Hi Mr. Tan,
I have been a loyal policyholder of NTUC for many years. I am really disappointed with the bonus cut, affecting several of my policies, including the policies taken for my children. I am considering to cancel all of these policies and to invest in unit trusts. Do you advice this move?
REPLY
Do not cancel your existing policies, as you will suffer a financial loss. You can lodge a strong protest against the bonus cut to the board of directors and to the MAS. It is a serious breach of contract.
When you bought these policies, you were given a scale of bonuses to expect in the future. NTUC Income does not have the moral right to change this structure, in an arbitrary manner. You can bring up this matter with MAS as they have to safeguard the "reasonable expectation" of the participating policyholders.
In the future, you should avoid saving in life insurance policies, including policies with bonuses and investment linked policies. After deducting the agent's commission and marketing expenses, they give poor value to the policyholder. The modest yield is now being reduced further through the manipulation of the bonuses.
You should also tell your friends to avoid buying saving-type life insurance policies with high upfront charge, sold by insurance agents.
Buy low cost Term or accident insurance to provide the protection for your family. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Wednesday, April 30, 2008
Pay of leaders
A few days ago, someone passed this question to me, “Do You think our leaders' performance commensurate with their pay?”
It is my policy to avoid commenting on any specific person’s performance and pay, even if this person reports directly to me.
I wish to share my personal views on how corporate and government leaders around the world are rewarded.
The prevailing thinking is that corporate leaders should be rewarded based on the shareholder value that they have created. This approach appears to be wonderful in theory. But it has great difficulty in practice.
The current method of measuring shareholder value based on the share price is flawed. The share price can fluctuate wildly based on many factors that are not related to performance of the corporate leaders.
Corporate leaders like this method because they can get fat bonuses in good years, and are not required to pay back these bonuses during the bad years.
It has contributed to big moral risks. Some corporate leaders manipulate the accounts to show big profits in the early years. Remember Enron and Worldcom? Some others take big risks to boost short term profits. Remember subprime mortgages, hedge funds and special investment vehicles?
These corporate leaders earn unimaginable amounts during the good years. When their companies have to write off billions of dollars of shareholder money in the subsequent years, these leaders depart with golden parachutes.
How should government leaders be paid?
It is important that the rewards should attract the right type of people to take the risk and nature of political life.
Monetary reward is an important factor. But it should not be the sole or dominant factor. A passion for this type of work and life is equally important.
We should attract leaders who have the passion to help improve the living standards of the ordinary people. These leaders are willing to put their interest of the public above their personal interest and give up the bigger rewards of corporate life.
They need to receive an adequate remuneration, so that they do not need to supplement their incomes through corrupt means. A remuneration of 10 to 20 of the average earnings of the population, accompanied by a good pension, should be adequate to give a comfortable life. But it will not put them anywhere near the earnings of top corporate leaders and professionals.
I believe that there are many capable people who are willing to come forward for the satisfaction of serving the people and an adequate remuneration. This will be the best type of people to be in government.
If a country cannot find this type of people, then there must be something seriously wrong with the values of that country!
It is my policy to avoid commenting on any specific person’s performance and pay, even if this person reports directly to me.
I wish to share my personal views on how corporate and government leaders around the world are rewarded.
The prevailing thinking is that corporate leaders should be rewarded based on the shareholder value that they have created. This approach appears to be wonderful in theory. But it has great difficulty in practice.
The current method of measuring shareholder value based on the share price is flawed. The share price can fluctuate wildly based on many factors that are not related to performance of the corporate leaders.
Corporate leaders like this method because they can get fat bonuses in good years, and are not required to pay back these bonuses during the bad years.
It has contributed to big moral risks. Some corporate leaders manipulate the accounts to show big profits in the early years. Remember Enron and Worldcom? Some others take big risks to boost short term profits. Remember subprime mortgages, hedge funds and special investment vehicles?
These corporate leaders earn unimaginable amounts during the good years. When their companies have to write off billions of dollars of shareholder money in the subsequent years, these leaders depart with golden parachutes.
How should government leaders be paid?
It is important that the rewards should attract the right type of people to take the risk and nature of political life.
Monetary reward is an important factor. But it should not be the sole or dominant factor. A passion for this type of work and life is equally important.
We should attract leaders who have the passion to help improve the living standards of the ordinary people. These leaders are willing to put their interest of the public above their personal interest and give up the bigger rewards of corporate life.
They need to receive an adequate remuneration, so that they do not need to supplement their incomes through corrupt means. A remuneration of 10 to 20 of the average earnings of the population, accompanied by a good pension, should be adequate to give a comfortable life. But it will not put them anywhere near the earnings of top corporate leaders and professionals.
I believe that there are many capable people who are willing to come forward for the satisfaction of serving the people and an adequate remuneration. This will be the best type of people to be in government.
If a country cannot find this type of people, then there must be something seriously wrong with the values of that country!
Street maps and better signages
I parked my car at Suntec City to attend a dinner. I had to walk to Millenia Walk to collect a bag. I had some difficulty in finding the way to my destination. Someone approached me on the street and asked for directions to the National Library. He was also lost. I was not able to help.
In many cities, there are street maps displayed at prominent places to help visitors to find the way to prominent landmarks. This is sadly lacking in Singapore. Signages in Singapore are also poor.
I hope that some responsible agency can take the initiative to provide street maps and improve the signages to help people to move around more easily.
In many cities, there are street maps displayed at prominent places to help visitors to find the way to prominent landmarks. This is sadly lacking in Singapore. Signages in Singapore are also poor.
I hope that some responsible agency can take the initiative to provide street maps and improve the signages to help people to move around more easily.
Management direction has changed
Dear Mr. Tan,
Thanks for giving me a job when I am in need while you're still our CEO at NTUC INCOME.
I have decided to leave INCOME as the direction of the management changed.
The commercial mindset INCOME adopted is no doubt one of the good options but it will be likely at the expense of the policyholders as the cost of operation increased (renovation, staff salary adjustment and advertisement).
I really admired the days when INCOME was steered by your leadership. This is also one of the reasons that motivated me to join NTUC INCOME during your era. Your management has definitely secured a job for the staff under your care and benefited the policyholders at large as they enjoy good bonus from year to year from the policies.
Mr. Tan you're always a model for me to learn and I am looking forward to your return to this industry to benefit us.
Thanks for giving me a job when I am in need while you're still our CEO at NTUC INCOME.
I have decided to leave INCOME as the direction of the management changed.
The commercial mindset INCOME adopted is no doubt one of the good options but it will be likely at the expense of the policyholders as the cost of operation increased (renovation, staff salary adjustment and advertisement).
I really admired the days when INCOME was steered by your leadership. This is also one of the reasons that motivated me to join NTUC INCOME during your era. Your management has definitely secured a job for the staff under your care and benefited the policyholders at large as they enjoy good bonus from year to year from the policies.
Mr. Tan you're always a model for me to learn and I am looking forward to your return to this industry to benefit us.
How to invest in low cost investment funds
Hi Mr. Tan,
I read your article about not to invest in structured deposit. How do I go about getting the ideal plan ID7 or ETF as recommended by you? How much do invest and for about how long? Thank you.
REPLY
You can ask the business center of NTUC Income, if they can sell the ID7 plan to you. You can buy the ETF through a stockbroker.
You can invest any amount, subject to a minimum of 1,000 shares in the case of ETF. You can invest as long as you wish. Usually, you will get a better return when you invest for the long term, i.e. for 10 year, 20 years or longer.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
I read your article about not to invest in structured deposit. How do I go about getting the ideal plan ID7 or ETF as recommended by you? How much do invest and for about how long? Thank you.
REPLY
You can ask the business center of NTUC Income, if they can sell the ID7 plan to you. You can buy the ETF through a stockbroker.
You can invest any amount, subject to a minimum of 1,000 shares in the case of ETF. You can invest as long as you wish. Usually, you will get a better return when you invest for the long term, i.e. for 10 year, 20 years or longer.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Terminate an existing life insurance policy
Hi Mr. Tan,
I have purchased an Umbrella Policy from NTUC since 1990. The cash value as of end Mar '08 is $X. I am thinking to terminate this policy and to invest the money instead. Do you think I should do this? Thanks a lot for taking time to help!
REPLY
It depends on the following:
a) do you still need the life insurance cover?
b) do you need the cash now, to spend on your daily expenses?
c) do you wish to reinvest it to earn a higher return?
Read this FAQ:
http://www.tankinlian.com/faq/existinglife.html
I hope that it gives useful informatin for you to make a decision.
I have purchased an Umbrella Policy from NTUC since 1990. The cash value as of end Mar '08 is $X. I am thinking to terminate this policy and to invest the money instead. Do you think I should do this? Thanks a lot for taking time to help!
REPLY
It depends on the following:
a) do you still need the life insurance cover?
b) do you need the cash now, to spend on your daily expenses?
c) do you wish to reinvest it to earn a higher return?
Read this FAQ:
http://www.tankinlian.com/faq/existinglife.html
I hope that it gives useful informatin for you to make a decision.
