A new way to sell insurance

INSURANCE AGENTS

Tired of prospecting?
Tired of making cold calls?
Tired of running around to make presentations?
Tired of long working hours?

We are looking for qualified agents to join our expanding team of full-time Insurance Consultants

• Fixed salary of $1,500 to $2,500 with performance-based incentives
• Comprehensive training and career progression
• Office-based environment
• Attractive staff benefits and balanced work-life
• 5-day work week
• Get a sign-on bonus of $1,000 (subject to conditions)

Interested candidates, please apply via: www.income.coop/career

Regular investments using CPF

QUESTION:

Dear Mr. Tan,

Thank you for regular updates in your blog. It is interesting, relevant and useful.

Could you discuss a little on regular savings plan for your investment funds products, using CPF OA and SA?

I am sure other readers would be keen to know if there is such a plan as it potentially helps to beat the CPF returns (if using CPF funds for investment). If there is no RSP arrangements, would NTUC be looking into this?

REPLY

Dear

NTUC Income has a regular savings plan. It is called the Ideal plan. It has to be paid by cash.

Alternatively, you can invest your CPF savings (ordinary or special account) as a single premium under our Flexilink plan. You can top up your savings at any time with a "recurring" single premium, provided that the top up is at least $1,000.

The advantage of a single premium plan is that the charge is very low.

Top Up Rider for Incomeshield

QUESTION:

Dear Mr Tan,

I am a fan of your blog. My family are gratefully insured under Incomeshield for many years. Your recent discussion on affordable medical insurance prompts me to seek your advice.

In about a week's time, my father is likely to undergo an angioplasty op by a referred doctor in SGH's National Heart Centre, likely under "minimum" B1 ward. Based on our calculation, we may be able to claim less than half of the hospital bill from Incomeshield. My dad is under Plan B.

This prompts me to think of getting my family a second medical plan (a backup) that may cover the higher cost should special circumstances that need private or Class B1 govt ward arise in the future.

However, we do not wish to give up on Incomeshield which we have great faith in in taking care of us in decades to come. And I know private medical plans are very
expensive (as you have mentioned) and also have to be paid by cash.

I would like to seek your advice on whether NTUC Income (and/or CPF Board)
allow one to take up both Incomeshield (paid with cash instead) and another
Shield plan (e.g. Aviva's MyShield) (paid from CPF Medisave) at the same
time. If it is possible, how will the claim process be like with 2 shield
plans?

REPLY

Dear

I am sorry to learn about your father's medical condition. Is your father covered under a dread disease policy? He can claim under this policy for a cash benefit.

For Incomeshield, we will be introduced a rider that can pay more, for major illness. The additional premium is 15% of the standard premium. It should cover all of the medical bill for your father's case, apart from the mandatory deductible and co-insurance. Under plan B, the premium will be about 30% lower than the expensive
plan that covers everthing "as charged".

The rider should be ready within two months.

Tan Kin Lian

Mr Yap: happy with investment-linked funds

Mr Yap, 43, was one of many policyholders who invested with NTUC Income and made a positive profit. Mr Yap started investing in Technology Fund in October 2002.

Mr Yap committed all his investment between October 2002 to May 2003. There were no education seminars then. He was able to get advice through various discussions with his peers.

Mr Yap is very happy with his investments in Investment Link Products ILP). He has invested in high risk funds such as Technology, Japan, Europe and Growth. He invested about $110,000 in total and have realised $80,000 of his investment, making a profit of about 45% over 2 years!

" I would definitely invest more in future. In the past, I do not believe in ILP or unit trust as the price movement is slow. I prefer higher risk instruments like shares and warrants.

However, I learnt some painful lessons which comes with very bad losses. The lesson leant is, for working people like me, it is better to leave the investment to the professional fund managers who charged reasonable costs. "

Mr Yap acknowledges that it is also less stressful to invest in investment funds and to aim for reasonable good returns. Investing in speculative stocks can be a very stressful experience for a already busy man like him.

" I will not hesitant to recommend my friends to invest with NTUC Income."

