Fair treatment of policyholders

Hi Mr Tan,

I read your blog about the new regulation on the par fund. How can the policyholder ensure that they are fairly treated? Is it fair for the fund to reduce the bonus in bad times, and take a long time to restore the bonus? Is this fair?

To your credit, NTUC was quite fast to restore its bonus rates when you were there as CEO. Will they continue to treat the policyholders fairly?

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REPLY:

NTUC Income is a cooperative society. When I was the CEO, I ensured the following:

* the fund is invested to earn an attractive return, at an acceptable risk level
* the expenses are kept at a low level
* 98% of the surplus is kept for the policyholder (shareholders take only 2%)

This is why NTUC Income was able to declare better bonus rates compared to other insurance companies. The return is much higher.

Many insurance companies spend too much money on the following:

* paying high commission and sales contests to advisers and agency managers
* advertising their products aggressively
* paying high salaries and other expenses

These expenses come out of the par fund, and will ultimately reduce the return to the policyholders. This is not fair to the policyholders. However, the policyholders do not have much choice, as they are stuck with their contract for many years.

I hope that the new regulations on the par fund will help to reduce this problem. (But, it may take a long time for the results to show).