Difficult to assess the risk
Mr. Tan,
I would like to seek your opinion on the MQ yield 2.08% product, as advertised in Strait Times . Do you think this is safe ?
As you know, the interest rates for FD is so low. I am thinking of treating this as a FD for 2 years. Coupon 2.08% annually, payable every 6 months.
This is a capital guaranteed. Provided Macqueries Bank does not go burst. This seem unlikely to happen. Can you please highlight other possible risks ?
REPLY
This is a structured financial product. I avoid all structured products, for the reasons given in this FAQ:http://www.tankinlian.com/faq/sinvest.html
In the document for this product, the issuer said that the "principal protection" does not apply under certain circumstances. Honestly, I do not know how to assess this risk (but it is not something you can just dismiss away) I am also not able to spend time to study this risk. Often, it cannot be calculated anyway. So, I always avoid these types of products.
I would like to seek your opinion on the MQ yield 2.08% product, as advertised in Strait Times . Do you think this is safe ?
As you know, the interest rates for FD is so low. I am thinking of treating this as a FD for 2 years. Coupon 2.08% annually, payable every 6 months.
This is a capital guaranteed. Provided Macqueries Bank does not go burst. This seem unlikely to happen. Can you please highlight other possible risks ?
REPLY
This is a structured financial product. I avoid all structured products, for the reasons given in this FAQ:http://www.tankinlian.com/faq/sinvest.html
In the document for this product, the issuer said that the "principal protection" does not apply under certain circumstances. Honestly, I do not know how to assess this risk (but it is not something you can just dismiss away) I am also not able to spend time to study this risk. Often, it cannot be calculated anyway. So, I always avoid these types of products.
Tuesday, April 29, 2008
Invest separately for higher return
Dear Mr Tan,
Thanks for your great advice in your blog, I always thinking that NTUC is the best insurance company in term of its low premium compared to other companies. However, after go through your article, I start to wonder.
Recently I have just bought a living policy (VIVO life) for my wife, my son and me, I attached the policies for your reference.
Would you mind to advice me whether I should continue or cancel this policy and change to Term policy instead?
REPLY
In the table below, I tabulate the cash value for each policy at the end of 20 years (based on 3.75% and 5/25%) and the amount that you can get by investing the same premium to earn a net yield of 4.5%
You can get about $10,000 (or 30% more) more for each policy by investing separately. If you buy decreasing Term insurance to provide the protection, the cost is very low. The Vivolife policy gives a poor return due to its high expenses, which are taken away from your savings.
It is better for you to buy Term insurance and invest the difference, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
You should have adequate life insurance cover on your life (say about 5 years of your income). You can buy a 20 year Decreasing Term or level TErm insurance.
REad this FAQ:
http://www.tankinlian.com/faq/benchmark.html
I hope that this information is helpful for you to make an informed decision.
Thanks for your great advice in your blog, I always thinking that NTUC is the best insurance company in term of its low premium compared to other companies. However, after go through your article, I start to wonder.
Recently I have just bought a living policy (VIVO life) for my wife, my son and me, I attached the policies for your reference.
Would you mind to advice me whether I should continue or cancel this policy and change to Term policy instead?
REPLY
In the table below, I tabulate the cash value for each policy at the end of 20 years (based on 3.75% and 5/25%) and the amount that you can get by investing the same premium to earn a net yield of 4.5%
policy Annual Cash value 20 years Amount
premium @3.75% @5.25% @4.5%
Self $1,454 $31,294 $34,907 $47,666
Wife $1,217 $26,428 $29,478 $39,890
Son $1,171 $27,105 $30,234 $38,389
You can get about $10,000 (or 30% more) more for each policy by investing separately. If you buy decreasing Term insurance to provide the protection, the cost is very low. The Vivolife policy gives a poor return due to its high expenses, which are taken away from your savings.
It is better for you to buy Term insurance and invest the difference, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
You should have adequate life insurance cover on your life (say about 5 years of your income). You can buy a 20 year Decreasing Term or level TErm insurance.
REad this FAQ:
http://www.tankinlian.com/faq/benchmark.html
I hope that this information is helpful for you to make an informed decision.
Poor yield from financial products
Do you fit into any of these categories? What about your family members?
1. Many people earn a low rate of interest on bank deposits. The bank interest rate, which has been less than 2% for several years and now less than 1%, is insufficient to cover the rate of inflation, which has now increased to more than 5%. If they invest in other financial products, they have to pay high charges and get a poor yield.
2. Many people invested several billions of dollars in structured financial products in the hope of getting a better yield than bank deposits. They were taken to the cleaners. Many housewives and retirees told me about their investment in the capital guaranteed products that were heavily advertised and sold by our trusted banks. After locking up their principal for five years, they get a total return of less than 1% per year, worse than bank deposit. They missed the chance of earning more than 10% per annum on the booming stockmarket.
3. For most people who invested in unit trusts and investment funds offered by life insurance companies, the outcome was not better. They have to suffer an upfront charge of 3% to 7% on their investment and an annual charge of 1% to 3%. After deducting these high charges, the net yield on their investment is mediocre and does not commensurate with the risk. The fund managers and other financial intermediaries have taken away most of the gains.
4. The worst cases are the hundred thousands of people who invested their regular savings in an investment linked product sold by the life insurance companies. In addition to the high charges mentioned above, they have to suffer “allocation rates” that takes away two years of their savings to pay commissions to the insurance agents. Many were not aware about the financial impact of these predatory “allocation rates”.
This is an extract of an artilce printed in: http://www.theonlinecitizen.com/.
1. Many people earn a low rate of interest on bank deposits. The bank interest rate, which has been less than 2% for several years and now less than 1%, is insufficient to cover the rate of inflation, which has now increased to more than 5%. If they invest in other financial products, they have to pay high charges and get a poor yield.
2. Many people invested several billions of dollars in structured financial products in the hope of getting a better yield than bank deposits. They were taken to the cleaners. Many housewives and retirees told me about their investment in the capital guaranteed products that were heavily advertised and sold by our trusted banks. After locking up their principal for five years, they get a total return of less than 1% per year, worse than bank deposit. They missed the chance of earning more than 10% per annum on the booming stockmarket.
3. For most people who invested in unit trusts and investment funds offered by life insurance companies, the outcome was not better. They have to suffer an upfront charge of 3% to 7% on their investment and an annual charge of 1% to 3%. After deducting these high charges, the net yield on their investment is mediocre and does not commensurate with the risk. The fund managers and other financial intermediaries have taken away most of the gains.
4. The worst cases are the hundred thousands of people who invested their regular savings in an investment linked product sold by the life insurance companies. In addition to the high charges mentioned above, they have to suffer “allocation rates” that takes away two years of their savings to pay commissions to the insurance agents. Many were not aware about the financial impact of these predatory “allocation rates”.
This is an extract of an artilce printed in: http://www.theonlinecitizen.com/.
Reply: Puncturing inflated claims
This letter is printed by Straits Times on 30 April with some editing.
25 April 2008
Editor
Forum page
Straits Times
I refer to Christopher Tan's article entitled "Puncturing Inflated Motor Claims" in the Straits Times 21 April 2008.
I wish to share my perspective on this matter, having been personally involved in helping my team to build the largest market share in motor insurance during my period as the chief executive officer of NTUC Income. We were able to offer lower premium rates to more than 300,000 policyholders and still produce a profitable business.
For many decades, insurance managers in Singapore are aware that dishonest workshops inflate the repair bills on third party claims. These workshops aggravate the damages to inflate the repair bills, claim for parts that are not replaced and exaggerate the repair time to claim a higher compensation for loss of use.
They use lawyers to lodge the third party claim against the insurance companies. The legal fees are added to the total claim. If insurance companies do not settle the inflated claims, the lawyers are quick to file a legal suit, which takes the cases into the domain of the courts. This further increases the legal fees and now adds the court costs.
To avoid the high legal fees, many insurance company assessors find it better to settle the third party claim, even though they are ware that the claim amount has been exaggerated. The higher claim payments are ultimately reflected in higher insurance premiums paid by motorists.
What can be done to reduce these inflated claims?
Six years ago, the insurance companies introduced the Idac scheme (i.e. independent damage assessment centers). They require the motorists to report the accident at an Idac center for the damages to be assessed on the spot, before the vehicles are sent to the workshop. This reduces the opportunity for the workshop to aggravate the damages. The Idac scheme was intended to apply to all claims, including third party claims.
The Idac centers are actually more convenient for motorists. The centers are open during most hours of the day and night and are a one-stop center for reporting of accidents and assessment of damages. Many motorists who experienced the service of the Idac centres give positive feedback on their convenience and reliability.
Unfortunately, some insurance companies decided to withdraw from the Idac scheme. Without the full participation of the insurance companies, it is not possible for the Idac centers to play its role in controlling the inflated third party claims. This led to the escalation of motor claims during the following years.
In my view, the Idac scheme still represents the best way to control the inflated claims. I hope that the insurance companies will review their position on this matter.
Another possible solution is for the Government to pass a law to make it mandatory for a motorist to lodge a third party claim directly with the insurance company immediately after the accident. This will allow the insurance company to assess the damages and settle the claim, without involving a lawyer. If the claim is in dispute, the owner can then engage a lawyer to handle the case. This is a common practice in many other countries.