Refinance your home loan?

Are you worried about higher interest rates on your home loan?

If you home loan is $500,000 and your bank increase the interest rate by 1%, you have to pay $5,000 more in interest each year. Your bank can continue to increase the interest rate after that, depending on the market condition.

You can protect against higher interest rate by re-financing your home loan with a fixed rate loan. NTUC Income can offer you 5 year loan at a fixed interest rate of 3.99% per annum. This interest rate will not be changed for the next 5 years.

In the market, a bank now offers a 5 year loan fixed at 4.25% per annum. If you take a loan of $500,000 from us, you will save $1,300 a year (compared to the rate charged by the bank).

NTUC Income offers these attractive terms to re-finance your home loan:

- switch to our flexi rate at the end of 3 years.
- free processing and valuation.
- free fire insurance for first year.
- legal fees absorbed by us (for refinance only) *
- payment holiday up to 12 months *

* terms and conditions apply

Annuity income is free of tax

If you buy an annuity, the payment that you receive each month is free of personal income tax.

Here is an example:

- you invest $100,000 in a life annuity at age 62
- you get $446 a month (giving a return of 5.3% yearly)
- your annuity income is increased yearly by the bonus declared (not guaranteed)
- refund of your capital less payments received, on early death

The income that you receive each year is free of income tax.

Get an attractive return on your life annuity, free of personal income tax on it.

Enjoy discount on your insurance

We asked our policyholders in a survey how we can best serve them in 2006. 80% said that they to get a discount on their next purchase of insurance.

You can find a suitable plan and get a discount when you visit www.KnowYourInsurance.com.sg.

Sabah - an interesting holiday destination

Sabah is now becoming an interesting holiday destination for Singaporeans.

The attractions are:

- nature, adventure, montain climbing, marine parks, diving, golfing
- low cost airfare now available through Silk Air (promotion: $240 return)
- good food, sea food
- nice and friendly people, culture

NTUC Income will be offering a special promotion for policyholders.

Get more details. Visit www.KnowYourInsurance.com.sg. Select "Sabah".

Medical insurance can be very costly, when you get old

An Australian actuary was surprised to learn that medical insurance premium in Singapore increase with age. He asked, "how is the old folk able to afford paying the premium, which will be very expensive? "

Here is my reply.

NTUC Income offers premium rates at a more affordable level. We offer a choice of 4 plans.

At a younger age, the policyholder can opt for a better plan (eg plan P or plan A) and pay a higher premium. The premium rate is still affordable, ie less than $300 a year.

When the policyholder retires after age 60, the premium can be quite steep, more than $1,000 a year. At that time, the policyholder can move to a lower plan (eg plan B or plan C) and pay a lower premium (compared to plan P or plan A).

Most of the other insurers charge premium rates that are 20% to 50% higher than NTUC Income. Their premium rates will be very expensive at the older ages. It could be $3,000 or more a year.

Advice: take your medical insurance from NTUC Income. We will keep it affordable for you.

Insure your new car with NTUC Income

If you buy a new car, you can insure it with NTUC Income. We offer:

- lower premium, representing a saving of $200 to $400 a year, every year
- protection against loss of warranty, if voided by the manufacturer
- repair at the manufacturer's workshop, if proprietary equipment is needed
- replace with a new car, if it is stolen or totally lost during the first year

You can also get an attractive loan from us.

Give us a call, before you look for your car. We can give you an attractive offer.

6477 7722
http://www.income.coop/insurance/motor/

Does buying an annuity help avoid estate duty?

25 January 2006

Editor
Forum Page
Straits Times

I refer to the letter "Does buying an annuity help avoid estate duty" by Ms Chua Qiing Yuan (St Times 24 January).

Ms Chua referred to my previous letter that was printed in the Straits Times on 29 December. I wish to clarify this matter.

Under a life annuity, the purchaser pays a capital sum to receive an income stream for a lifetime. The life insurance company estimates the future income from investing the capital sum and pays out the total capital and income over the expected lifetime of the annuitant. On death, the capital sum is treated as fully expended.

