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Tuesday, October 31, 2006

It cost only $10 a month to insure for $100,000

 

i-Term, 10 years term, male, non-smoker
monthly premium for $100,000

Age LTA DTA %
20 9.20 6.50 70
30 10.10 6.70 66
40 18.90 12.80 68
50 45.30 37.40 82
60 135.70 107.90 80
69 328.60 264.80 80

Premiums are based on age at entry.


A male at age 30 can insure for $100,000 for 10 years at a premium of $10.10 a month. If he opts for decreasing term assurance (where the assured reduces by 10% each year), the premium is only $6.70. By choosing a decreasing term, the premium reduces by about 20% to 30%, depending on entry age.

More people join Incomeshield

With the introduction of the Enhanced Incomeshield, more people are joining us. Each month, we receive 5,200 new applicants (as compared to 3,000 previously).

About 2,000 policyholders leave us each month to join other plans (a decline from 3,500 previously).

We are able to clear the new applications promptly, if they do not have any pre-existing medical condition.

For those with medical conditions, we are not able to clear them as they require to be underwritten. We are still short handled. I apologise for the delay.

Invest in a life annuity

Life Annuity for single premium of $100,000



Immediate Annuity (Participating)

Age Male Female
With-CP No-CP With-CP No-CP

55 $391.60 $428.20 $366.60 $391.20
60 $428.60 $488.40 $400.90 $439.10
65 $473.60 $567.40 $443.30 $504.10
70 $528.50 $672.10 $496.10 $593.70



With-CP: with capital protection, ie refund of balance of capital sum on early death
No-CP: no capital protection, ie no refund on early death

Participating: a bonus will be added to increase the annuity each year. The amount of bonus depends on the investment yield of the annuity fund. It is not guaranteed, but is expected to average about 2.5% per year.

Buy a life annuity

I advice a retiree to invest in a life annuity. You can get a better return (compared to bank deposit) and the payment is guaranteed for a lifetime.

A male at age 65 can invest $100,000 to buy a capital-protected life annuity that pays $473.60 per month (or 5.7% per annum). Each year, a bonus may be added to the life annuity, depending on the yield of the annuity fund. I expect the bonus to average around 2.5% over the long term. This means that the annuity payment is likely to increase by about 2.5% a year. This is helpful to offset the increase in the cost of living.

Under the capital protected life annuity, the balance of the capital sum (after deducting the annuity payments) will be refunded to the estate in the event of early death. Only the interest is forgone. If the annuitant lives longer and has received more than than the capital sum, there is no refund.

The annuitant has the option to buy a non-protected life annuity, which pays a higher monthly income. For a male at age 65, the non-protected annuity pays $567.40 per month (or 6.8% per annum). This is nearly 20% more than a capital-protected annuity. This annuity will also enjoy bonus.

I advise the retiree to buy a non-protected annuity, as it pays more to the annuitant. The annuitant probably have a property or other assets to pass to the children. The annuity should be kept mainly for the retiree. By accepting a non-protected annuity, the payout will be higher.

The amount of annuity depends on the age at the time of purchase, and on the gender of the annuitant. The difference between capital protected and non-protected also varies according to each person.

FAQ on Life Annuity

Put your cash in money market now

Dear Mr Tan,

I have been caught with some bad experience both with insurance and investment but nothing serious to affect my life savings.

Being in my fifties, I runs a small business and have enough saving for my retirement which have for some years been kept in USD and SGD deposits earning very poor interest and suffering depreciating USD exchange rates.

I am afraid to invest in stock or funds at this moment thinking it is too high. Do you think I should wait or do something now with my savings? I am more thinking of protecting my nesteggs, avoiding it being eroded by inflation, poor interest rates and depreciating exchange rates.

I am of course feeling sorry to myself that I missed the current booming market.

P

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Dear P

It may be better to wait for the market to correct, before investing in the equity fund. In the meantime, you can put your money in the money market fund (ie flexi-cash) plan to earn about 2.5% to 3% per annum. There is no lock-in period.

Flexi-Cash

When the market correct, which I hope may happen within the next 12 months, you can invest in an equity fund.

This is what I did for the cash in my bank account. I put in the flexi-cash and will wait for a market correction.

If the market does not correct, I will be happy to get 2.5% to 3% per annum. This rate will change with the money market.

Tan Kin Lian

Consumers need advice "untouched by selfish agenda"

Dear Mr Tan

Like many faceless citizens, I am a fan of yours, more so after reading your blog and viewing your new website.

I have also been very impressed with Larry Haverkamp (Dr Money).

Both of you are a rare breed to whom all of us should go to for financial advice because I find the information from both of you so untouched by selfish agenda unlike others whom I understand of course have to make a living and so must try to sell whatever they can get the most profit out of.

All the regulations such as 14 days cooling off period are just something for the promoters to overcome.

I wonder if it is possible for more professional in your trade to model themselves after you and Mr Haverkemp.

I have no doubt we would be better off as a commercial city and society with more real value and respect given to the consumers at large.

Currently its seems that being a professionals are more like having a licence to profit as much as possible from the consumers who of course cannot be more sophiscated or more informed than the professionals and thus are generally at their mercy.

There must be a big untapped market for unbiased information to guide consumers around with their insurance, investment and other aspects of our life.

I hope by your examples, you may have shown the way for other professionals to follow as to how to really help their customers and at same time make a reasonable profit, making it a win win situation for all instead a zero sum situation of taking as much as possible from the customers and leaving their customers the risks of investment and insurance policies drawn up by the professionals as much as the laws allowed them for their interests instead of being fair to their customers.

Lastly, I am surprised that you have been able to actively engaged the readers of your blog and keeping it so updated despite your currently responsibilities in running Income and giving lectures etc.

I hope to attend one of your lectures before you leave. Meantime, you may put this and your reply on your blog if you wish.

My best wishes to you and congratulations on your success in this regards.

Warmest regards

BP Pan

Our agents give better value to customers

Dear Mr Tan

It is mentioned that the consultants at the business centres do not earn a commission.

What about insurance agents who are not from the business centres? Are they also paid a salary and do not earn any commission?

Regards

OC

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Dear OC

Our insurance agents (or advisers) are paid a commission on the insurance policies that they sell. Our agents earn a lower commission rate (compared to agents from other insurance companies). We are able to offer products that with lower premium and better return to our policyholders.

Please read the following FAQ:

Endowment
Ideal
Flexi-link

Do you wish to visit our business center or have an adviser to contact you?

Tan Kin Lian

Hard boiled eggs

Do you know how to make hard boil eggs which are easy to peel off the shell?

Here is an advice from an experienced hand.

1. Place eggs in single layer in pot/saucepan.
2. Cover with at least one inch of water over tops of shells.
3. Cover pot with lid and bring to a boil.
4. As soon as it begins to boil, remove from heat and let stand.
5. When cooked to desired level, drain off hot water.
6. Immediately cover with tap/cold water.
7. Hard-cooked eggs: let stand in tap/cold water until completely cooled.

Monday, October 30, 2006

Top up showed a large gain in a few months

In June, we write to our investment-linked policies to top up their investments, as the stockmarket had corrected by about 10 percent.

Many policyholders responded to our advice. They have made a return of 5% to 10% during the past few months. Those who top-up earlier had a bigger gain, compared to those who acted later. In many cases, the amount of the top-up was more than their initial investment.

Here are some examples:


Nr Age Prev Inv Fund Top-up Now Gain
1. 46 5,000 Growth 75,000 79,494 6.0%
2. 45 30,000 Tech 50,000 56,004 12.0%
3. 40 20,000 Growth 99,700 104,422 4.7%
4. 55 50,000 Prime 50,000 54,715 9.4%
5. 61 40,000 Growth 55,000 58,076 5.6%

Cooling off period for sale of financial products

Banks employ marketing officers to sell complex financial products to their customers. The best time to catch the customer is on the maturity of their fixed deposits. As the customers are not happy with the low interest rate, the marketing officer introduced a structured deposit to the customer.

Many of these customers are ordinary people, who do not understand the risk and the fairness of the terms of the product.

The banks are required to give materials in writing to the customer. The matuerials explain the risk in some general way. But the marketing officer, during their talk, explain away the risk. They say, "The chance of losing all your money is very small". These statements are given verbally and not put down in writing.

Many people buy the complex risky products, without understanding the risk.

I suggest that the banks should be requird to give a 14 day cooling off period to the customer, and that it should happen on receipt of the wordings of the contract. The cooling off period must be prominently displayed on the front of the contract.

During the past ten or more years, life insurance companies are required to give a 14 day cooling off period for the sale of their products. This right has to be prominently conveyed to the customer.

I hope that there is a similar requirement for the complex structured products that are now being marketed by the banks.

Sunday, October 29, 2006

NTUC Income does NOT treat AMD as suicide

Hello Mr Tan,

I noted that the government is trying to get Singaporeans to sign Advanced Medical Directive. From the insurer's point of view, is death via termination of life support system considered suicide?

TTY

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Dear TTY

NTUC Income does not treat AMD as "suicide".

We are guided by the following view stated in a FAQ from MOH website.

Does the AMD Act encourage euthanasia?

No, the AMD Act does NOT encourage euthanasia. On the contrary, the AMD Act is explicitly and categorically against euthanasia. The Act states in:

Section 17(1) - Nothing in the Act shall authorise an act that causes or accelerates death as distinct from an act that permits the dying process to take its natural course.