Without legislative support, it is a constant cat and mouse game with the dishonest workshops. Insurance managers have to devise many checks and controls to manage the dishonest claims. It is expensive and tiresome.
Singapore has an expensive and wasteful method of handling third party claims, resulting in inflated claims and high legal expenses. It is a blemish on our record as an efficient, transparent society.
Tan Kin Lian
25 April 2008
Editor
Forum page
Straits Times
I refer to Christopher Tan's article entitled "Puncturing Inflated Motor Claims" in the Straits Times 21 April 2008.
I wish to share my perspective on this matter, having been personally involved in helping my team to build the largest market share in motor insurance during my period as the chief executive officer of NTUC Income. We were able to offer lower premium rates to more than 300,000 policyholders and still produce a profitable business.
For many decades, insurance managers in Singapore are aware that dishonest workshops inflate the repair bills on third party claims. These workshops aggravate the damages to inflate the repair bills, claim for parts that are not replaced and exaggerate the repair time to claim a higher compensation for loss of use.
They use lawyers to lodge the third party claim against the insurance companies. The legal fees are added to the total claim. If insurance companies do not settle the inflated claims, the lawyers are quick to file a legal suit, which takes the cases into the domain of the courts. This further increases the legal fees and now adds the court costs.
To avoid the high legal fees, many insurance company assessors find it better to settle the third party claim, even though they are ware that the claim amount has been exaggerated. The higher claim payments are ultimately reflected in higher insurance premiums paid by motorists.
What can be done to reduce these inflated claims?
Six years ago, the insurance companies introduced the Idac scheme (i.e. independent damage assessment centers). They require the motorists to report the accident at an Idac center for the damages to be assessed on the spot, before the vehicles are sent to the workshop. This reduces the opportunity for the workshop to aggravate the damages. The Idac scheme was intended to apply to all claims, including third party claims.
The Idac centers are actually more convenient for motorists. The centers are open during most hours of the day and night and are a one-stop center for reporting of accidents and assessment of damages. Many motorists who experienced the service of the Idac centres give positive feedback on their convenience and reliability.
Unfortunately, some insurance companies decided to withdraw from the Idac scheme. Without the full participation of the insurance companies, it is not possible for the Idac centers to play its role in controlling the inflated third party claims. This led to the escalation of motor claims during the following years.
In my view, the Idac scheme still represents the best way to control the inflated claims. I hope that the insurance companies will review their position on this matter.
Another possible solution is for the Government to pass a law to make it mandatory for a motorist to lodge a third party claim directly with the insurance company immediately after the accident. This will allow the insurance company to assess the damages and settle the claim, without involving a lawyer. If the claim is in dispute, the owner can then engage a lawyer to handle the case. This is a common practice in many other countries.
Without legislative support, it is a constant cat and mouse game with the dishonest workshops. Insurance managers have to devise many checks and controls to manage the dishonest claims. It is expensive and tiresome.
Singapore has an expensive and wasteful method of handling third party claims, resulting in inflated claims and high legal expenses. It is a blemish on our record as an efficient, transparent society.
Tan Kin Lian
1309 visitors on April 29
1,309 people visited this blog on April 29. This is an increase of 30% over the last peak - which was below 1,000 visitors. My guess is that the bonus cut by NTUC Income contributed to this big jump.
Pay of our leaders
Kin Lian
I like to pose a question and You have the prerogative not to answer though I eagerly look for one. Do You think our leaders' performances commensurate with their pays? Thank You!
From: patriot.
REPLY
I suppose that you are referring to our government leaders. In my reply, I shall also focus on the pay of our corporate leaders. I shall have to be careful about how I address this matter. Wait for a few days.
I like to pose a question and You have the prerogative not to answer though I eagerly look for one. Do You think our leaders' performances commensurate with their pays? Thank You!
From: patriot.
REPLY
I suppose that you are referring to our government leaders. In my reply, I shall also focus on the pay of our corporate leaders. I shall have to be careful about how I address this matter. Wait for a few days.
Monday, April 28, 2008
How to invest
Dear Mr. Tan,
I am interested in Investments that will give me monthly returns and low risks. I am also interested in the Singapore shares i.e SIA, Sembcorp, SingTel etc. My questions is how do I go about investing?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
I am interested in Investments that will give me monthly returns and low risks. I am also interested in the Singapore shares i.e SIA, Sembcorp, SingTel etc. My questions is how do I go about investing?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Online Citizen
I will be making a regular contribution to the Online Citizen. My first article will appear tomorrow, 30 April. It is entitled "High Cost of Living".
http://www.theonlinecitizen.com/
http://www.theonlinecitizen.com/
Short bus trips
My friend stayed in Punggol and work in Raffles Hospital (next to Bugis Junction). If he takes the MRT, he has to make two transfers at Dhoby Ghaut and at Raffles City.
He thought that it wuld be more convenient to take the MRT to Dhoby Ghaut and to change to a bus to Bugis Junction, which is just a few stops away.
The trouble is: what bus to take?
I searched the Public Transport Guide (available from Popular Bookstore for $6.50). There are 18 bus services passing the nearest bus stop to Dhoby Ghaut. There are 17 bus services passing the two bus stops next to Raffles Hospital. By checking through these two long lists, I was able to find two bus services that connect these two bus stops.
Most people buy the bus guide published by Transit Link. It is dificult to use and will take a long time to search for the connecting service. No wonder many people are reluctant to take public transport.
I hope that, in the revamped public transport system, there will be 2 to 4 local services to connect each town to the nearest MRT stations and bus interchanges. This will encourage short trips on the buses. With fewer services, the waiting time will also be shorter.
He thought that it wuld be more convenient to take the MRT to Dhoby Ghaut and to change to a bus to Bugis Junction, which is just a few stops away.
The trouble is: what bus to take?
I searched the Public Transport Guide (available from Popular Bookstore for $6.50). There are 18 bus services passing the nearest bus stop to Dhoby Ghaut. There are 17 bus services passing the two bus stops next to Raffles Hospital. By checking through these two long lists, I was able to find two bus services that connect these two bus stops.
Most people buy the bus guide published by Transit Link. It is dificult to use and will take a long time to search for the connecting service. No wonder many people are reluctant to take public transport.
I hope that, in the revamped public transport system, there will be 2 to 4 local services to connect each town to the nearest MRT stations and bus interchanges. This will encourage short trips on the buses. With fewer services, the waiting time will also be shorter.
Lawyer for Injury Claim
Dear Mr. Tan
Would you be able to recommend a lawyer, specializing in motor accidents claim.
in this unfortunate incident, a family member was hit by a motorcycle. Appreciate your kind recommendation
REPLY
I am not able to recommend any lawyer to you on this matter.
If you check Google and type "lawyer motor claim Singapore", you can find a few firms listed.
All the best.
Would you be able to recommend a lawyer, specializing in motor accidents claim.
in this unfortunate incident, a family member was hit by a motorcycle. Appreciate your kind recommendation
REPLY
I am not able to recommend any lawyer to you on this matter.
If you check Google and type "lawyer motor claim Singapore", you can find a few firms listed.
All the best.
Zero Certs
Dear Mr. Tan,
What is your opinion about Zero Certs? The advertisement claimed that it is like an indexed fund and is transparent. The investor can also select the Singapore stockmarket, like the ETF. Is it a good investment?
REPLY
The price of the Zero Cert is based on the index. However, all the dividends paid on the underlying stocks of the index are kept by the fund manager, as their expense charge.
The average dividend yield of the component stocks of the ST index is about 2.5%. As the Zero Cert take away the dividend entirely, the expense charge of the Zero Cert is about 2.5% per year. This is a high charge for an indexed fund.
It is better to invest in the StateStreet STI Trakker Fund (i.e. the STI ETF). The expense ratio is only 0.3%. If you earn an average dividend yield of 2.5%, you will get a net yield of 2.2% plus the gain in the price of the index.
Lesson: avoid complicated products. Invest in simple, transparent products.
What is your opinion about Zero Certs? The advertisement claimed that it is like an indexed fund and is transparent. The investor can also select the Singapore stockmarket, like the ETF. Is it a good investment?
REPLY
The price of the Zero Cert is based on the index. However, all the dividends paid on the underlying stocks of the index are kept by the fund manager, as their expense charge.
The average dividend yield of the component stocks of the ST index is about 2.5%. As the Zero Cert take away the dividend entirely, the expense charge of the Zero Cert is about 2.5% per year. This is a high charge for an indexed fund.
It is better to invest in the StateStreet STI Trakker Fund (i.e. the STI ETF). The expense ratio is only 0.3%. If you earn an average dividend yield of 2.5%, you will get a net yield of 2.2% plus the gain in the price of the index.
Lesson: avoid complicated products. Invest in simple, transparent products.
Reduction in yield
Hello Mr. Tan,
I bought an Investment Linked Policy (ILP) in mid 2007. After reading this case study (http://tankinlian.blogspot.com/2008/04/high-cost-of-investment-linked-policy.html) , I feel I might've made a poor investment choice but I'm not sure how to get the figures. I just can't seem to find the net yield or the reduction in yield anywhere in my policy document.