For example, a male annuitant at age 62 can invest $100,000 in a participating life annuity that pays back a monthly income of $524 for a lifetime. This represents a notional return of 6.3% on the invested sum. I use the word "notional return" as it includes a refund of the capital. The monthly income may be increased by a bonus yearly, depending on the actual investment return of the fund. The bonus will increase the notional return.

The annuitant can opt to receive a lower monthly payment of $446 in return for a capital guarantee. In this case, the balance of the capital sum (excluding interest), less the annuity payments received, will be refunded in the event of early death of the annuitant. If the total annuity payment is more than the capital sum, there is no refund.

If there is a refund at the time of death, that refund will be treated as part of the estate and is subject to estate duty. This estate duty is likely to be small, as a significant portion of the capital may have been paid back already.

Most annuitants are likely to survive beyond the refund period or may have bought a life annuity that does not have a capital guarantee. In this case, there is no estate duty.

The key advantage of a life annuity is that it pays an attractive income that is guaranteed for a lifetime. The payout continues even after the capital sum and accrued income has been fully paid out. This is only possible because the annuitants who die earlier leaves behind the balance of their money to pay the annuitants who live longer. This is the concept of sharing of risks.

There is another signficant advantage, often overlooked. The monthly income is
fully exempt from personal income tax. This applies to most life annuities, except those purchased under some special arrangement, such as the Supplementary Retirement Scheme.

NTUC Income has 29,000 annuitants who have invested a total of $1,450 million in these contracts. The average investment is $50,000 per annuitant. The average payout is $4,100 yearly, presenting a notional return of 8.2% on the invested sum.

Tan Kin Lian
Chief Executive Officer

90 people visit my blog each day

This blog has a site meter. It records the number of visitors each day. My site meter shows that 90 people visit my blog each day.

Do tell your friends to visit my blog. I will post my views on insurance, financial and social issues. I hope that you find them to be useful.

Why is term insurance not popular?

Someone asked me, "Why is term insurance not popular?"

The answer is, "agents prefer to sell endowment and whole life insurance".

For example, a policyholder can buy term insurance for $100,000 over 20 years by paying a premium of $400 a year. If they buy a whole life policy, they pay a premium of $2000 a year.

Agents can earn commission of up to 1.5 years of premium when they sell a whole life policy. Yes, they can earn $3,000 on selling a whole life policy to you. You pay for it through the higher premium.

They earn less on their term insurance policy. Maybe $200 to $400 in commission.

So, agents sell whole life and endowment policy. They tell the customer that this is a better plan for the customer. They did not tell the customer that they earn a higher commission.

In reality, the customer is better off to buy a term insurance and to invest the difference in a unit trust or investment linked plan (such as the Ideal plan from NTUC Income) where 100% of the savings is invested.

Be careful about buying a ILP from other insurers. They may take away 1.5 years of your savings as well.

Beware about the distribution charges under ILP

Beware about the distribution charges, when you buy a regular premuim investment linked product (ILP).

Some products take away nearly 2 years of your savings. If you annual savings is $3,000, you stand to lose up to $6,000. This is used to pay commission to the insurance agent.

If you buy the ILP from NTUC Income, 100% of your savings is invested from the first month.

What is the catch?

If you terminate your policy within 20 years, you are required to pay $40 a year for the remaining period. If you terminate on the 10th year, you have to pay a back end charge of $40 X 10 = $400. That is all.

This is, of course, much lower than $6,000.

The name of the ILP from NTUC Income is called Ideal plan (code: ID5). And here is another tip: you can save as much as you wish, say $500 a month, and you still pay the same back end charge. ID5 makes a lot of sense, if you save a large monthly sum.

My wish for budget 2006

Here is my wish for budget 2006.

I wish that the finance minister will encourage people to make private savings for their retirement. This is to supplement the Central Provident Fund savings, which has been significantly reduced in recent years.

In many countries, there is an attractive tax relief to encourage private savings. The savings are deducted from taxable income. But, as most lower and middle income earns do not pay income rate in Singapore, this may not work.