Section 17(2) - It is hereby declared that nothing in this Act shall condone, authorise or approve abetment of suicide, mercy killing or euthanasia.

A terminally ill patient CANNOT use the AMD to commit suicide, nor does the AMD allow doctors to abet in any suicidal attempt. This is punishable by law.

Friday, October 27, 2006

Car Tracking

If you visit Malaysia often, it is better to install a car tracking device.

NTUC Income has tied up with a provider to give a special package to our policyholders to install a car tracking device.

60 policyholders have installed this device. We have successfully recovered 1 car fixed with the trackers. With a tracking device, there is a high probability of recovery if cars are stolen.

Policyholders thus benefit from a 10% to 25% reduction in their insurance premium. The amount of discount given varies, depending on our theft experience of the model of car.

Our policyholders pay a one time installation fee of $720. We allow our policyholders to pay over four interest-free installments.

There is also an annual subscription fee of $132. This subscription fee is
for the management and maintenance of the alarm centre.

The first year's subscription fee is waived during this promotion period.

Car sharing service

The Minister for Transport recently advised households to use public transport, instead of owning a second car.

I wish to suggest that these families can join as a "car share" member to have access to a second car for the occasional events.

NTUC Income started the first pilot car-sharing scheme with 4 cars in 1997. Today, there are 4 car-sharing organisations operating 500 shared cars with 10,000 members.

The NTUC Income Car Co-Op has 195 cars at 77 locations, serving around 5,000 members.

For more details, click here: Car Share

Advice from an insurance specialist

Dear Mr Tan,

I recently tried to help my wife to see the possiblity to switch her AIA policy plan to NTUC. She bought the insurance plan in 1996. Next year will be so-called critical 11 years.

As we are both not so familiar, we do not know whether to keep the AIA policy.

I bought NTUC living policy and it seems the return is much better compared to her this AIA policy.

We did not go for your NTUC walk-in counters as we think that most of them may just ask us to keep the policy.

Do you know of an insurance specialist who can advice on this matter (prefer speaking mandarin so that my wife can understand better)?

Thanks alot.

Best regards,

HSW

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Dear HSW

I will ask my colleague to get a insurance specialist, who speak Mandarin, to call your wife and explain to her.

Tan Kin Lian

Thursday, October 26, 2006

Learn to play Logic9 (Sudoku)

Sudoku is popular all over the world. It is printed in Today paper and in MyPaper (under the title Logic9).

I am surprised that many people do not know how to play this puzzle. They have seen the puzzle before, but have not been taught how to do it.

I will be giving a 30 minute talk on how to play this puzzle at easy and difficult level in November and December. We will be giving a Logic9 puzzle (worth $5) to each attendee.

If you want to learn the tip on how to be an expert in this puzzle (and be within the top 5% of the population), come to listen to my talk. It is fun and rewarding.

Watch out for the advertisement in the newspaper and in eNN. You can register to subscribe to eNN for free at:, Free eNN

Buy unit trust through a financial adviser?

There are more than 300 unit trusts and insurance funds available for the public to invest.

The financial adviser can select the best performing funds and offer them to the investing public.

There is a danger in this approach.

The funds that perform well in the past may not perform well in the future. In fact, the academic studies have shown that actively managed funds generally perform worse than index funds, after deducting the fees.

In fact, if an fund has performed well by adopting a certain strategy, it is likely that the same strategy will perform below average in the future, as the results go in cycles.

So, if a financial adviser ask you to invest in a fund that performed well (and it is easy for them to pick these funds from the large numbers in the market), you are likely to make the wrong choice.

It is better to invest in a large, well diversified fund with low charges. Indexed funds fall in this category.

Return on Money Market Fund

The money market fund managed by NTUC Income offers a return that is linked to the money market.

The fund charges a very modest 0.25% p.a. to cover our expenses. The rest of the return is given to the investor.

The actual monthly return from the money market fund (net of charges) was:

 
31-May-06 0.31%
30-Jun-06 0.11%
31-Jul-06 0.23%
31-Aug-06 0.29%
30-Sep-06 0.20%


The average is 0.22% per month, or 2.7% per annum.

I have decided to transfer $100,000 from my bank (which earns about 1%) into the money market fund.

Tuesday, October 24, 2006

Posting in SG Entrepreneurs

Among all Singapore CEOs, Mr Tan Kin Lian is definitely one of the most bold and interesting personality for being the only CEO who holds a corporate blog to his name.

In the recent Spirit of Enterprise Awards 2006, we met up with Mr Tan and invited him to come and contribute to our blog. Immediately without hesitation, he accepted our invitation.

So, we are honoured to have him sharing with us his experiences as a CEO in NTUC income, his thoughts about the insurance and financial planning market and advice to young entrepreneurs and also his future plans after NTUC Income.

Read the interview

Election in Melbourne

My friend who lives in Melbourne, Victoria, Australia told me that the candidates are paid by the government, a certain sum of money for each vote that they get in the election, provided that they get at least 2,500 votes.

This is intended to defray their expensses of contesting the election. It will give them the funds to contest the next election.

He said that the payment is usually sufficient to cover the expenses of the contest.

I am not sure if his facts are correct. He is not sure if this payment applies only to the local election, or applies to the state and national elections as well.

Traffic Congestion in Singapore

The Minister for Transport said that there are too many cars on the road. He is looking into measures to improve the traffic system. The current system has been largely unchanged for 10 years.

We can expect new measures and higher charges for using the roads. We have to think of new ways, e.g. to encourage car pooling and encourage more people to use public transport.

The traffic congestion is quite bad in many parts of Singapore.

Monday, October 23, 2006

The History of Sudoku (Logic9)

It’s hard, perhaps impossible, to pinpoint the exact time and place in which the original concept of Sudoku (Japanese: 数独, sÅ«doku) began, but it seems to be related to the appearance of the first Magic Squares.

The idea of the magic square was transmitted to the Arabs from the Chinese, probably through India, in the eighth century.

It appears that Magic Squares may have introduced to Europe through Spain by Abraham Ben Meir ibn Ezra, a Hispano-Jewish philosopher and astrologer.

The Swiss mathematician and physicist Leonhard Euler (1707-1783) presented to the St. Petersburg Academy on October 17, 1776, how to construct Magic Squares with a certain number of cells, in particular 9, 16, 25, and 36.

This particular type of puzzle as we know it was first published in the late 1970’s in Math Puzzles and Logic Problems magazine by Dell Magazines. The name given by Dell to these puzzles was Number Place.

Dell took Euler’s Latin Square concept and applied it to a 9x9 grid with the addition of nine 3x3 sub-grids, or boxes, each containing all numbers from 1 to 9.

So, the Sudoku concept was not invented in Japan as many people may believe, but the name Sudoku was. In 1984 Nikoli, Japan’s leading puzzle creating company, discovered Dell’s Number Place and decided to present them to their Japanese puzzle fans.

The puzzles, which were first named Suuji Wa Dokushin Ni Kagiru, ("the numbers must be single" or "the numbers must occur only once") quickly became popular.

In 1986, after some important improvements were added, mainly by making symmetrical patterns and reducing the number of given clues, Sudoku became one of the best selling puzzles in Japan.

Realizing that the only problem with the Sudoku puzzles was their long name, Kaji Maki, the president of Nikoli abbreviated it to Sudoku - (Su = number, digit; Doku = single, unmarried).

At the end of 2004 Wayne Gould, a retired Hong Kong judge as well as a puzzle fan and a computer programmer, visited London trying to convince the editors of The Times to publish Sudoku puzzles. Gould, that had written a computer program which generates Sudoku puzzles of different difficulty levels, demanded no money for the puzzles. The Times decided to give it a try and on November 12, 2004 launched their first Sudoku puzzle.

The publishing of Sudoku in the London Times was just the beginning of an enormous phenomenon which swiftly spread all over Britain and its affiliate countries of Australia and New Zealand.

Even the Teachers magazine which is backed by the government recommended Sudoku as brain exercise in classrooms and suggestions have been made that Sudoku solving is capable of slowing the progression of brain disorder conditions such as Alzheimer's.

In April 2005 Sudoku completed a full circle and arrived back to Manhattan as a regular feature in the New York Post. On Monday, July 11, the Sudoku craze spread to other parts of the USA.

Today there are Sudoku clubs, chat rooms, strategy books, videos, mobile phone games, card games, competitions and even a Sudoku game show.

Sudoku has also sprung up in newspapers all over the world and is commonly described in the world media as "the Rubik's cube of the 21st century" and as the "fastest growing puzzle in the world".

Invest in Money Market Fund

My investment in ST Tracker Fund has appreciated 60% during last 3 years. I am thinking of realising it and re-investing in the Global Equity fund.

But, in the meantime, I may put the money in the Money Market fund to earn about 3% per year.

Smiling Tiger

I met someone at the supermarket. He said, "Hi, Mr Tan".

I asked him, "How do you know me?" He said, "From your smile. I call you - a smiling tiger".

I am not sure if this is a compliment. But, I know that he meant well. I found that he was a union branch leader, and worked in the National Heritage Board.

Sorry to hear that you are leaving Income

Dear Mr Tan

I have been a policy holder of Income since 1993. I am glad to inform you that Income remains my preferred insurer for me and my family to this day.

It is thus with great regret that I learn that you are leaving Income, as I feel that you really have the benefits of the policy holders at heart and really take the effort to educate the public on insurance and personal financial planning.

Hopefully, your successor will be a person who holds fast to these ideals too, who will continue to look after the welfare of Singaporeans.