The benefit illustration for my policy is listed below. I'll be very grateful if you can guide me and tell me if my ILP is too expensive:
End of Year: 20
Annual premium: $2160
Total premium: $43,200
Distribution cost: $1296
Protection value (guaranteed): $10,800
Total (include nonguaranteed CV): 5% > $60,200, 9% > $92,800
Cash Value (nonguaranteed): 5% > $60,200, 9% > $92,800
Effect of deduction: $23,010
I am really very lost. Thank you Mr Tan!
REPLY
I suggest that you ask your insurance company to calculate for you the reduction in yield, based on an investment period of 10 and 20 years.
You can check it with my calculation below.
You invest $2160 a year. Assuming a gross yield of 5%, you get $60,200 at the end of 20 years (assuming a gross yield of 5%). The net yield (calculated from a financial calculator) is 3.3%. Reduction in yield is 1.7%.
Assuming a gross yield of 9%, you get $92,800 at the end of 20 years. The net yield (calculated from a financial calculator) is 7.4%. Reduction in yield is 1.6%.
If you invest in the STI ETF, the reduction in yield (i.e. expense ratio) is only 0.3%.
I bought an Investment Linked Policy (ILP) in mid 2007. After reading this case study (http://tankinlian.blogspot.com/2008/04/high-cost-of-investment-linked-policy.html) , I feel I might've made a poor investment choice but I'm not sure how to get the figures. I just can't seem to find the net yield or the reduction in yield anywhere in my policy document.
The benefit illustration for my policy is listed below. I'll be very grateful if you can guide me and tell me if my ILP is too expensive:
End of Year: 20
Annual premium: $2160
Total premium: $43,200
Distribution cost: $1296
Protection value (guaranteed): $10,800
Total (include nonguaranteed CV): 5% > $60,200, 9% > $92,800
Cash Value (nonguaranteed): 5% > $60,200, 9% > $92,800
Effect of deduction: $23,010
I am really very lost. Thank you Mr Tan!
REPLY
I suggest that you ask your insurance company to calculate for you the reduction in yield, based on an investment period of 10 and 20 years.
You can check it with my calculation below.
You invest $2160 a year. Assuming a gross yield of 5%, you get $60,200 at the end of 20 years (assuming a gross yield of 5%). The net yield (calculated from a financial calculator) is 3.3%. Reduction in yield is 1.7%.
Assuming a gross yield of 9%, you get $92,800 at the end of 20 years. The net yield (calculated from a financial calculator) is 7.4%. Reduction in yield is 1.6%.
If you invest in the STI ETF, the reduction in yield (i.e. expense ratio) is only 0.3%.
Crowded trains during off-peak hours
I took the MRT at 9 pm from City Hall to Yio Chu Kang station. The train was crowded throughout the entire journey. The air conditioning was not working. It was uncomfortable.
SMRT is efficient in packing the trains during the peak and off-peak hours. This makes good profit for their shareholders. But it is at the expense of the commutters.
In other cities, the commuters expect crowded trains during the peak hours, but the train rides are quite comfortable during the off-peak hours. This is not the case in Singapore.
I hope that the key officials in the Ministry of Transport, Land Transport Authority and the Public Transport Council will take the train and experience it for themselves.
SMRT is efficient in packing the trains during the peak and off-peak hours. This makes good profit for their shareholders. But it is at the expense of the commutters.
In other cities, the commuters expect crowded trains during the peak hours, but the train rides are quite comfortable during the off-peak hours. This is not the case in Singapore.
I hope that the key officials in the Ministry of Transport, Land Transport Authority and the Public Transport Council will take the train and experience it for themselves.
Reduction in Annual Bonus
1. NTUC Income has reduced the annual bonus on its life insurance policies and compensated it by increasing the special bonus. Is this change good for policyholders?
It is better for a policyholder to have a higher rate of annual bonus, as it is vested immediately each year. The special bonus is not guaranteed and may be withdrawn at a future date, before it is paid.
In the past, there were many cases of insurance companies that used high projections to sell their policies and have reduced the special bonuses before they are due to be paid. This has caused great losses to the hapless policyholders who are denied the projected payouts, after waiting for so long.
2. Does NTUC Income have the right to change the bonus structure in this manner?
At the time of issue of the policy, NTUC Income gave a projection showing how the bonuses will be distributed in the future years. Although these bonuses are not guaranteed, there is an expectation that the future bonuses will be distributed fairly. If the investment yield is high, the bonus rates should be increased. If the yield is low, the bonus rates may be reduced.
This has become a "reasonable expectation" of the policyholders. The Monetary Authority of Singapore required life insurance companies to ensure that the "reasonable expectation" of the policyholders is respected.
NTUC Income will be acting against the "reasonable expectation" by reducing the annual bonus in a year when the investment yield is exceptionally high (i.e. above 10%). The increase in special bonus payable in the future does not give adequate compensation to the policyholders, as it is not guaranteed and is payable only after a long time in the future.
Some policyholders have to terminate the policies earlier, for various reasons. They will get a lower cash value due to the lower annual bonuses. This penalty is unfair to these policyholders.
3. Should I cancel my policies with NTUC Income, as their annual bonuses and cash values will be poor in the future?
Do not cancel your policies, as you will suffer a financial loss. As NTUC Income has unilateraly changed the bonus distribution unfairly, you can take a strong stand against this change. See below.
4. What can a policyholder do?
If you feel that you have been severely disadvantage by the reduction in annual bonus, you can send a strong letter of protest to the following:
a) chairman of the board of directors of NTUC Income
b) the Monetary Authority of Singapore
c) your Member of Parliament
If sufficient policyholders voice their unhappiness, these parties will have to take action to correct the injustice.
There is also the possibility for policyholders to get together to take collective legal action. This should be reserved as the last step.
5. How many policyholders are affected by this change?
NTUC Income has said that 310,000 policyholders are affected.
6. Does this change affect all policyholders of NTUC Income?
It affects the policyholders who took the policies in recent years, and not the policyholders who took the policies earlier. This is another source of inequity, as different groups of policyholders are treated differently on this matter.
It is better for a policyholder to have a higher rate of annual bonus, as it is vested immediately each year. The special bonus is not guaranteed and may be withdrawn at a future date, before it is paid.
In the past, there were many cases of insurance companies that used high projections to sell their policies and have reduced the special bonuses before they are due to be paid. This has caused great losses to the hapless policyholders who are denied the projected payouts, after waiting for so long.
2. Does NTUC Income have the right to change the bonus structure in this manner?
At the time of issue of the policy, NTUC Income gave a projection showing how the bonuses will be distributed in the future years. Although these bonuses are not guaranteed, there is an expectation that the future bonuses will be distributed fairly. If the investment yield is high, the bonus rates should be increased. If the yield is low, the bonus rates may be reduced.
This has become a "reasonable expectation" of the policyholders. The Monetary Authority of Singapore required life insurance companies to ensure that the "reasonable expectation" of the policyholders is respected.
NTUC Income will be acting against the "reasonable expectation" by reducing the annual bonus in a year when the investment yield is exceptionally high (i.e. above 10%). The increase in special bonus payable in the future does not give adequate compensation to the policyholders, as it is not guaranteed and is payable only after a long time in the future.
Some policyholders have to terminate the policies earlier, for various reasons. They will get a lower cash value due to the lower annual bonuses. This penalty is unfair to these policyholders.
3. Should I cancel my policies with NTUC Income, as their annual bonuses and cash values will be poor in the future?
Do not cancel your policies, as you will suffer a financial loss. As NTUC Income has unilateraly changed the bonus distribution unfairly, you can take a strong stand against this change. See below.
4. What can a policyholder do?
If you feel that you have been severely disadvantage by the reduction in annual bonus, you can send a strong letter of protest to the following:
a) chairman of the board of directors of NTUC Income
b) the Monetary Authority of Singapore
c) your Member of Parliament
If sufficient policyholders voice their unhappiness, these parties will have to take action to correct the injustice.
There is also the possibility for policyholders to get together to take collective legal action. This should be reserved as the last step.
5. How many policyholders are affected by this change?
NTUC Income has said that 310,000 policyholders are affected.
6. Does this change affect all policyholders of NTUC Income?
It affects the policyholders who took the policies in recent years, and not the policyholders who took the policies earlier. This is another source of inequity, as different groups of policyholders are treated differently on this matter.
Bus interchanges
There are 35 bus interchanges in Singapore. Some interchanges are large and have to serve more than 25 services. The commutter may have to walk a long distance to the stop for the required service. This makes a transfer to be quite inconvenient.
In the design of the new transport system, I hope that they were will be 2 to 4 local services to serve a MRT station. The stops for these services can be located within a short walking distance to the train station. This will make it convenient for commuters to make a transfer.
In the design of the new transport system, I hope that they were will be 2 to 4 local services to serve a MRT station. The stops for these services can be located within a short walking distance to the train station. This will make it convenient for commuters to make a transfer.
Sunday, April 27, 2008
Investing in Unit Trust
Dear Mr. Tan,
Is unit trust a complicated product? Do you recommend investing in a unit trust?
