of getting the banks and financial institutions to adopt the same settlement given in Hong Kong.

I urge all investors to put in a renewed effort to get more people to sign the petition and reach the target of 1,000 signatures.

Update as at 9 August: 716 signatures (average of 10 per day)

How to be happy

Read this article.

Whole life and endowment with low rates of commission

Someone asked me why I am against whole life and endowment plans, and why I offered these plans during my tenure as CEO of NTUC Income.

I have covered these issues on several occasions in my blog during the past two years. I shall repeat what I have said earlier.

I do not like life insurance plans that have these features:

a) Pays high rate of commission
b) Pays a low rate of bonus (i.e. less that what has been earned)
c) Gives a poor return

During my tenure as CEO of NTUC Income, the whole life and endowment plans had the following features:

a) Pays a modest rate of commission (i.e. about half of the market rate)
b) Pays a high rate of bonus
c) Gives a fairly attractive return, i.e. more than 5% p.a for policies taken in the earlier yeras.

During the last three years of my tenure, I encouraged the agents to sell term insurance and to sell an investment linked plan with low rates of commission (i.e. 15% for 3 years only).

After I left, the marketing strategy has changed.

Tan Kin Lian

Interests of policyholders protected: MAS

Published in St Times Forum page

I REFER to last Thursday's letter by Mr Larry Haverkamp, 'Transparency in insurance: Policyholders underpaid'. He suggests that insurers have built up 'orphaned money' by under-declaring bonuses to participating policyholders. This is not the case in Singapore. With the introduction of the Risk-based Capital Framework in August 2004, insurers in Singapore are required to record the total amount of assets held in the participating fund as backing the liabilities to the participating policyholders. This means all assets in the participating fund belong to the participating policyholders. The issue of 'orphaned money' therefore does not arise.

In addition, there are rules governing the distribution of bonuses for participating funds. Under the Insurance Act, when insurers declare bonuses to participating policyholders, they can distribute not more than $1 to shareholders, as compensation for their management of the fund, for every $9 of bonus declared to policyholders. This ensures that insurers have an interest to manage the participating fund properly to achieve reasonable long-term returns for policyholders in accordance with the stated investment objectives of the fund.

These requirements ensure there is no incentive for insurers to intentionally under-declare bonuses in the hope of building up large amounts of 'orphaned money' to benefit their shareholders in future.

The Monetary Authority of Singapore (MAS) informed insurers in July this year that the definition of a participating policy in the First Schedule of the Insurance Act will be amended to provide even greater clarity that the assets of the participating fund belong to participating policyholders.

Angelina Fernandez (Ms)
Director (Communications)
Monetary Authority of Singapore

MY COMMENT

I have sent a reply to the St Times. I will wait a few days to see if they will publish my letter. After that, the letter will be published in this blog.