If I could share with you on a personal basis - I like Income as I feel that its policies are priced fairly and clear and easy to understand, the management looks after the interests of policyholders, and the agents (or at least my agent) are honest, upfront and do not give me any b*llsh*t. (please pardon me!)

My experience with other insurers have not been too pleasant, as I always feel that they try to sell me a product that either 1) they do not understand, or 2) is not useful to me, or 3) gives them lots of commission but does not benefit me, or 4) try to oversell a product without due consideration of whether I can afford it in the long run.

Kudos to you and Income for a job well done, and I wish you all the best in your future pursuits.

Best regards
JY

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Dear JY

Thank you for your kind words. Wish you all the best.

Tan Kin Lian

Sunday, October 22, 2006

Negative headline is unfair

Last week, a leading newspaper had a headline that suggested that a prominient entrepreneur (a multi-millionaire) based in Singapore, is sued for fraud.

This created an impression among a few knowledgeable people that this entrepreneur is acting dishonestly.

I pointed out that the suit was taken by a private individual. The circumstance of the dispute is under litigation.

It was unfair of the newspaper to use a headline that created a wrong impression among the general public.

It is a different matter, if the case is taken by the public prosecutor. The prosecutor has a duty to carry out some investigation to be satisfied that there is sufficient evidence to press a case.

I urge the public to be careful about reading the headlines, especially if there is a tendency for some newspaper to be sensational or negative. Do take a more generous view about people who may be charged or sued unfairly.

Use Skype for text meetings

I intend to use Skype for meetings. Up to 100 people can be involved in the chat meeting (ie communicate by typing).

This new method can also be used in a meetings within Singapore, involving people at various locations. It saves time travelling to the meeting.

It is especially useful, if some of the participants are overseas.

Discussion with text message is also quite convenient.

Use Skype for International Calls

I have started to use Skype for international calls. It works well. I can speak from my personal computer, and contact the other party using their telephone number. I have to pay about 5 cents a minute for the call. The voice quality is good.

If both parties arranges a scheduled time, they can talk or chat (using text messages) over the computer. This is free.

It is a cheap and wonderful way to communicate.

How can employers prevent the escalation of medical expenses?

Question: Are employees' medical expenses continually on the rise? What can bosses do
about this situation?

Reply:

Medical expenses for employees are likely to increase in the future as the workforce gets older.

A good way for the employer to be sheltered from the increasing cost is to pay a fixed sum to the employee, according to the level of the employee. This allows the employee to buy their own personal medical insurance. Many insurance companies now offer a Shield plan that provides lifetime coverage. The premium in each year depends on the age of the insured person and on the type of plan that is selected.

The employee can select a plan that meets his or her personal needs. They can choose a plan that covers a low class of ward and pay a lower cost. If they choose a plan that covers a higher class of ward, they have to pay a higher cost. As the employee has to pay for their own cost (after receiving the fixed subsidy from the employer), more are likely to choose a more cost effective plan.

This system has a further advantage. When the employee changes his or her job, the employee can continue the coverage under the Shield plan. The plan is not linked to the specific employer.

The Shield plan covers in-hospital treatment, and outpatient treatment for certain specified illnesses. The empoyee will have have to pay on their own for visits to the general practitioner or specialist. They should avoid seeing the doctor for minor ailments, as they now have to pay on their own. They can learn how to take care of the common ailments on their own.

Tan Kin Lian

Saturday, October 21, 2006

Reply to New Paper: Claim by Anthony Ng

18 October 2006

Editor
New Paper

I refer to your report entitled "Court sets aside attempt to make him bankrupt" (New Paper, 16th Oct 2006).

I wish to explain how a theft claim is settled by NTUC Income, and the reasons for our approach.

During the past 12 months, we settled a total of 250 theft claims representing 96% of all theft claims received by us. The remaining 4% of the claims were withdrawn due to the recovery of the vehicle. On average, it takes about 3.5 months for a theft claim to be settled.

The market value of the stolen vehicle is establised in accordance with our practice note, which is given to all claimants. This has worked well and has resulted in obtaining a fair value that is accepted by the claimants.

This is how we handle a theft claim.

We require the policyholder to furnish us a police report and complete a theft claim form. We wait for the police to complete its investigation into the theft, to ensure that it is a genuine theft. The police investigation usually takes about 3 months. During this time, we interview the owner on the circumstances relating to the theft and agree with the owner on a fair market value for the vehicle.

Here are the facts relating to Anthony Ng's case:

Mr Ng reported to the police that the car was lost on 28 June 2005. He did not notify us about the theft until 6 September 2005, i.e. a delay of 8 weeks. He had actually breached the policy condition for failure to notify us of the theft immediately, but we did not hold this breach against him.

We contacted Mr Ng on three occasions to discuss the circumstances of the claim, but he did not turn up. Subsequently, he was not contactable. Up to now, we not been able to made any offer to Mr Ng on the settlement of the theft claim, due to his lack of cooperation.

About two years ago, Mr Ng had taken a loan from our loan department for the purchase of the car. He failed to pay the loan instalments on time. Mr Ng had actually defaulted on the loan repayment prior to the theft of the car. A total of 7 installments were outstanding by the time our loan department appointed our lawyer to take legal action on 1 November 2005.

My loan department decided to take legal action as they were not satisfied with the non-payment of the loan instalments and his lack of cooperation in expediting the settlement of the theft claim.

In making the case for bankrupcy, the lawyer acting for our loan department used a value for the car as being the sum that the financial institution can recover in the event that the theft claims is not successful. This value comprises the value of the road tax, COE and the PARF value.

I wish to confirm that the amount to be settled for the theft case will be in accordance with our practice note, and will be significantly higher than the sum reported by the New Paper.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Friday, October 20, 2006

Zaobao Interview: My Insurance Plans

How well have you been insured? what kind of policies you hold? What kind of protection you are giving to your family members?

Reply:

When my children were young, I bought term insurance and whole life insurance. The total amount of my insurance was about five years of my annual income. I bought critidal illness insurance for my wife. I also bought insurance to my three children, to cover them against accidents, hospital expenses and to save for their education.

I invest in investment linked plans (ILP) to save for my retirement. Most of my investments are in the large, well diversified, low charge plan offered by NTUC Income. They earned a very attractive return during the past few years, ie more than 10% per annum. Over a longer period of 10 toi 20 years, I expect an average return of 5% to 6% per annum. I think that this is the most suitable type of investment for most ordinary people.

Tan Kin Lian

Zaobao Interview: Business Center

You set up business centres to allow consumers to seek free financial and insurance advice and having salaried agents to man the counters.

Some Income agents felt they have been undercut. Has Income indeed gotten such feedback from agents on this? If so, what's the nature of the feedback?

What about on the part of "walk-in" consumers, are they worried about the follow-up of their cases. What's the feedback of consumers on this thus far? Will appreciate that you give an overall picture on number of people who have visited the business centres and bought some policieis. How many such centres are there now?

Reply:

This year, we introduced serveral sales promotions and marketing campaigns. They provide a lot of sale opportunities for our 700 full time insurance agents. We are able to generate 25,000 new sales leads each month. Most of our active agents are so busy following up on these sales leads that they have no time to worry about the business centers.

A small number of less active agents still complain about the business center, but this is diminishing. A small handful who were strongly against this concept have left us. The remaining agents are adjusting well and are benefitting from the new sales opportunities.

We set up the business centers to cater to a new market. There are customers who prefer to visit or telephone our business center to talk to a salaried consultant. As the consultant are not paid any commission, the customer feel that they are not being pushed to buy the product. The feedback from the customers who visit the business center is positive. The business centers see a steady increase of business.

We operate two business centers now, with 80 salaried consultants. We aim to open a total of four business centers with 200 salaried consultants by end of 2007.

Tan Kin Lian

Zaobao Interview: Motor Insurance

One big recent issue was that purchasers of cars cannot choose their insurance company - you have termed that anti-competitive. However, Income has also earlier insisted that repair work be done at its designated workshops. How do you reconcile this "irony"?

Many said Income is trying to salvage its diminishing market share in motor insurance. I am sure there are more reasons to this, perhaps you can enlighten us?

Reply

Under our motor insurance plan, we will arrange the repairs at our designated Quality workshop. This allows us to ensure the quality of repair and bring down the repair cost, by preventing inflated claims. We are able to bring down the cost of insurance by 10% to 15% for our customers.

A consumer who does not like our motor insurance product is free to insure his or her car with any of 30 insurance companies in the market. More than 30% choose NTUC Income to enjoy our service and lower premium rates.

This year, we suffer a temporary decline in market share as the distributors of new cars coerce their customers to take the insurance with their tied insurer. The customer is not given a free choice. As the distributor has a monopoly in the distribution of the car models, they are able to control the market for the purchase of insurance on new cars. As many people changed their cars during the past year, we lost out on this market.

We expect to regain our market share when the owners buy their own insurance for the second year.

Tan Kin Lian

Zaobao Interview: Supplementary Retirement Scheme

Not saving enough for retirement is now a common worry. You have earlier suggested that the government raise the cap on tax relief so that more can plan for their retirement (including buying insurance). Can you give more details on this proposal?

Reply:
The current rate of contribution to Centeral Provident Fund is probably adequate for most people earning up to $4,000 a month, if they do not take out too much of their savings to pay for their home.