REPLY
A unit trust is generally a simple product. Your money goes into a fund which is invested on behalf of all the investors. The fund manager has to disclose the following:
a) Upfront spread
b) Expense ratio (i.e. the annual charge)
c) Scope of investment.
It is best to invest in a unit trust that has no spread, i.e. the same price is used for buying and selling of each unit, or a spread of not more than 1%. You should choose a fund with low expense ratio, less than 1% per annum.
If you select a unit trust that has a high spread and expense ratio, you have to be sure that the fund manager is able to produce a better return compared to the market. Usually, it is difficult to make this judgement.
I prefer to invest in an indexed fund, such as the STI ETF. It has no spread (except a transaction charge of 0.3%) and an expense ratio of 0.3%. An ETF is like a unit trust, except that it can be traded on the stock exchange. A unit trust is transacted daily based on the net asset value at the end of each day.
Tip: invest in a low cost unit trust, such as the STI ETF.
Is unit trust a complicated product? Do you recommend investing in a unit trust?
REPLY
A unit trust is generally a simple product. Your money goes into a fund which is invested on behalf of all the investors. The fund manager has to disclose the following:
a) Upfront spread
b) Expense ratio (i.e. the annual charge)
c) Scope of investment.
It is best to invest in a unit trust that has no spread, i.e. the same price is used for buying and selling of each unit, or a spread of not more than 1%. You should choose a fund with low expense ratio, less than 1% per annum.
If you select a unit trust that has a high spread and expense ratio, you have to be sure that the fund manager is able to produce a better return compared to the market. Usually, it is difficult to make this judgement.
I prefer to invest in an indexed fund, such as the STI ETF. It has no spread (except a transaction charge of 0.3%) and an expense ratio of 0.3%. An ETF is like a unit trust, except that it can be traded on the stock exchange. A unit trust is transacted daily based on the net asset value at the end of each day.
Tip: invest in a low cost unit trust, such as the STI ETF.
Avoid complicated products
Many financial institutions design complicated products that lock you up for many years and give you a poor yield.
They pay a high commission (taken from your investment) to the marketeer, which could be an insurance agent or the relationship manager of a bank.
To hide the poor yield, they introduce several complicated features to distract the investor. If they are transparent, they will never be able to sell the poor yielding product.
Many life insurance products introduced in recent years are designed to be complicated and non-transparent. They give a poor yield to the policyholder.
Some products may give a fairly decent yield, but it comes with high risk. For example, if the underlying investment is risky and can earn a gross yield of 7%, the investor may get a net yield of only 3%, after deducing the high charges which takes away most of the gain. Usually, the investor is not aware about the high risk, as it is hidden in many pages of a complicated document.
Lesson: Never invest in any complicated product, even if it is sold by your trusted bank. Instead, you should invest in transparent product, such as stocks or bonds that are transacted through the stock exchange. If you invest in fixed deposits, you can check the interest rate offered by various banks.
They pay a high commission (taken from your investment) to the marketeer, which could be an insurance agent or the relationship manager of a bank.
To hide the poor yield, they introduce several complicated features to distract the investor. If they are transparent, they will never be able to sell the poor yielding product.
Many life insurance products introduced in recent years are designed to be complicated and non-transparent. They give a poor yield to the policyholder.
Some products may give a fairly decent yield, but it comes with high risk. For example, if the underlying investment is risky and can earn a gross yield of 7%, the investor may get a net yield of only 3%, after deducing the high charges which takes away most of the gain. Usually, the investor is not aware about the high risk, as it is hidden in many pages of a complicated document.
Lesson: Never invest in any complicated product, even if it is sold by your trusted bank. Instead, you should invest in transparent product, such as stocks or bonds that are transacted through the stock exchange. If you invest in fixed deposits, you can check the interest rate offered by various banks.
Monthly income plan
Dear Mr Tan
I have been offered the following "Monthly Income Plan" by my bank, marketing for a life insurance company:
Initial Investment - 10 K @$1
Front end load : 5 %
Annual fee : 1.25 %
Initial investment: 9,675 units
Monthly pay out coupon : App. $38 for 11 months and app $58 for 12th month. Total amt received per year : $476.
How to sell : relationship manager (RM) told me that just fill up the form. based on current market price and I can sell. eg of current unit price is 99 cts., from the statistics , it is as low as 87 cts.
My initial thought is that I wanted to invest 10 K. My concern is that after investing, I will only get my return after 3rd year, and RM may continue to ask me to make further investment.
REPLY
I believe that the annual payout of $478 (i.e. 4.78%) is not the actual income earned on the investment, but is a withdrawal of your initial investment. You have to check this point.
I dislike this type of complicated structure as it is confusing to the investor. Never trust anything that you do not understand.
You can read this FAQ on the charges for an investment linked fund:
http://www.tankinlian.com/faq/ilp.html
For a single premium ILP, the upfront charge is usually between 3% to 7%. The charge of 5% is at the average level. The annual fee of 1.25% is reasonable, provided that the fund is largely invested in equity. If it is invested mostly in bonds or money market funds, the fee should be less than 1%.
I find all ILPs to be expensive. It is better to invest in a ETF such as the STI ETF managed by StateStreets. The upfront charge is only 0.3% (ie the brokerage that you pay to the stockbroker).
I have been offered the following "Monthly Income Plan" by my bank, marketing for a life insurance company:
Initial Investment - 10 K @$1
Front end load : 5 %
Annual fee : 1.25 %
Initial investment: 9,675 units
Monthly pay out coupon : App. $38 for 11 months and app $58 for 12th month. Total amt received per year : $476.
How to sell : relationship manager (RM) told me that just fill up the form. based on current market price and I can sell. eg of current unit price is 99 cts., from the statistics , it is as low as 87 cts.
My initial thought is that I wanted to invest 10 K. My concern is that after investing, I will only get my return after 3rd year, and RM may continue to ask me to make further investment.
REPLY
I believe that the annual payout of $478 (i.e. 4.78%) is not the actual income earned on the investment, but is a withdrawal of your initial investment. You have to check this point.
I dislike this type of complicated structure as it is confusing to the investor. Never trust anything that you do not understand.
You can read this FAQ on the charges for an investment linked fund:
http://www.tankinlian.com/faq/ilp.html
For a single premium ILP, the upfront charge is usually between 3% to 7%. The charge of 5% is at the average level. The annual fee of 1.25% is reasonable, provided that the fund is largely invested in equity. If it is invested mostly in bonds or money market funds, the fee should be less than 1%.
I find all ILPs to be expensive. It is better to invest in a ETF such as the STI ETF managed by StateStreets. The upfront charge is only 0.3% (ie the brokerage that you pay to the stockbroker).
Annual and special bonus
Dear Mr. Tan,
NTUC Income has reduced the annual bonus and increase the special bonus. Is the special bonus guaranteed? Can the special bonus be reduced in the future? Can I trust NTUC Income to honour the special bonus that is being projected now?
REPLY
The special bonus is not guaranteed. It can be taken away at any time. This has happened in the case of other life insurance companies. When they reduce the special bonus, the impact on the policyholder is very severe.
It is better to have a high rate of annual bonus, rather than a high rate of special bonus. An annual bonus is vested in each year as it is declared, and cannot be taken away. A special bonus does not vest until the time of claim.
In the past years, NTUC Income has a fixed rate of 25% for special bonus. As this is a uniform fixed rate, it has honoured it for the past 20 over years.
In the future, the special bonus is not an uniform rate, and may vary according to type of policy and duration. You can never be sure that you are getting a fair share of the special bonus, especially when the investment climate changes.
If you do not accept this change, you can lodge a complaint to MAS. This is a fundamental change of practice, which affects the reasonable expectation of the policyholder. It is important for MAS to ensure that the new practice is done in a manner that is fair to all policyholders, now and in the future.
NTUC Income has reduced the annual bonus and increase the special bonus. Is the special bonus guaranteed? Can the special bonus be reduced in the future? Can I trust NTUC Income to honour the special bonus that is being projected now?
REPLY
The special bonus is not guaranteed. It can be taken away at any time. This has happened in the case of other life insurance companies. When they reduce the special bonus, the impact on the policyholder is very severe.
It is better to have a high rate of annual bonus, rather than a high rate of special bonus. An annual bonus is vested in each year as it is declared, and cannot be taken away. A special bonus does not vest until the time of claim.
In the past years, NTUC Income has a fixed rate of 25% for special bonus. As this is a uniform fixed rate, it has honoured it for the past 20 over years.
In the future, the special bonus is not an uniform rate, and may vary according to type of policy and duration. You can never be sure that you are getting a fair share of the special bonus, especially when the investment climate changes.
If you do not accept this change, you can lodge a complaint to MAS. This is a fundamental change of practice, which affects the reasonable expectation of the policyholder. It is important for MAS to ensure that the new practice is done in a manner that is fair to all policyholders, now and in the future.
Reduce need to commute
PRINTED IN STRAIT TIMES FORUM PAGE ON 26 APRIL 2008
Many cities face a big challenge in handling the large number of people who have to commute to and from work. They contribute to congested roads, crowded buses and trains and long commuting time. Singapore faces the same challenge.