In the USA, the investment earnings from the retirement funds are deferred till retirement. Again, this will only work when most people pay income tax.

In all cases, there is a recognition by the government to forego some tax revenue to encourage people to make supplementary savings.

In Singapore, I suggest two possible ways to encourage more people, especially from the lower and middle income, to save for their retirement:

- government to contribute $1 for every $4 of savings; this scheme is similar to the baby bonus, but at a lower rate

- government to issue long term bonds that pays an attractive return that can only be invested by retirement funds; the return can be 1% or 2% higher than the market rate.

We need to have an attractive scheme that will encourage people to save for retirement. It will cost money to the government, but it will benefit the government in the long run, as there is less need to take care of poor old people.

Singaporeans, grow up!

I reproduce the letter from Cheyenne Yee, that was printed in Today 19 January. I agree with the views expressed in the letter. We need to mature as a society.

---------------------------------------

SORRY FOR THE INCONVENIENCE

Dear Mervyn Tan,

I pity you.

I pity you because you were born in a country where we would rather see you in jail than embrace your talent. Although you left the country and renounced your citizenship, we still want you to pay for an offence you commited almost 20 years ago.

You did not go through the same suffering as we did, and maybe we bear a grudge against people like you. We will not forgive you since we are not mature enough.

Maybe if you were a woman, it would be easier since women in Singapore do not serve National Service (NS). It is okay for them not to do it. But it is not okay for you. You have no choice.

The moment you are born male here, you have to serve NS even if your family decided to raise you elsewhere - even if you have few memories of this place, and no longer have a sense of belonging here. Sounds illogical, but this is how we work.

So, stay away. We really do not want you back. Even if you are world-famous. Come back ony when we grow up.

Cheyenne Yee

Reply to: Income agents quitting

19 January 2006

Editor
Forum Page
Straits Times

I refer to the article entitled "Income agents quitting over insurer's direct sales strategy" (St Times, 17 Jan).

Your article mentioned that 50 agents have left so far, angered by introduction of salaried team. This is not correct.

Each year, about 100 full time advisers leave us for a variety of reasons. Most of them leave for a change of career. This is also the experience in other life insurance companies. The decline of 50 full time advisers in 2005 was due primarily to a drop in the recruitment of new advisers.

We now have 700 full time advisers. They are doing quite well, and earned more than in previous years. They have benefitted from the sales promotions that accompany our new strategy.

We expect about 170 advisers to qualify for the prestigious Million Dollar Round Table based on their sales in 2005. This is an increase compared to 130 for the previous year.

To quality for the MDRT, the adviser has to earn at least $51,000 in commission on new insurance sales in each year. The actual earnings, including renewal commission, is much higher.

Our strategy is to serve our policyholders in the best possible way. We offer suitable insurance products that provide good value and best meet the needs of our policyholder. We will keep our expenses low, so that our policyholders will be able to enjoy the best possible return on their savings.

Our direct channel offers the chance for customers to enjoy the savings through a modest discount. To qualify for this discount, they have to visit our business center, and save on the time taken by our insurance advisers from visiting them in their home.

Our business center is now manned by salaried consultants. In the future, our insurance advisers may be able to offer the same modest discount to the customers, provided that the customers visit them in the office.

We also encourage customers to visit our educational website to learn about insurance on their own. The website www.KnowYourInsurance.com.sg now attracts 1,500 visitors each day.

We will continue to offer to customers the choice of being served by insurance advisers who visit their homes or workplaces. The customers will find our insurance products to be attractive, as the commissions paid to our insurance advisers are at a modest level, compared to the market. This channel continues to be an important pillar of our sales strategy.

Contrary to the impression given in your article, our insurance advisers will continue to have a bright future, as they will benefit from the business growth that is generated by our strategy to look after the best interest of policyholders.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Work together to promote car sharing

NTUC Income operates the largest car sharing scheme in Singapore. We have 5,600 members sharing 200 cars located in 70 locations.