For people who earn more than $4,000 a month, the contribution to CPF is capped at this salary ceiling. They are not allowed to contribute beyond this ceiling and enjoy any tax relief.

The government has introduced a Supplementary Retirement Scheme to allow people to make additional contributions for their retirement. The amount allowed to be contributed to SRS is quite low, at current levels. This makes the SRS not attractive.

I suggest that the contribution to SRS should be increased to 20% of annual income, less contribution to the CPF. This will allow the higher income earners to make supplemnentary savings for their retirement.

Tan Kin Lian

Zaobao Interview: Life Insurance

There has often been complaints by consumers over different facets of insurance. They mainly pertain to grievances over buying products that do not deliver what's promised. What is your advice to consumers who wish to buy insurance or who have already bought insurance?

Reply:
Life insurance is important. A breadwinner needs life insurance to provide a sum of money to the family, in the event of his or her premature death or permanent disability. The need is greater for families with young children.

Many insurance companies offer products to meet this need, but they bundled the insurance needs with compulsory savings. These are sold as endowment and whole life products. These products are sold by insurance agents who earn high commission. The company also incur expenses in their administration, provide for the cost of insurance and make a profit for their shareholders. These expenses take away about 2% to 3% on the investment yield.

In the past, when the investment yield was high, the insurance company can still provide a fairly attractive return to the policyholder. But, when the investment yield came down in recent years, the net yield was unattractive.

My advice to consumer is to find an insurance company that incurs low expenses and is able to give a better return to the policyholder. The difference can be as much as 15% to 25%, depending on the type of insurance plan and the period of insurance. If an insurance company with high expenses pays you $100,000 on maturity of the policy, another company with low expenses may be able to pay you $15,000 to $25,000 more.

Another option is to buy term insurance to protect your family. The cost is term insurance is less than 20% of the cost of a whole life policy. You can invest the remainder of your savings separately in an investment fund. You will be able to get a better return on your savings. This is usually much more than the cash value of your endowment or whole life policy.

Tan Kin Lian

Call 63 INCOME for service

Dear Mr Tan,

I am a policy holder for medical insurance. Recently I was hospitalised. Upon discharged I tried to contact my adviser KS. I called 3 times in 3 days and left message for her to return call but I did not get any response.

I am disappointed that the adviser did not respond to me. After the 3 days of disappointment, I manage to contact the claims department (63321133). I spoke to a gentleman, very pleasant, very helpful.

Will I buy another insurance from NTUC Income. Definitely not.

Best regards,

LWK

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

Dear LWK

We have contacted our insurance adviser, KS. This is her explanation. In view of her explanation, I hope you will forgive this lapse in service.

Tan Li Leng
Head - Field Department

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

Dear LWK

I am sorry about this lapse of service.

We encourage our policyholders to call our hotline 63INCOME (6346 2663) which provides 24 hour service.

It will avoid the occasional lack of follow up by the agent (which may be due to reasons beyond our control).

Tan Kin Lian
CEO, NTUC Income

Buy term and invest the difference

Hi Mr Tan,

I write to seek your advice on the likely returns on my endowment policy and to switch out of P to NTUC.

I am 34 years old. I am also now 6 years into a 25 year life/critical illness endowment policy with P (100K as life sum insured).

I read in the papers about low term rates and why it is unwise to mix endowment policy with term.

I enquired from my adviser the rates of a P policy on the same scope as my current endowment policy but without the "endowment" elements.

The rates are $255 versus $50. This difference is significant as this P endowment policy has a guaranteed amount plus a non-guaranteed amount. Despite the projected yield of about 4%, I have no confidence the non-G portion pay-out will be met.

I may be better off switching out of the endowment policy now, but a term for $50 till I am say 55, and investing the difference of $200 into some kind of scheme that earns better returns than the projected yield. Is my thinking correct?

Warm Regards,

UTY

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

Dear UTY

I will ask my business center manager to get a consultant to look into your case. We will offer an alternative plan for you.

However, I suspect that as you have aleady incurred the high charges under your P policy, it may not be possible for us to offer a better alternative for you under our similar Living policy

One possibility is for you to swtich to our Ideal plan (ie an investment linked plan) and buy the critial illness separately under a rider. My consultant will give you the figures to see if it is to your advantage.

Tan Kin Lian
CEO, NTUC Income

Do not allow the workshop to make inflated claims

Dear Mr Tan

I have an accident at woodland Innova JC entry. My car was hit by another car which trying to reverse out of the JC entry

A 3rd party claim was make on my car insurance and the car driver accident report provide in correct statement, that my car collided into his car.

I strongly beleive that the claim was submitted by the workshop. Can you help implement a warning cause in all accident report that the vehicle owner / driver is reposnsible for the statment, so that the owner and diver will not be signing blank form for the workshop to make claim without the owner's knowledge.

NL

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

Dear NL,

I will alert my manager in charge of motor insurance, and his general manager. In the past, we do give warning to third party on incorrect statement. Some people are angry at our warning.

Tan Kin Lian

Buy low cost term insurance for your protection

Insurance advisers (agents) are trained to convince you on the value of life insurance in providing financial security to your family, in the event of premature or unexpected death, disability or critical illness.

They are right. It is important to take care of your family.

The advisers prefer to sell you a whole life or endowemnt plan, because you pay a high monthly premium. They commission is based on the amount of the premium.

It is better for you to buy term insurance to cover these risks. Although you do not get a return on the premium, the cost is less than 15% of the normal premium. You can invest the remainder of your savings in a large, well diversifed, low charge fund (also available from NTUC Income) and get an attractive return.

Visit our business center or call 62 462663 (62 INCOME.)

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

Here are some comparison:



Monthly premium for $100,000 sum assured

Male
Age 20 25 30 35
Whole life $121.50 $140.50 $165.50 $196.50
20 yrs term $ 9.70 $ 10.70 $ 13.40 $ 18.90
20 yrs decreasing term $ 6.70 $ 6.90 $ 8.10 $ 11.40

Living (critial illness) $149.50 $176.50 $210.50 $255.50
20 yrs living benefit $ 15.20 $ 20.10 $ 29.90 $ 46.90

Female
Age 20 25 30 35
Whole life $111.50 $128.50 $150.50 $176.50
20 yrs term $ 7.00 $ 8.20 $ 10.40 $ 14.00
20 yrs decreasing term $ 5.20 $ 5.40 $ 6.20 $ 8.40

Living (critical illness) $136.50 $159.50 $189.50 $227.50
20 yrs living benefit $ 14.30 $ 18.40 $ 27.60 $ 45.20

Wednesday, October 18, 2006

Advice to a retiree on investing your savings

1. What is the best way to invest my savings, after my retirement?

You should use a capital sum to buy a life annuity of about 30% to 40% of your income prior to retirement. You should find this sum to be adequate, if you own a home which is fully paid. If you are still paying for the education of your children, it should be funded separately.

You have to pay between 200 to 250 times of your monthly annuity, depending on your age and the type of annuity that you buy. For example, if you want an annuity of $1,000 a month, you should be paying between $200,000 to $250,000.

If you buy a capital protected annuity (which refunds the balance of your capital sum, without interest, on early death), you have to pay about 20% more than a non-protected annuity. Most people prefer the capital protected annuity, but this trend may change in the future.

Let me explain why 30% to 40% is adequate for a retiree. When we are working, we have to spend about 50% of our earnings to pay for a home, raise a family, tax and expenses of working. We have to set aside 10% to 20% for our savings. These items are usually not necessary after retirement, i.e. the home is fully paid and the children have grown up.

The annuity guarantees a payment for life. If you buy a participating annuity, you will enjoy an annual bonus (added to the annuity) that depends on the investment yield in each year. This will help to offset the increase in cost of living.

2. How should I invest the remainder of my savings

I recommend that it be invested in a large, well-diversified, low charge fund. You should select a fund with 50% to 100% invested in equity. This investment is likely to give you an attractive return, 5% or more, over a period of 10 to 30 years (but this is not guaranteed).

Although equity has risk, you can minimise it by investing for the long term (ie average out the good and bad years) and choosing a large fund (to reduce the risk of loss of a few individual investments).

You must choose a fund that have an annual charge of 1% or less. You should avoid a fund that has an expense ratio of 2% or more, as it takes away too much of your yield.

3. Is it better for a young person to save at an early age?

A young person should save 10% to 20% of the earnings for their retirement. You should invest in a large, well diversified, low charge fund that can give an average return of 5% or more over 10 to 30 years.

You should avoid taking an investment plan that have a high upfront charge that is used to pay the distributor (ie the insurance or financial adviser). The current upfront charges in the market (about 18 months of savings) are too high. NTUC Income charges about 6 months only.

By investing in a fund, you will get a higher yield compared to a traditional endowment or whole life policy. The difference in yield can be between 1% to 2% per year. Over a saving period of 30 years, the difference can be 50% or more. If you get $100,000 from a traditional product, you can get an additional $50,000 from a good investment.

It is important to choose the right type of investment for the future.

Note: The figures quoted above are estimates and do not represent any guarantee of the actual return for the future. Investment has risk. But, if you manage the risk well, you can get a better yield.

Talk to our consultant at the business center

Dear Mr Tan,

Having heard so much about your Blog, I decided to visit it today. It is interesting to note how you responded to the people who wrote regarding their problems and enquiries.

Your warm and caring attitude, coupled with your sound and practical advice, promote good rapport and great PR for INCOME on the whole.