Most of the remedial measures appear to focus on the supply side, that is, build more roads and provide more trains and buses. They take a long time to implement and do not seem to solve the underlying problem The construction works aggravate the problem.
I suggest that attention should be given to new measures to reduce the need for commuting, such as:
> encourage businesses to locate their workplaces in satellite towns
> encourage people to work near their homes, or live near their place of work
> reduce or waive stamp duty on property transactions, for a person who moves to be closer to the place of work
> improve the local transport within a town
If we can reduce the commuting demand significantly, we can make a major contribution to reduce energy consumption, travel time, travel cost and road congestion.
Tan Kin Lian
Many cities face a big challenge in handling the large number of people who have to commute to and from work. They contribute to congested roads, crowded buses and trains and long commuting time. Singapore faces the same challenge.
Most of the remedial measures appear to focus on the supply side, that is, build more roads and provide more trains and buses. They take a long time to implement and do not seem to solve the underlying problem The construction works aggravate the problem.
I suggest that attention should be given to new measures to reduce the need for commuting, such as:
> encourage businesses to locate their workplaces in satellite towns
> encourage people to work near their homes, or live near their place of work
> reduce or waive stamp duty on property transactions, for a person who moves to be closer to the place of work
> improve the local transport within a town
If we can reduce the commuting demand significantly, we can make a major contribution to reduce energy consumption, travel time, travel cost and road congestion.
Tan Kin Lian
When you are over 60
SENT TO ME BY A FRIEND
1. Focus on enjoying people, not on indulging in or accumulating material things.
2. Plan to spend whatever you have saved. You deserve to enjoy it and the few healthy years you have left. Travel if you can afford it. Don't leave anything for your children or loved ones to quarrel about. By leaving anything, you may even cause more trouble when you are gone.
3. Live in the here and now, not in the yesterdays and tomorrows. It is only today that you can handle. Yesterday is gone, tomorrow may not even happen.
4. Enjoy your grandchildren (if you are blessed with any) but don't be their full time baby sitter. You have no moral obligation to take care of them. Don't have any guilt about refusing to baby sit anyone's kids, including your own grand kids. Your parental obligation is to your children. After you have raised them into responsible adults, your duties of child-rearing and babysitting are finished. Let your children raise their own off-springs.
5. Accept physical weakness, sickness and other physical pains. It is a part of the aging process. Enjoy whatever your health can allow.
6. Enjoy what you are and what you have right now. Stop working hard for what you do not have. If you do not have them, it's probably too late.
7. Just enjoy your life with your spouse, children, grandchildren and good friends! People, who truly love you, love you for yourself, not for what you have. Anyone who loves you for what you have will just give you misery.
8. Forgive and accept forgiveness. Forgive yourself and others. Enjoy peace of mind and peace of soul.
9. Befriend death. It's a natural part of the life cycle. Don't be afraid of it. Death is the beginning of a new and better life. So prepare yourself not for death but for a new life with the Almighty.
10. Be at peace with your Creator. For... He is all you have after you leave this life.
1. Focus on enjoying people, not on indulging in or accumulating material things.
2. Plan to spend whatever you have saved. You deserve to enjoy it and the few healthy years you have left. Travel if you can afford it. Don't leave anything for your children or loved ones to quarrel about. By leaving anything, you may even cause more trouble when you are gone.
3. Live in the here and now, not in the yesterdays and tomorrows. It is only today that you can handle. Yesterday is gone, tomorrow may not even happen.
4. Enjoy your grandchildren (if you are blessed with any) but don't be their full time baby sitter. You have no moral obligation to take care of them. Don't have any guilt about refusing to baby sit anyone's kids, including your own grand kids. Your parental obligation is to your children. After you have raised them into responsible adults, your duties of child-rearing and babysitting are finished. Let your children raise their own off-springs.
5. Accept physical weakness, sickness and other physical pains. It is a part of the aging process. Enjoy whatever your health can allow.
6. Enjoy what you are and what you have right now. Stop working hard for what you do not have. If you do not have them, it's probably too late.
7. Just enjoy your life with your spouse, children, grandchildren and good friends! People, who truly love you, love you for yourself, not for what you have. Anyone who loves you for what you have will just give you misery.
8. Forgive and accept forgiveness. Forgive yourself and others. Enjoy peace of mind and peace of soul.
9. Befriend death. It's a natural part of the life cycle. Don't be afraid of it. Death is the beginning of a new and better life. So prepare yourself not for death but for a new life with the Almighty.
10. Be at peace with your Creator. For... He is all you have after you leave this life.
Disturbed by cut in annual bonus
Dear Mr. Tan
I was disturbed by the lastest news that Ntuc Income had declare to cut our annual bonus and by doing this, they will increase our maturity bonus. I was not convince how can this method benefit me in the long run.
I had called Income's hotline and had spoken about this issue. However, nothing can be resolved as they stand very firm that they do this is to benefit to the policyholder. I had total 6 life policies been affected could you give me some advise regarding this issue.
REPLY
You can ask NTUC Income to show you the cash value of your policies for the future years, based on the old bonus rates and the revised bonus rates. You will be able to see if the change in bonus is fair. It is their duty to provide a clear explanation of the change in bonus, especially as they are making a major change of this kind.
If they do not respond to your request, you can write to MAS and ask their assistance.
I was disturbed by the lastest news that Ntuc Income had declare to cut our annual bonus and by doing this, they will increase our maturity bonus. I was not convince how can this method benefit me in the long run.
I had called Income's hotline and had spoken about this issue. However, nothing can be resolved as they stand very firm that they do this is to benefit to the policyholder. I had total 6 life policies been affected could you give me some advise regarding this issue.
REPLY
You can ask NTUC Income to show you the cash value of your policies for the future years, based on the old bonus rates and the revised bonus rates. You will be able to see if the change in bonus is fair. It is their duty to provide a clear explanation of the change in bonus, especially as they are making a major change of this kind.
If they do not respond to your request, you can write to MAS and ask their assistance.
Saturday, April 26, 2008
Unit trust and ETF
A Sunday Times article said that unit trusts are not transparent. This is not correct. The unit trust trade on its net asset value at the end of each day. The fund manager accepts your investment in cash, gives you the units, and then invest the additional cash. It creates liquidity. For a long term investor, this is a good arrangement.
A ETF trades on the price quoted on the exchange. This may be transparent and tradeable, but it may suffer from the lack of liquidity, if you wish to trade in a large volume.
Each arrangement has its advantages and disadvantages. The most important factor is the expense ratio. If the unit trust or ETF gives a low expense ratio, a long term investor will gain from it, compared to high expense funds.
A ETF trades on the price quoted on the exchange. This may be transparent and tradeable, but it may suffer from the lack of liquidity, if you wish to trade in a large volume.
Each arrangement has its advantages and disadvantages. The most important factor is the expense ratio. If the unit trust or ETF gives a low expense ratio, a long term investor will gain from it, compared to high expense funds.
Personal attacks
I have blocked many unsubstantiated remarks levied against NTUC Income, its products, its agents and management.
I allow some of the negative comments to go through, if they are not personal and make a point that is based on facts.
I have also received personal attacks against me. I block them, if they are personal and malicious. However, I have decided to allow some of them to go through.
I allow some of the negative comments to go through, if they are not personal and make a point that is based on facts.
I have also received personal attacks against me. I block them, if they are personal and malicious. However, I have decided to allow some of them to go through.
Investment linked plans from NTUC Income
Someone, probably a NTUC Income agent, made an anonymous posting about the regular premium investment-linked plans (namely the Ideal plans ID2 and ID7) introduced by me when I was CEO. He (or she) accused me of being unfair in recommending against investment linked plans now. Although it was a personal attack against me, I have decided to post the comment.
Those who correctly read my blog knows that I am recommending against regular premium ILPs that take away two years of savings, especially sold to customers who are not informed about the high charges.
The Ideal plans introduced during my time have the following upfront charges:
ID2 - 7 months premuim
ID7 - nil
They are much lower than the charges of the regular premium ILPs sold in the market. Read this comparision:
http://www.askdrmoney.com/Ins_ILP_RP.htm
The Ideal ID7 is a good plan for the customer. But the insurance agents are not willing to sell it, as they earn a low commission. You have to buy it from the business center (if they still offer it).
You can avoid all the upfront charges by investing in the STI ETF. For the life insurance cover, you can buy a decreasing Term insurance. Read this FAQ:
http://www.tankinlian.com/faq/low.html
Recently, I withdraw a large sum of money from the money market fund and wanted to re-invest in the Combined Fund. Although it was a topping up of any existing policy, I was asked to pay a upfront spread of 3% for the new investment. I decided against it. I took out the money and invested it in the stockmarket directly.
By not taking care of the interest of an existing policyholder, NTUC Income has lost a large investment.
Those who correctly read my blog knows that I am recommending against regular premium ILPs that take away two years of savings, especially sold to customers who are not informed about the high charges.