There are three other operators, namely CitySpeed, WhizzCar and Honda. Together, they have 5,400 members sharing 160 cars.

NTUC Income cooperates with the other operators to develop the car sharing market in Singapore. Each serves a different market segment. We meet regularly to share
experiences to improve the standard of carsharing service.

For example, NTUC Income shares our technology and call center facility with one of the operator.

I want to quote this example as another way for business to work in Singapore. We do not need to compete aggressively. We can cooperate to improve efficiency (and bring down cost) and quality of service.

Buying a new car?

BUYING A NEW CAR?

Take your insurance from NTUC Income and enjoy these excellent benefits:

- potential saving of $400 yearly on your insurance premium
- protection against loss of manufacturer warranty for 3 years **
- no extra loading on your premium, even if you had a bad accident **
- replacement with a new car, if it is stolen or total loss during the first year **
- repairs at manufacturer's workshops for engine and proprietary repairs **
- attractive terms for your car loan

** subject to conditions

Call 6477 7722
www.income.coop/insurance/motor/
www.income.coop/insurance/motor/comparison.asp

Stay with Incomeshield

Taken from NTUC Income's website

If you have been approached to switch from Incomeshield to another Shield product, you should consider your decision carefully. Here are some key advantages of Incomeshield:

- Our premium rates are more affordable than other Shield plans
- We provide adequate coverage to meet most medical treatments
- You can buy a rider to cover the deductible and co-insurance
- You can buy a rider to cover the major illnesses (for only 15% more)
- You can enjoy unlimited lifetime coverage

Here is a brief comparison of the total premium payable over 40 years (from age 41 to 80 years) between Incomeshield and similar Shield plans offered by other insurers:

Plan    NTUC Income      Other insurers
A        $30,525        $34,071 to $42,263
B        $18,338        $21,609 to  $28,403

The coverages provided by the various plans are quite similar, except for some diffferences in the limits. The difference in premium can be as much as 60%. You can save up to $12,000 over 40 years, by insuring with NTUC Income.

These premiums shown above are based on current rates. They are expected to increase in future years, due to higher medical costs. It is important that you choose an affordable plan from NTUC Income.

The insurance agent or broker who advise you to switch away from Incomeshield may have earned an attractive commission from the other insurer. The agent is required to tell you about the commisison that they will earn now and in the future.

If you wish to attend a dialogue session, you can call 6877-3366.

Tan Kin Lian
Chief Executive Officer

Customers want to buy insurance directly

E-MAIL FROM CUSTOMER

Dear Mr Tan

I read your blog with great interest; it provides a lot of informative material with real life case studies.

I have been looking around for insurance policies to save for children and own retirement. I realise the amount of commissions that go to the adviser is quite high. Up to two years of premiums go towards their commissions.

I know that more professionals are now turning to financial advisers simply because they want to buy policies for themselves and their families without having to pay high commissions to agents.

NTUC has gone through a positive revolutionary changes under your stewardship. I look forward to a day when you become a one-stop shop for insurance. You should allow customers to buy insurance directly, without having to pay high commission.

People like me can read and understand the insurance products. All we want is to buy the product and not pay for the service of the agent.

For now, we do not seem to have a choice but to have to go through an agent. Every insurance company I have gone to has the same system.

Mr Tan, I sincerely implore that you kindly look into this revolutionary way of selling insurance. I can assure you there will be a lot of buyers who are interested to buy insurance in this way.

When that day comes, I will certainly be one of your first customers at the service counter. I hope that you will provide several counters, to service those who walked in, and those who made an appointment. I shall hold my breath and reserve my funds for now.

------------------

REPLY

Dear

We do have a business center that operates in the way that you wish for. It is is staffed by salaried consultants, who are able to provide advice and also to help you to find the right insurance policy to buy. We provide a modest discount to a customer who come to us directly.

Call 6788 1111 if you wish to make an appointment to see a consultant at our business center.

We also have an interactive and educational website for you to learn about the various insurance products. You can visit www.KnowYourInsurance.com.sg

Tan Kin Lian
Chief Executive Officer

Discount of $500 ??