You represent a rare breed of CEOs who are approachable, humble, having time for people, willing to listen and render assistance. However, I have encountered some CEOs who are too aloft even to take a call or talk to the man in the street.

I note you are travelling in China and will wait for your return next week to discuss my Income Policy.

Best Regards,

AL

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

Dear AL

I try to give some brief general advice by e-mail.

If you wish to have a more specific advice, I suggest that you visit our business center and talk to our consultant. They should be able to advice you. They are paid a salary and do not earn any commission. The center is located at 75 Bras Basah Road. Hope it is okay.

Tan Kin Lian

Low cost insurance to protect the family

Dear Mr. Tan,

For the past 16 years, I was running a business, but it failed. In recent years, I have been struggling to pay the debts to the banks and other institutions.

I put my feet firmly on the ground, cleared the hurdles and wish to start all over again.

My greatest worry was my family's well being, as I don't have any insurance coverage for them.

I want my family members to be protected and insured. I am able to put aside S$50 per month just to set my family insured and protected. What is your advice?

I am aged X and have two children. My monthly average earning is about $Y.

Many agents are keen to work on "high" premium potentials and not wasting time on me.

MS

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

Dear MS

I congratulate you on your perseverence and success in recovering from a setback in your financial circumstances. As your current income is still quite modest, I suggest that you should buy a low cost term insurance to protect your
family. You can find more details at this webpage:

http://www.income.coop/insurance/term/faq.asp

This is a pure insurance cover, and does not have any savings element. I think that it is most suitable for you.

If you wish to save for the future, I suggest the Ideal plan. More details are
available at:

http://www.income.coop/insurance/ideal/faq-4child.asp

If you like my suggestion, you can come to the business center at 75 Bras Basah Road and talk to our insurance consultant. They can give you the best advice. They do not earn any commission on the sale.

Tan Kin Lian

Policyholder wants to switch to NTUC Income now

Dear Sir,

What is your suggestion for someone already bought the cover from other insurance company? Should the policy be terminated and switched to NTUC Income? I am not able to get another policy now. Like to hear your adivice.

KS

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

Dear KS,

I will get my product specialist to find out more about your circumstances and give you the proper advice.

Usually, as you have already incurred the high charges for the critical illness policy taken from the other insurance company, it is not beneficial for you to make a change now. Let us take a look at the actual numbers and make a decision after that.

Tan Kin Lian

Reply to Zaobao: Discounting of bonus

18 October 2006

Editor
Lianhe Zaobao

I refer to the letter, "Can NTUC Income's policy be more transparent?", by Madam Wei Qi Ying (Zaobao, Oct 13).

Mdm Wei purchased a Foundation Policy in 1988. This is a long-term endowment plan, with maturity in year 2042.

This policy pays the sum assured plus accumulated bonus on the maturity date, or on earlier death or permanent total disability of the life assured. This is a standard endowment policy which is bought by large numbers of people over the years.

The Foundation policy allows the policyholder to encash the bonus at its discounted value. The discounting factor takes into account the number of years to the maturity date. The effect of the discounting is shown clearly in the illustration given to the policyholder at the time of purchase.

The Foundation policy actually gives a special benefit to the policyholder. If the bonus is encashed for the purpose of the tertiary education of the life assured (child), we pay an additional 25% on top of the discounted value of the bonus.

If Mdm Wei compares the premiums that she has paid for the Foundation policy and the cash value today, she will realise that she is getting a reasonable return, compared to similar policies issued by other insurance companies.

I wish to encourage all policyholders to make the effort to understand the key terms of the contract at the time of purchase of the policy. The insurance company is required to provide this information in a standard illustration of benefits. It is the duty of the insurance adviser to explain the terms to you.

More information on NTUC Income's Foundation Policy can be obtained from our website, www.income.coop/insurance/foundation

Peh Chee Keong
Head, Life Insurance Dept
NTUC Income

Monday, October 16, 2006

Tianjin is congested

I travelled by road from Beijing Airport to Tianjin City. Normally, the journey takes 2 hours. On this occasion, it took more than 3 hours, due to congestion on the trunk road and on entering into the city.

My local friend said the air pollution is bad.

Tianjin City was much better 10 years ago, when it was less developed. Development does have its negative aspect on the quality of life.

Luggage arrived promptly at Beijing Airport

I arrived at Beijing Airport on a full flight from Singapore. The clearance through health, immigration and customs was smooth and fast. When I came down the escalator to the luggage collection center, a big sign (which was clearly seen) announced the conveyor belf for my flight.

My luggage already arrived. They were taken off the conveyor belt earlier and stacked neatby by the side.

This is the most impressive experience in my whole life of air travel. It beats the great experience in Singapore.

Beijing Airport is ready for Olympics 2008.

Saturday, October 14, 2006

Get the Right Financial Healthcheck

Your most important action, after getting a healthcheck, is to get the right treatment.

If you carry out a financial healthcheck, you must select the right product to make your investment.

Many advisers offer you the wrong product that give you a poor return. This is due to the high commission that is paid to the adviser. The typical cost of the advice is 18 months of your savings. That is a lot of money to give away.

If you select a comparable product from a low cost provider, such as NTUC Income, you can about 15% more on the maturity of your savings over 20 years. If the maturity amount is $100,000, you can get $15,000 extra.

If you save for 30 years, the difference is larger. You can get 25% from a low cost provider.

This is based on a difference in yield of 1.2% per annum.

When you save for your future, make sure that you get the right product. Choose a product that offers you a better yield (from a low cost provider). Take care of your own financial future.

Friday, October 13, 2006

Exchange traded fund

What is the difference between an Exchange Traded Fund (ETF) and an indexed fund?

A ETF is a fund that is managed to follow an index. The fund can be traded through the exchange. You can buy and sell the fund at any time during the trading day. The price is based on willing buyer, willing seller. It should follow quite closely to the value of the underlying assets.

An indexed fund is NOT traded through the exchange. If you wish to buy or sell units of the fund, you have to accept the price that is fixed by the manager at the end of the trading day. It will be based on the value of the underlying assets (based on the closing price).

Most of the investment-lined funds (ILPs) and unit trusts are NOT traded on the exchange.

For long term investors, it is better to invest in a non-traded fund. If you want to do short term or intra-day trading, a ETF is more suitable.

My personal website

If you wish to know about my personal plans after leaving NTUC Income, visit my personal website, www.tankinlian.com

Thursday, October 12, 2006

A new way to get insurance service

Some customers are well served by their insurance advisers who take care of their needs over many years. They enjoy the personal service, advice and attention of the adviser.

Some customers are not so fortunate. Their adviser drops out of the business, and decide to do other types of work. This applies not only to NTUC Income, but to other insurance companies as well.

In fact, the turnover rate of insurance advisers has been quite high over the years, especially among the younger advisers.

NTUC Income offers a new option to our customers.

- You can come to our business center and be served by our salaried consultant
- You can get service from our 24 hour contact center.

You are not tied to a specific adviser. You will be served by our organisation according to our service standard.

More people find this option to tbe quite attractive.

Poor follow up by insurance agent

Mr Tan

Many thanks for your birthday greetings.

I have visited your blog after reading the press reports. It is an informative and interesting blog.

Would like to share with you on my experience with your agent that is serving me. He was assigned to me after the initial agent that served me left your organisation. I took several policies with NTUC since 1991 but have not received any form of contact from this agent.

Quite some time ago, I contacted him when I have some queries on the claim forms. He did not help much other than suggested I called the company. I am very disappointed at him.

Not long ago, I bought two policies from a Prudential agent at Standard Chartered Bank, which is a total stranger to me.

I have also seen your Talk at TV program. I appreciate your HARD WORK, GREAT EFFORT in making Insurance more COMPREHENSIVE via TV program .

I hope all your agents appreciate your GREAT WORK and they must work harder not to let your effort goes down to other agency. Hope you keep me posted when you no longer at NTUC.

RW

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

Dear RW,

Thank you for your feedback. I am sorry that the service from the agent has been disappointing.

I will ask X to contact you and see if he can be of any help in your insurance matters. Alternatively, you can visit our business center at 75 Bras Basah Road and talk to our salaried insuranced consulant.

Tan Kin Lian

Easy for workshop to make a third party claim

12 October 2006

Editor
Forum Page
Straits Times

I refer to the report entitled "Fake road collisions: Income to go after workshops (St Times 12 October 2006).

The Motor Workshop Association's representative, Mr. Joey Lim said that the outcome of the recent court case would allow insurers to put the squeeze on workshop operators. The small workshops would be reluctant to hire a lawyer and would be forced to settle for a smaller amount offered by the insurer.

I wish to refute this statement.

It is easy for a third party workshop to submit their claim directly with NTUC Income. They can send the vehicle to an Idac center for assessment of the damages. We will make a fair offer of the repair cost based on the benchmark price obtained from our Motor Repair Cost System. This has produced a repair cost that is similar to what is estimated by our quality workshop. It contains a satisfactory profit margin for the repairer. After the repair has been completed, we pay the bill within four days.

We will only take legal action against a workshop that refuses to make a direct settlement with us, inflate the repair bill and get a lawyer to submit the claim. It is our duty to avoid paying an inflated repair bill. We want to act vigilently against inflated claims, so as to reduce the premium rate payable by our customers.

Each year, we handle about 10,000 repair jobs for our customers. About 94% of the repairs are arranged by us and carried out at our quality workshops. Only 6% of our customers opt for their own workshop to carry out the repair at the same price as our quality workshop.