The Ideal plans introduced during my time have the following upfront charges:
ID2 - 7 months premuim
ID7 - nil
They are much lower than the charges of the regular premium ILPs sold in the market. Read this comparision:
http://www.askdrmoney.com/Ins_ILP_RP.htm
The Ideal ID7 is a good plan for the customer. But the insurance agents are not willing to sell it, as they earn a low commission. You have to buy it from the business center (if they still offer it).
You can avoid all the upfront charges by investing in the STI ETF. For the life insurance cover, you can buy a decreasing Term insurance. Read this FAQ:
http://www.tankinlian.com/faq/low.html
Recently, I withdraw a large sum of money from the money market fund and wanted to re-invest in the Combined Fund. Although it was a topping up of any existing policy, I was asked to pay a upfront spread of 3% for the new investment. I decided against it. I took out the money and invested it in the stockmarket directly.
By not taking care of the interest of an existing policyholder, NTUC Income has lost a large investment.
Friday, April 25, 2008
Calpers earned 19.1% return
Source: Bloomberg
California Public Employee Retirement Scheme (Calpers) earned a 19.1 percent return for the year ended June 30, 2007, according to its most recent annual report, compared with a gain of 18.4 percent on the Standard & Poor's 500 Index of stocks.
The fund had about 60 percent of its portfolio invested in public equity, about 24 percent in bonds and other fixed income, 8 percent in real estate, 6.7 percent in private equity and 1.4 percent in cash equivalents, the report said.
California Public Employee Retirement Scheme (Calpers) earned a 19.1 percent return for the year ended June 30, 2007, according to its most recent annual report, compared with a gain of 18.4 percent on the Standard & Poor's 500 Index of stocks.
The fund had about 60 percent of its portfolio invested in public equity, about 24 percent in bonds and other fixed income, 8 percent in real estate, 6.7 percent in private equity and 1.4 percent in cash equivalents, the report said.
Homeowners convert to costlier fixed rate loans
Source: Bloomberg
Mortgage refinancing in the U.S. is increasing as record numbers of homeowners dump their adjustable-rate mortgages for the security of a fixed loan.
The amount of refinanced home loans will reach $321 billion by the end of June, the most in a year. Nine out of 10 of those borrowers will choose a fixed rate.
Property owners are abandoning adjustable-rate mortgages, or ARMs, to ward off the prospect of higher payments. About 6 million U.S. homeowners, or 59 percent of the ARM market, have Libor-indexed loans. The 12-month U.K. benchmark Libor rate rose more than two-thirds of a percentage point in the past month.
Question: Will this situation happen in Singapore? Will more people move from floating to fixed rate loans?
Mortgage refinancing in the U.S. is increasing as record numbers of homeowners dump their adjustable-rate mortgages for the security of a fixed loan.
The amount of refinanced home loans will reach $321 billion by the end of June, the most in a year. Nine out of 10 of those borrowers will choose a fixed rate.
Property owners are abandoning adjustable-rate mortgages, or ARMs, to ward off the prospect of higher payments. About 6 million U.S. homeowners, or 59 percent of the ARM market, have Libor-indexed loans. The 12-month U.K. benchmark Libor rate rose more than two-thirds of a percentage point in the past month.
Question: Will this situation happen in Singapore? Will more people move from floating to fixed rate loans?
Bonus on participating policies
Dear Mr. Tan
I have several life insurance policies with X. They reported higher investment income for 2007. I hear that they will reduce their annual bonus on their policies and increase the maturity bonus. Is this fair to policyholders? If not, what action can the policyholder take?
REPLY
The life insurance company and its appointed actuary is required to act fairly in the distribution of the annual bonus. They have to follow the principles set out in their contract or in their company bye-laws. Recently, the Monetary Authority of Singapore has issued a guideline on the distribution of bonuses on participating policies.
In the situation that you have described, the company X has to give a convincing explanation on why they are reducing their annual bonus, in spite of an increase in investment income. If you are unhappy with the explanation, you can lodge a complaint with MAS or with FiDREC.
You can ask MAS to verify if Company X has met with their obligation under the MAS guidelines.
I have several life insurance policies with X. They reported higher investment income for 2007. I hear that they will reduce their annual bonus on their policies and increase the maturity bonus. Is this fair to policyholders? If not, what action can the policyholder take?
REPLY
The life insurance company and its appointed actuary is required to act fairly in the distribution of the annual bonus. They have to follow the principles set out in their contract or in their company bye-laws. Recently, the Monetary Authority of Singapore has issued a guideline on the distribution of bonuses on participating policies.
In the situation that you have described, the company X has to give a convincing explanation on why they are reducing their annual bonus, in spite of an increase in investment income. If you are unhappy with the explanation, you can lodge a complaint with MAS or with FiDREC.
You can ask MAS to verify if Company X has met with their obligation under the MAS guidelines.
Higher return and lower risk
Dear Mr Tan,
Indeed, having read through your website, I have come to understand just how great ETFs are, esp the STI ETF. You mentioned that STI ETF is like a unit trust, less those high expense ratio and high sales charge. You also highlighted that for long term investors, it is good to invest in ETF.
Having thought through quite some time, I don't get the logic. Since STI ETF can be bought and sold like shares, why is it beneficial, especially to long term investors?
REPLY
Shares are likely to earn a higher return compared to bonds and other safer investments. But shares are volatile, i.e risky.
By investing in a fund comprising of many shares, you reduce the risk through diversification. By investing for the long term, you average out the good and bad years, to get an average long term return.
Hence, a low cost investment fund, such as ETF, allows you to earn a higher return (from shares) and reduce the risk through diversification.
Indeed, having read through your website, I have come to understand just how great ETFs are, esp the STI ETF. You mentioned that STI ETF is like a unit trust, less those high expense ratio and high sales charge. You also highlighted that for long term investors, it is good to invest in ETF.
Having thought through quite some time, I don't get the logic. Since STI ETF can be bought and sold like shares, why is it beneficial, especially to long term investors?
REPLY
Shares are likely to earn a higher return compared to bonds and other safer investments. But shares are volatile, i.e risky.
By investing in a fund comprising of many shares, you reduce the risk through diversification. By investing for the long term, you average out the good and bad years, to get an average long term return.
Hence, a low cost investment fund, such as ETF, allows you to earn a higher return (from shares) and reduce the risk through diversification.
Is the worst over?
Dear Sir
It's nice to read your blog. Just to seek your views:
1) has the worse (financial market) over ?
2) is it time to start investing now or when ?
REPLY
If you are investing for the long term, 10 years or longer, it is quite safe to start investing now.-
It's nice to read your blog. Just to seek your views:
1) has the worse (financial market) over ?
2) is it time to start investing now or when ?
REPLY
If you are investing for the long term, 10 years or longer, it is quite safe to start investing now.-
Thursday, April 24, 2008
Large writedowns by banks
Source: Economist
UBS made public a summary of an internal investigation into the mistakes that led it to write down a total of $38 billion, the most by any European bank hit by the subprime crisis. The company laid most of the blame on positions taken by its investment-banking arm. To rebuild its fortunes, the Swiss bank is reducing the size of its investment-banking business to refocus on its private-client base.
Other banks added to the list of woes stemming from the mortgage markets. Credit Suisse, UBS's rival, swung to a loss in the first quarter largely because it took SFr5.3 billion ($5.0 billion) in writedowns. Bank of America said its first-quarter profit had fallen by 77% compared with a year ago, and that it would increase its provision for credit losses by $5 billion. Citigroup booked another $13 billion in writedowns and made a quarterly loss of $5.1 billion. And Royal Bank of Scotland said it needed to raise £12 billion ($24 billion), about a third of its market value, in a rights issue to help protect its core capital.
Total: USD 85 billion
UBS made public a summary of an internal investigation into the mistakes that led it to write down a total of $38 billion, the most by any European bank hit by the subprime crisis. The company laid most of the blame on positions taken by its investment-banking arm. To rebuild its fortunes, the Swiss bank is reducing the size of its investment-banking business to refocus on its private-client base.
Other banks added to the list of woes stemming from the mortgage markets. Credit Suisse, UBS's rival, swung to a loss in the first quarter largely because it took SFr5.3 billion ($5.0 billion) in writedowns. Bank of America said its first-quarter profit had fallen by 77% compared with a year ago, and that it would increase its provision for credit losses by $5 billion. Citigroup booked another $13 billion in writedowns and made a quarterly loss of $5.1 billion. And Royal Bank of Scotland said it needed to raise £12 billion ($24 billion), about a third of its market value, in a rights issue to help protect its core capital.
Total: USD 85 billion
High food prices
I saw a media report that the price of wheat and corn increased by 60% over the past 12 months. The price of rice increased by more than 100%.
The large increase in food prices is partly due to reduced supply and higher real demand. But the large increase is exaggerated considerly by speculation by the hedge funds. Ordinary people now start to hoard the grains, contributing to the speculative fever.
Like all speculation of this kind, the bubble will burst and the prices will come down to the correct market level. It will be higher than 12 months ago, but should not be at the high levels today.
My advice: buy enough rice to meet your family needs. Do not engage in the speculation and hoarding. If you do, be prepared to suffer a loss when the market drops.
The large increase in food prices is partly due to reduced supply and higher real demand. But the large increase is exaggerated considerly by speculation by the hedge funds. Ordinary people now start to hoard the grains, contributing to the speculative fever.