Some dealers offer a further discount of $500 to the purchaser who agrees to insure the car with their tied insurer.

The premium charged by the tied insurer is much higher than NTUC Income. After the $500 discount, the difference is quite small. If you are already enjoying a loyalty discount of 5% from NTUC Income, it is better to stay with us.

Model                     Tied     NTUC  
                          Insurer  Income
Honda Civic 1.8 Sedan 5   $1995    $1575  
Honda Jazz                $1680    $1280  
Nissan Sunny 1.6 EX Auto  $1578    $1319  
Vios 1.5 Auto             $1578    $1172  

The difference in premium could be $400 a year. If you insure for 10 years, you may be able to save $4,000 by insuring with NTUC Income.

Invest in a well diversified fund with low charges

I saw an investment product offered by a bank that has the following features:

- sales charge of 5%
- annual management fee of 1.75%
- pays out 8% per year, but this may be done by eroding the capital
- sell call warrants

Selling the call warrants allows the fund to earn income, but it also caps the gain that can be earned.

It is better to invest in the combined fund offered by NTUC Income. It is well diversifed and imposes a sales charge of 3.5% and an annual management fee of 0.95%. Due to the difference in charges over a 10 year period, the investment in the combined fund will pay you 10% more than the product offered by the bank.

The actual return depends on the underlying return of the fund. Here I assume that they are both funds provide the same average return over 10 years.

Advice: it is better to invest in simple financial products that have low charges.

Visit www.askdrmoney.com to get a comparison of the charges.

Avoid Investing in Structured Products

I avoid investing in structured products.

Here are my reasons:

- these products have high charges
- the charges are not transparent
- they sometimes have risks which are not well explained
- the investor usually do not get the full gains from the investment.

It is better to invest in unit trusts or investment linked funds. The charges are disclosed to you. Although the investor is exposed to the risk, at least the full gain goes to the investor.

It is better to invest in simple, transparent products.

Save $50 to $200 on your motor insurance premium

We compared the motor insurance premium for 10 popular models charged by NTUC Income, company A and company X. These are the three largest motor insurers in Singapore.

The comparisons are shown in www.income.coop/insurance/motor/comparison.asp

The premium rate for NTUC Income are between $50 to $200 cheaper than the two insurers.

Our policyholders can enjoy the further 10% discount, as follows:

- discount of 5% when they insure directly with us
- discount of 5% when they insure with us for three years or longer.

You can save a lot of money every year, by insuring with NTUC Income. We hold a 40% market share. Many people like our attractive premium rates, good service and convenience (ie report accident at Idac center and let us take care of the repair).

Refund of annuity are subject to estate duty

Someone asked me if the refund of capital on a life annuity is subject to estate duty.

The answer is "yes". It forms part of the estate. But, the refund is likely to be less than the invested capital (as the capital is reduced by each payment). If the annuitant dies after 15 years, the refund will disappear.

Some life annuity does not have a refund feature, and pays a higher amount.

Similarly, any gift made during 5 years before death is also subject to estate duty. Most people will live more than 5 years after making the gift, if they do it at a younger age.

I advise people - make your gift earlier when you are not too old. It will be more useful to your children when they start their own family or buy a house. If you do not wish to give them a lump sum, buy a term annuity so that your gift is given to them in installments.

Increase regular savings

In a recent survey, I was surprised to learn that 50% of people in the age gropu 40 to 55 wants to increase their regular savings.

This suggests that many people realise that they have inadequate savings for their retirement needs.

I thought that this group is likely to be squeezed by the cost of living, medical bills, repaying loans, and sending children to university.

But, they must have taken these factors into account, and decide that they need more savings.

What is the best plan to meet this need?

It is the ideal plan from NTUC Income:

- 100% of savings is invested from first month

- invested in the combined fund: large, well diversifed, low charges, attractive return

- cost of insurance protection is low, use the decreasing term assurance.

I hold educational seminars every two weeks. Call 6877 3366 to register.