NTUC Income wish to help the smaller workshops to operate efficiently and survive in this competitive market. A total of 130 workshops now operate under five business fusion groups to tender for the repair jobs of our customers. They are able to meet our quality standards and to offer a competitive price. As their cost of operation is lower than the larger workshops, they can enjoy a satisfactory profit margin. They also enjoy free and convenient access to these repair jobs.

About 30% of our repairs jobs are now awarded to the smaller workshops under the business fusion groups. Our customers give a high satisfaction rating to their service quality and standard of repair.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Wednesday, October 11, 2006

Choose an insurer based on its actual return to policyholders

Editor
Forum Page
Straits Times

I refer to the letter from Ms Ong Hwee Leng entitled "Poor bonuses - time insurers revise premiums" (St Times, 11 Oct 2006).

Ms Ong said that the bonuses declared on her policies have been at least 30 percent below the projections at the time of her purchase. She probably bought her policies from another insurer, not NTUC Income.

If she had bought a 20 year endowment policy from NTUC Income in 1996, the actual reduction in bonuses is about 10%. This is largely contributed by a decline in the yield on fixed income investments, which account for a large proportion of the investments of the life insurance fund.

Our policyholders see a smaller reduction in bonuses for the following reasons:

- our initial projection was more realistic
- they were based on a rate of bonus that could be supported by the prevailing investment yield

We were able to offer a fairly attractive return to our policyholders due to our low expense ratio. We pay commission to agents that are much lower than the market and distribute a modest rate of dividend to shareholders. We are able to give more of the investment gains to our policyholders.

For maturing policies, we have consistently given a much better payout to our policyholders, averaging about 15% for a 20 year endowment policy. This is largely contributed by our low expense ratio.

My advice to consumers is to choose your insurer based on its track record of giving a actual better return to its policyholders, rather than on projected values or the sales presentation by its agents.

The actual returns from NTUC Income are posted in our website, www.income.coop.


Tan Kin Lian
Chief Executive Officer
NTUC Income

Tuesday, October 10, 2006

Consultant gives fair and objective advice

Dear Mr Tan

As suggested by you, I met your product specialist on my financial planning matters.
He is Mr AJ from the Business Centre. I had a good 2 hours chat with him.

What I like about the service is that

- He is fair and objective
- He is not pushy
- He was able to tell me the pros and cons of your competitors product
- He was able to recommend products that meet my needs
- He was able to explain details clearly
- I am left in no doubts about my own financial position

I think the culture you have set for INCOME is good - one where customers are not felt pressurized to purchase a product because of pushy salesman but because the customer feel that the product serve his needs

I also like the transparency that you have set for the industry.

I am still deciding which of the products to purchase, but I know at the end of the day, I have make a right choice because I have received good advice.

All the best to your future endeavours.

JC

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

Dear JC

Thank you for your feedback.

Many of my advisers are also not pushy and they give good advice as well, for the benefit of the customer. They can serve you at your home or office.

Tan Kin Lian

Faster processing of Incomeshield claims

For September 2006, we settled 51% of Incomeshield claims within 7 days, a vast improvement compared with 1% in July.

The recent implementation of several measures contributed to speeding up the processing of claims:

a) auto mapping of medical condition
b) auto mapping of surgical table/benefit
c) direct access to claims by approving officers (avoid data entry)

We will soon automate the processing of within-deductible claims. This will help to speed up the processing of the remaining claims.

William Fong
Head, Group & Health Dept

Fierce competition for motor insurance

A policyholder received a quotation of $900 for the renewal of his motor insurance from company A. He visited our business centre. Our current rate for his risk profile is $766.

He went back to company A, which promptly reduced the premium to $700. Later, company H reduced the premium to $654.

NTUC Income will continue to charge our premium rate based on our cost of claims and expenses. This is an adequate rate.

Some competitors are willing to undercut our premium rate to win over the business. However, as their claim cost and expenses are higher, they will have to increase the premium rate on the following year.

This irresponsible price cutting is not sustainable.

Monday, October 9, 2006

Supplementary Retirement Scheme (SRS)

The Central Provident Fund is designed for Singapore workers to make savings for their retirement and other purposes. Singapore workers contribute up to the salary ceiling (about S$4,000 per month). Contributions are tax exempt and the benefits are received free of tax.

The Supplementary Retirement Scheme was created to allow the foreigners and high income earners to make supplementary savings for their retirement. Contributions are tax-exempt but 50% of the benefits are subject to tax. It benefits the tax-paying contributors due to deferral of tax.

The tax benefit is modest, but it is better than nothing. The cost to the government is also quite modest.

Currently, the maximum sum that a Singaporean can contribute to the SRS is about $11,000. This is too small to be worth while.

I suggest that the SRS be reviewed, so that it can be more adequate as a vehicle to save for retirement. I propose that the contribution to SRS be set at 20% of the taxable income, less any contribution to the CPF.

Most people need to save about 20% of their income to meet their retirement needs. The CPF gives the best tax advantage, but the government wish to reduce the tax leakage. Under the SRS scheme, the tax leakage is reduced, as 50% of the benefit receievd (which includes capital gains) is subject to tax.

I hope that the Government will consider this proposal, to enable more people to make adequate savings for their retirement.

Comparsion of cost and returns for Critical Illness plans

Are you paying the right cost for your critical illness plan? Do they give you a fair return for your premium?

The following table shows the amount that you are insured for $150 a month, and the cash value at the end of 20 years.

NTUC Income's cash value is 50% higher than company A and company H, and 15% higher than company P.

We are able to pay much more, because we pay a lower commission to our adviser and lower dividend to our shareholders.

Make the right choice! Take care of your interest! Do not pay more than necessary!



Male, 25 $150 monthly prem

Company Sum Assd Cash Value Yield
NTUC Income $84,990 $47,260 2.9%
Company P $88,770 $41,340 1.7%
Company M $93,360 $34,940 0.9%
Company A $78,950 $30,720 -1.1%
Company H $81,090 $27,510 -2.2%

Male, 40 $150 monthly prem

Company Sum Assd Cash Value Yield
NTUC Income $47,850 $40,490 1.5%
Company P $48,060 $36,270 0.4%
Company M $56,270 $34,030 -0.2%
Company H $46,150 $28,240 -2.0%
Company A $45,050 $27,420 -2.3%

Sunday, October 8, 2006

Does Incomeshield cover Hypertension and Diabetes?

Hi Mr Tan,

I have visited your blog once in a while and must say that it is informative from a NTUC point of view. I’m not sure how it will be after you have left NTUC. I hope comments will be as impartial and provocative as possible.

I have a personal question though. Read somewhere in which you reply about a person with controlled diabetes and hypertension being covered under incomeshield. Could you tell us if the person will still be covered for diabetic and hypertension treatment?

D

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

Dear D

The Incomeshield plan covers the cost of hospital stay and certain outpatient treatment (for specified illness), subject to certain limits, and after deucting the Deductible and Co-payment. Details are found in this FAQ:

http://www.income.coop/insurance/incshield/faq.asp

If the insured person has a previous medical condition (eg hypertension and diabets) and is accepted for Incomeshield, he will be covered for the hospital stay arising from these conditions. He is not covered for the cost of regular medication to treat these conditions (as they are not covered under the plan).

Tan Kin Lian

How to get Critial Illness Cover at a lower cost

Some insurers advertises the value of critical illness cover. But, they do not tell you about the cost of their product.

The critical illness cover is marketd by an adviser who earns a large commission. You have to pay about 150% of your annual premium in distribution cost. If your annual premium is $3,000, you have to pay $4,500 for the advice.

The cost of the critical illness cover is additional to the above. And the profit taken by the insurance company is another significant portion.

In fact, the actual cost of the insurance is quite low (based on the percentage of people who make a claim). The expenses take away a large part of the premium.

If you buy a similar product from NTUC Income, the distribution cost is about half of the market average. We take away a very small portion as profit for shareholders.

For most of our products, we are able to pay a much higher return to our policyholder, for the same premium and amount of cover. The difference is about 15% for a 20 year policy, and can be higher, if the policy is kept for a longer period.

27% market share in health insurance

For year 2005, our market share is estimated at 27.3%. We are 1st in ranking ahead of AIA(18.9%) and Great Eastern Life(18.8%).



Annual premium $million

Individual Group General Total
Income 199.6 23.2 - 222.8
Industry* 558.3 121.5 137.7 817.5*
Mkt share 35.8% 19.9% - 27.3%

Saturday, October 7, 2006

www.tankinlian.com

I have created a personal website at www.tankinlian.com. I shall be giving more details about my future plans over the next few months at this personal website.

My investments have made good returns over past 20 years

Dear Mr Tan

I am a NTUC Income policy holder. In view of my trust & confidence in NTUC, I have taken up a few life & investment link related policies more than 20 years ago. I am very pleased to note that these investments have made considerably good returns in preparation for my retirement life ahead.

I learn that you have chosen to retire in April next year after having served for 30 years in NTUC (Income). I would like to take this opportunity to thank you and place on record my appreciation for your outstanding leadership, excellent financial management skills and good investment judgement which bring about this great achievements where my family, relatives and NTUC (Income) policy holders at large can reap the benefits

Warmest regards

WSY

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Dear WSY

Thank you for your kind words.

Tan Kin Lian

Thursday, October 5, 2006

Simple and transparent terms for home loans

6 October 2006

Editor
Today Paper

I refer to the letters entitled "First discounts" from Ms Angeline Lee and "Spiralling rates" from Mr Deepak Gurnani.

The home loan schemes in the market are indeed quite complex. Many financiers in the market offers different board rates for their home loans. When the board rate changes, the customer may be confused, and is not sure if he still enjoys a competitive rate.

NTUC Income provides an alternative to owners of private properties. We adopt a simple and transparent approach for our loan scheme. We have only one board rate for home loans on variable rates. This applies to all loans taken from us. As the board rate changes, we notify our customer in advance. They know clearly what is the interest rate that they pay at any time.

We revise our board rate to keep in line with the market, but we try to minimise the frequency of changes. Our current board rate is 3.5% per annum, and has been effective since January 2004. We have not changed this board rate for the past 33 months. From 1 Nov 06, we will raise our board rate by a modest increase of only 0.25%. The revised board rate will be only 3.75% per annum, probably among the lowest in the market.

NTUC Income also offers a fixed rate scheme, which keeps the rate fixed at 4.15% per annum for the first 5 years. The interest will revert to the board rate after 5 years. We give an option to the customer to switch to the board rate at the end of the 3 years. This option provides an additional flexibility to the customer to enjoy lower interest rate, under certain circumstances.

We believe that many customers prefer a simple and transparent scheme for their home loans. We offer free processing, valuation and home insurance for the first year of loan. For a customer who switch their existing home loans from another financier to our fixed rate loans, we provide a legal subsidy of up to $2,000.

More details are available fromour website: www.income.coop/loans.


Melissa Yam
Head, Loan & Property
NTUC Income

Thank you for creating jobs for matured workers

During the economic slowdown a few years ago, many matured workers were retrenched. NTUC Income created the position of customer relations officers for over 300 mature workers to find a second career.

Last night, after the Income Day dinner, a lady approached me. She said, "Mr Tan, I am a customer relations officer. I want to thank you for creating this job which allowed me to continue to be employed".

She was almost in tears, as she spoke. I was moved.

It was nice of her to express her appreciation. Most people will take these things for granted.

Tan Kin Lian's speech at NTUC Income Day

I joined NTUC Income on 1 April 1977. By next April, I would have completed 30 years of service.

30 years is a long, long time. It is time to make a change.

I will be leaving NTUC Income. This will allow the board of directors to find a new chief executive to lead NTUC Income in its next phase of development.

NTUC Income has several strengths:

- it is financially strong, and has been awarded the highest rating by Standard & Poors among all insurance companies in Asia

- it has passionate, dedicated and competent employees

- it has core competencies, in our call center, low cost of operation, claims management, and a strong pro-customer brand.

It also has challenges to respond to a competitive and changing market.

The future is bright. I am confident that the new chief executive, whoever he or she may be, will be able to use the strengths to bring NTUC Income to greater heights.

The future for me, personally, will be equally exciting, challenging and busy.

I will be working with a few partners to build the technology platform and the business strategy for what I call, "the insurance company of the future". It will operate efficiently to bring down the cost of insurance and financial services to consumers, using the connectivity and power of the internet.

I intend to provide this solution to existing or new insurance companies operating outside of Singapore.

I will also disseminate my knowledge and years of experience through consultancy and training engagements. I like to continue being involved in transforming organisations with innovative and differentiating competencies.

I want to thank so many colleagues and friends who have worked with me during part or all of the past thirty years. You are wonderful people. I enjoy working with you. I shall miss you. But, we will continue to keep in touch.

If you want to know about my future plans, and how things turn out, you can continue to read my personal blog. I will continue to update it regularly.

Thank you.

Tan Kin Lian

Wednesday, October 4, 2006

Wait to recover the loss on technology fund

Dear Mr Tan,

One of my relative bought about $70,000 worth of NTUC technology fund. It is now worth about $40,000. Will this fund grow back to at least $70,000?

When they bought this fund, no one advice them that this is a risky fund. As you mentioned, there are ups and downs.

When will my relative recover at least back to their breakeven point ? How long will it grow back from 20cents to a dollar

KT

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Dear KT

Your relative will have to wait for the tech fund to reach 35 cents (not $1), before they can recover their investment.

I hope that this can happen within the next few years (but I do not know for sure). Many people expect technology to recover by now, but it seems to be taking longer.

They must have invested at a bad time. Many other investors made the investment at a lower price (or have averaged out on their investments), so they are already making a capital gain in this fund.

I have some personal investment in the technology fund as well, made at about the same level as your relative. So, I will also have to wait.

In my case, I have other investments, so the gain in some funds outweigh the losses in the tech fund.

Tan Kin Lian

Actual return on life insurance policies

There has been some requests for life insurers to post their actual return on their life insurance policies.

NTUC Income wishes to make a start. Here are the actual return on our endowment policies maturing in 2006.


Endowment policies maturing in 2006.

Term Taken in Monthly Entry Maturity Yield
premuim age amount

10 yrs 1996 $100 25 $14,800 4.4%
15 yrs 1991 $100 25 $26,600 5.2%
20 yrs 1986 $100 25 $45,800 6.2%

10 yrs 1996 $100 40 $14,600 4.2%
15 yrs 1991 $100 40 $26,100 5.0%
20 yrs 1986 $100 40 $42,200 5.5%




The maturity benefit included the additional bonus distributed on every 5 anniversary.

The actual return on maturity are attractive, varying from 4.2% to 6.2% per annum.

Our maturity values for a 20 year policy is about 15% higher than similar plans
offered by our competitors.

We give a better return to our policyholders, due to lower commission, lower expenses and lower distribution to shareholders.

StateStreet STI (Tracker Fund)

Two or three years ago, I invested $207,000 in the StateStreet STI tracker fund. It is listed in the Singapore Exchange. This fund aims to track the STI index.

The fund performed well. It appreciated to $328,000 now. I obtained a gain of 58% over this period.

This must be my best personal investment. My other stock selection did not do well.

Timing is one factor for this good return. When I invested, the STI was at around 1600. Today, it is at 2600. So, the chance to make this kind of exceptional return has passed, at least for the near future.

Which ie better - Growth Fund or Global Equity Fund?

Which is better - Growth Fund or Global Equity Fund?

My view: both are suitable.

The Global Equity Fund has 100% invested in equity. It is suitable for long term investments, ie 10 years or longer.

The Growth Fund has 70% invested in equity and 30% in bonds. It has less volatibility and a slightly lower return. But the difference is small.

Most of my personal investments are in the Growth Fund. I may find a suitable time in the future to switch to Global Equity (eg if there is a severe market correction). In the meantime, my current investment is satisfactory.

550 people visit my blog daily

About 550 people visit my blog daily. This is a drop from 1,100 last week. But it is almost twice the average number of visitors previously (before news of my departure from NTUC Income). Maybe, it two weeks time, it will come back to the normal number?

Disappointed with Dynamic Guaranteed Fund

Dear Mr Tan,

I am a loyal customer of NTUC Income. I am quite upset about the way my investment was managed. I was introduced to the Dynamic Guaranteed Fund 5 years ago by my insurance agent.

After a couple of years, I realised that the fund is not progressing. I requested an explanation and was told that I can switch to Ideal Plan. I decided not to make the switch then.

My grudge is why must I hold on to the fund for 5 years if the fund managers are not confident of delivering good returns? Shouldn't my money be refunded back without incurring any cost so that I can make a better return elsewhere?

Though it was just a token sum of money that I had invested, I have decided not to purchase "You Need Trust" in future as I can only trust myself.

NHL

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Dear NHL

I am sorry that you are disappointed with the investment. Many people share your same views.

I hope that you have received our FAQ that explain the situation. I am not able to beyond what has already been explained. I hope that you understand my difficulty.

Tan Kin Lian

Policyholder tops up investment in Growth Fund

Dear Mr Tan

I believe you have given me good advice.

I will try to put in another $8000 or $10,000 quite soon and then arrange to withdraw $400 monthly. How much would I need to invest in Growth fund in total to withdraw $500 monthly? This would be my limit.

I might sell one of my single company stocks to achieve this or just withdraw from my fixed deposit when it matures. Growth Fund is much more stable because it is so diversified.

Did you know the banks are giving less than 3% annually for fixed depoosit below $50,000?

I am glad you will be leaving many of your investments in NTUC Income even after you leave. This is reassuring.

VS

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Dear VS

If you wish to have a monthly payment of $500 for 20 years, you will need the following capital sum:

- assuming the fund earn 5% per annum: $77,000
- assuming the fund earn 5.5% per annum: $74,000
- assuming the fund earns 6% per annum: $71,000

Thank you for updating me that the banks now pay less than 3% interest. I suspect that interest rate has dropped, but I was not sure. Your information confirmed it!

Tan Kin Lian

Wonderful experience at Business Center

Dear Mr Pius,

I would like to bring to your attention a very good staff that you have under your employment, her name is JK and she's working at the Business Centre.

I am very pleased with the way she has advised and served me when I went down to the NTUC Income Bras Basah Branch.

I am very impressed with her professionalism and amiable nature as she patiently explained the investment products that NTUC could offer. She was able to make me feel very comfortable with her as she answered my queries.

I have come across 'financial advisors' who are insincere and impatient with clients' queries but JK stands out to be very different from the ones I met.

She understand my needs and make appropriate and sound recommendations. She further advised me to invest my CPF with the Growth Fund. She was even willing to go beyond her office hours just so that she could explain my investments in detail. She did all these with no strings attached. We were the last to leave the office on that day - about 7.30pm.

I am very pleased with Jassie and she has made my experience with NTUC Income a delightful one.

I hope NTUC Income will have more of such exemplary Insurance Consultants. I look forward to future partnerships with NTUC Income.

ASH

Tuesday, October 3, 2006

Which is better - combined or inexed fund?

Which is better - indexed or combined fund?

My answer: both are suitable.

Both funds have low annual charges:

- combined fund (from NTUC Income) charge about 1% annually
- indexed fund (not available yet) will charge about 0.5% annually

The difference of 0.5% is small. The combined fund is actively managed and is likely to earn more than this difference.

Both of these funds are much better than similar funds in the market where the annual charge could be 1.5% to 3% per annum (if other hidden charges are included).

I suggest that the investor can invest in the combined fund now, and decide at a later date, if you wish to switch to an indexed fund (when it becomes available).

The most important principle is:

- choose a large, well diversified fund
- look for low charges, ie 1% or less

I shall keep my money with NTUC Income

Dear Mr Tan

I might even invest some more money at a future date, but perhaps should not put all my savings into Income and should have some fixed deposits in the banks.

Who knows how the company will manage without you?

VS

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Dear VS

I advise against putting your money in the bank. They can pay interest at only 3% per annum. It is better to put the money in the Growth Fund, as the return is likely to be much higher.

Don't worry about how Income will manage without me. It will do well.

I have a lot of my personal savings invested in the funds managed by NTUC Income. I shall keep the money there, after I leave NTUC Income.

Tan Kin Lian

Saddened by your sudden decision

Dear Kin Lian

I am SADDENED by your sudden decision to leave NTUC iNCOME.

The way it unfolded was not nice at all and was not done in good taste. From the public perception it wasn't good and fair treatment of someone who has done a lot for Singapore through NTUC INCOME and for people like us, poor motorists and life insurance policy holders, who have been exploited by other insurance companies to say the least.

But there is a lesson in life. People, organisations and Singapore society quickly and conveniently forget what you have done for them and quickly move on. In no time, you are history forgotten and irrelevant, if you no longer serve their purpose.

And there will be fair weathered friends surfacing that you did not realise exist.

I want to stand up for you. I sincerely hope that you will carve out another icon or simply retire and enjoy your life as you wish.

Singapore needs more people like you who can stand up. Far to many Singapore CEOs, esp in certain secured job areas, are apple polishing and weak and have no passion nor commitment.

All the best

AT

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Dear AT

Thanks are not as bad as you have painted. I do intend to continue working on interesting projects in the future. You can keep in touch with me through my blog.

Tan Kin Lian

Both parties give different versions of the accident

FROM THIRD PARTY CLAIMANT:

Dear Mr Tan,

My parked 2-month old vehicle was badly damaged by a hit-and-run lorry. I wasn’t at the scene as I was working in my office. I was traumatized and greatly despaired to see the state of my car when I returned to it much later.

I managed to find out from a witness, owner of a drink stall just next to the accident scene, that a lorry hit some parked vehicle at the scene.

With the witness’ statement, I made a police report.

I immediately put up notices at the accident scene to seek for witnesses who saw the number plate of lorry driver. I visited the scene every day to gather any information that would help to identify the lorry.

In fact, I came across at least 3 witnesses who witnessed the accident but not the number plate of the culprit. You can imagine the stress that I have gone through. Finally, a witness responded to my notice with the number plate of the culprit.

It happened that the lorry was insured by NTUC Income as I found out through LTA search service. I have since provided the information to the Investigation Officer.

I have also made a claim to NTUC Income against the lorry driver with all the necessary documents, including police report, survey report and contact information of Investigation Officer.

To my horror, your claim officer, replied that her insured claimed ignorance of the accident and that his lorry was not damaged, despite of existence of witnesses!

Your advice and help will be greatly appreciated.

OSH

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REPLY FROM MY MOTOR INSURANCE MANAGER

Dear OSH

According to your email, our policyholder denied getting involved in the accident with your car and the police is currently investigating into it.

We hope you understand that we are not able to settle your claim with the present facts. Our policyholder will be very angry with us if we ignore his story and settle your claim.

To expedite matter, I will ask one of our investigator to have a thorough interview with our policyholder and we will see what come out of it.

Eddie Loke

Is my investment of $62,000 adequate?

Dear Mr Tan

Do you think the Growth Fund is good to invest in long term? Or is Global Equities better?

Recently I bought $62,000 into Growth Fund ( switching some of my Balanced fund and Spore Equity units ) and also topping up with new funds.

I have asked for a withdrawal of $300 monthly for my monthly expenses, as I am a retiree.

Do you think my investments can sustain this withdrawal?

VS

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Dear VS

Both the Growth Fund and the Global Equity Fund are suitable.

If you have invested $62,000 and you draw out $300 a month a month, the investment can last you more than 35 years (if you earn an average of 5% p.a.) and nearly 50 years (if you earn an average of 5.5% p.a.). The balance on the money passes to your estate on death (provided that the money does not run out). I think that your invested sum is adequate.

You can ask your adviser to explain more to you.

Tan Kin Lian

I agree with you entirely!

Hi Mr.Tan,

I read with mixed feelings the news regarding your planned departure from NTUC Income in April 2007.

On one hand, I felt sad to see someone who always wants to give the policyholders a good deal leave NTUC Income, my preferred insurer.

On the other hand, I felt that trying your hand on something new after 30 years on a job may turn out to be refreshing and challenging for an active mind like yourself.

Despite your position as a large company's CEO which may sometimes attract undue criticism, you always speak your mind, sometimes on topics not linked to insurance. You always have a view on any issue.

For this, I admire you even though at times my own views on some matters differ from yours.

May I wish you happiness and success in your future endeavours.

CKK

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Dear CKK

Thank you.
On this matter, I agree with you entirely.
Wish you all the best!

Tan Kin Lian

Monday, October 2, 2006

Is it advisable to downgrade to a lower plan?

FROM A POLICYHOLDER

Dear Mr Tan

A few years back, my family upgraded Incomeshield plan from B to A.

For me personally, should I be hospitalised, I would like to stay in a subsidised ward, ie B2. That being the case, since the deductible and co-ins is higher for A plan than B, isn't it advisible for me to downgrade from Plan A to B?

AL

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Dear AL

We advise our policyholders that if they are comfortable with B1 or B2 ward, there is no need to purchase a higher medical plan and pay a higher premium.

As we grow older and move to a higher age-band, the premium will increase. We should move to a lower plan so that the premium remain affordable. There is a higher government subsidy for restructured hospitals at the lower class wards.

If our policyholder is insured under a higher plan and opt to be treated in a lower class ward, we apply the deductible of the lower ward. This is reflected in our FAQ: http://www.income.coop/insurance/incshield/faq.asp.

Tan Kin Lian
CEO

How to identify people with strategic thinking?

FROM A BUSINESS ASSOCIATE:

Hi Kin Lian,

History has thought us that as leader of a Strategic Business Unit, we do recognize that there are basically two types of employee we need to run a business and to leap forward successfully; one that is doer and one that contribute strategic or creative ideas when needed.

The first type is most easily found in today’s world, but the latter type is almost hard to find. But we need them especially so when we are living in such a competitive environment. Not all leaders are creative.

In your many years of leading NTUC Income, I am sure many of the creative ideas were generated which have brought NTUC Income to such great success.

How do you go about sourcing for such type of employees who can contribute to strategies and great ideas? What criteria you would place upon to sieve out such people? Where do you normally source from ?

I found that if the existing employees do not possess such competency, many hours of brainstorming would not yield results. What is your opinion ?

SK

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Dear SK

Here are my views about creating an environment for creative and strategic thinking colleagues to come forward.

- strategic thinking is a process
- we have to try it and see if it works
- if it does not work, it is just theory
- the leader must be prepared to back the strategic thinking

I have to play this role in NTUC Income. I encourage my colleagues to think "out of the box". I encourage them to "do, learn, adapt". What is strategic happens only if it is tried and found to work. If it does not work, we try again.

My colleagues love this approach. So, we do have some great creative things that are done in NTUC Income, which contribute to our success.

I hope that these points are useful to you.

Tan Kin Lian

Sunday, October 1, 2006

Projected bonus on participating policies

The Sunday Times printed an lengthy article to explain the projected bonus on participating policies.

I received the following question from the public:

- how can I find out the actual investment return earned by the various life insurance companies?

- does a company with a higher investment return give higher bonus to their policyholders?

I gave this reply:

- generally, a company that earns a higher investment return should be able to give a higher bonus, and a better return

- but it also depends on their expense ratio and the amount of the profits taken by their shareholders.

It is better to ask the company to tell you about the actual return earned on a policy that was taken 10, 15 and 20 years ago and matured this year.

You can compute the actual return on the policy, and compare it with the return on similar policies taken with other companies. This comparison is more straightforward.

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Here is an example.

A customer bought a endowment policy 20 years ago, and paid a monthly premium of $100. The policy matured recently.

If the participating fund earned an average of 6% per annum, and paid ALL of the gain to the customer, the customer would have received a maturity beenfit of $47,000.

Most life funds would probably have given a return of about $37,000 (ie about 4% per annum). The difference of $10,000 is used to pay the agent commission, expenses and profit to the shareholders.

An insurance company operating at low cost may be able to give about $42,000 (ie about 5% per annum). They pay lower commission and expenses and give less to shareholders. Compared to similar "high cost" products, they can give agout 15% more on maturity.