Like all speculation of this kind, the bubble will burst and the prices will come down to the correct market level. It will be higher than 12 months ago, but should not be at the high levels today.
My advice: buy enough rice to meet your family needs. Do not engage in the speculation and hoarding. If you do, be prepared to suffer a loss when the market drops.
Peter Drucker: Innovation
This is what Peter Drucker said about "innovation".
Innovation is an important function of a business. It has to innovate to provide for different needs of the customers.
It is not enough for a business to just provide a product or service. It has provide better and more cheaply. It is not necessary for a business to grow bigger, but it has to grow better.
Innovation may result in a lower price, but it may also result in a new and better product, a new convenience, or a new want.
Innovation results in a different product or service, and creates a new potential of satisfaction. It may be to find a new use for an old product.
Innovation is not invention.
Innovation is an important function of a business. It has to innovate to provide for different needs of the customers.
It is not enough for a business to just provide a product or service. It has provide better and more cheaply. It is not necessary for a business to grow bigger, but it has to grow better.
Innovation may result in a lower price, but it may also result in a new and better product, a new convenience, or a new want.
Innovation results in a different product or service, and creates a new potential of satisfaction. It may be to find a new use for an old product.
Innovation is not invention.
Innovation is easy and fun
FIRST POSTED IN SEPTEMBER 2005
Joseph Tay wrote an article in Today paper on 12 September entitled "Why innovation is hard and scary". The article said that uncertainty and fear of failure prevent us from taking risk.
I wish to present a different view - "Innovation is easy and fun". Here are four points.
Point one. I define innovation as doing something that you have done before, but finding a new way to do it. The aim is to improve the results.
As you have done it before, you can get the benchmark from the "old way". This benchmark can be used to compare against the "new way". If you can get better results, then the new way is better.
You will find it fun to get better results through innovation. Many people will love the challenge.
Innovation is different from creativity. Creativity means doing something that has not been done before. It is more difficult to handle. Innovation is easier.
Point two. To get better results, you will have to try many times. You have to face uncertainty - will the new way can produce better results? How to convince the boss?
Do not try to find the answer through planning or through theory. Try it out and see if it works. If not, try a different way. Be ready to try many times, and to measure the results.
Remember, Thomas Edison had to try 1,000 times before he found the right way to produce a light bulb.
I encourage "do, learn , adapt". You can learn best by experimentation. Because you have to t ry many, many times, it is better to act promptly. Do not spend too much time in analysing.
Point three. Do not ask for approval from your boss or from civil servant (if some government regulation might be involved). Be ready to trust your judgement.
If you ask for approval, the next person need to be familiar with the task before they can decide. They probably know less about the innovation than you. So, it is better for you to decide.
A well known sports manufacture has the slogan, "Just do it".
Point four. What happens if the change involve a high level of risk that can cause business failure?
If this is the case, you can try a pilot project. Try it on a small, experimental scale. If the pilot project works, you can present it for approval by your boss. By that time, you are convinced, and it will be quite easy to convince your boss on making the big bet.
Conclusion. I hope that my four points on innovation will be helpful to encourage people to be willing to innovate, and to improve. It can be easy and fun.
Tan Kin Lian
Joseph Tay wrote an article in Today paper on 12 September entitled "Why innovation is hard and scary". The article said that uncertainty and fear of failure prevent us from taking risk.
I wish to present a different view - "Innovation is easy and fun". Here are four points.
Point one. I define innovation as doing something that you have done before, but finding a new way to do it. The aim is to improve the results.
As you have done it before, you can get the benchmark from the "old way". This benchmark can be used to compare against the "new way". If you can get better results, then the new way is better.
You will find it fun to get better results through innovation. Many people will love the challenge.
Innovation is different from creativity. Creativity means doing something that has not been done before. It is more difficult to handle. Innovation is easier.
Point two. To get better results, you will have to try many times. You have to face uncertainty - will the new way can produce better results? How to convince the boss?
Do not try to find the answer through planning or through theory. Try it out and see if it works. If not, try a different way. Be ready to try many times, and to measure the results.
Remember, Thomas Edison had to try 1,000 times before he found the right way to produce a light bulb.
I encourage "do, learn , adapt". You can learn best by experimentation. Because you have to t ry many, many times, it is better to act promptly. Do not spend too much time in analysing.
Point three. Do not ask for approval from your boss or from civil servant (if some government regulation might be involved). Be ready to trust your judgement.
If you ask for approval, the next person need to be familiar with the task before they can decide. They probably know less about the innovation than you. So, it is better for you to decide.
A well known sports manufacture has the slogan, "Just do it".
Point four. What happens if the change involve a high level of risk that can cause business failure?
If this is the case, you can try a pilot project. Try it on a small, experimental scale. If the pilot project works, you can present it for approval by your boss. By that time, you are convinced, and it will be quite easy to convince your boss on making the big bet.
Conclusion. I hope that my four points on innovation will be helpful to encourage people to be willing to innovate, and to improve. It can be easy and fun.
Tan Kin Lian
Innovation
From: Wikipedia
The classic definitions of innovation include:
* the act of introducing something new (American Heritage Dictionary).
* the introduction of something new (Merriam-Webster Online)
* a new idea, method or device (Merriam-Webster Online)
* the successful exploitation of new ideas (Department of Trade and Industry, UK).
* change that creates a new dimension of performance (Peter Drucker)
* the process of making improvements by introducing something new
In economics, business and government policy, the "something new" must be substantially different, not an insignificant change. In economics, the change must increase value, customer value, or producer value. Innovations are intended to make someone better off, and the succession of many innovations grows the whole economy.
The term innovation may refer to both radical and incremental changes to products, processes or services. The often unspoken goal of innovation is to solve a problem.
Innovation is an important topic in the study of economics, business, technology, sociology, and engineering. Since innovation is also considered a major driver of the economy, the factors that lead to innovation are also considered to be critical to policy makers.
Views from Tan Kin Lian:
Innovation is doing something new. It is a change to an existing process, and is able to bring significant improvements. It does not need to be perfect; it only needs to be significantly better. This approach, "to be better, not perfect" can encourage people to act promptly to introduce innovation.
The classic definitions of innovation include:
* the act of introducing something new (American Heritage Dictionary).
* the introduction of something new (Merriam-Webster Online)
* a new idea, method or device (Merriam-Webster Online)
* the successful exploitation of new ideas (Department of Trade and Industry, UK).
* change that creates a new dimension of performance (Peter Drucker)
* the process of making improvements by introducing something new
In economics, business and government policy, the "something new" must be substantially different, not an insignificant change. In economics, the change must increase value, customer value, or producer value. Innovations are intended to make someone better off, and the succession of many innovations grows the whole economy.
The term innovation may refer to both radical and incremental changes to products, processes or services. The often unspoken goal of innovation is to solve a problem.
Innovation is an important topic in the study of economics, business, technology, sociology, and engineering. Since innovation is also considered a major driver of the economy, the factors that lead to innovation are also considered to be critical to policy makers.
Views from Tan Kin Lian:
Innovation is doing something new. It is a change to an existing process, and is able to bring significant improvements. It does not need to be perfect; it only needs to be significantly better. This approach, "to be better, not perfect" can encourage people to act promptly to introduce innovation.
Declaring a benign cyst
Should a benign cyst be declared to the insurance company? Here is the advice from a doctor.
There are several types of breast cysts. Some do not have increased risks of malignacy and some do It is best for the applicant to re-declare the condition.
The applicant should obtain a copy of all her results from her attending physician and submit these resuts to the underwriter. It will be useful if she can also ask her attending physician to provide a short note of the diagnosis, when it was diagnosed and how the progress has been since being diagnosed.
Usually these patients are reviewed at least once a year and ultrasound will be done at reveiws to check on the progress. If the condition has been present for several years and nothing has happened, it is less likely to be any condition that will give rise to increased mortality.
There are several types of breast cysts. Some do not have increased risks of malignacy and some do It is best for the applicant to re-declare the condition.
The applicant should obtain a copy of all her results from her attending physician and submit these resuts to the underwriter. It will be useful if she can also ask her attending physician to provide a short note of the diagnosis, when it was diagnosed and how the progress has been since being diagnosed.
Usually these patients are reviewed at least once a year and ultrasound will be done at reveiws to check on the progress. If the condition has been present for several years and nothing has happened, it is less likely to be any condition that will give rise to increased mortality.
Wednesday, April 23, 2008
12 months bond for training a new employee
Dear Mr. Tan
I surf the net and found about your blog, that has short article about training bond. I would like to know, would it be possible if i request for some sample from you for my reference. How is the calculation being made, terms and conditions and what are the procedures involve. I m still searching for more samples on the net but not much can be found. Hope you can help me with that. Thank you.
REPLY
When I was in NTUC Income, we introduced a condition in the letter of appointment. It reads as follows (not the exact words):
QUOTE
In the event that the employee leaves the service for any reason during the first 12 months from the commencing date of service, the employee agrees to reimburse the employer an amount equal to one month's salary to compensate the employer for the cost of recruiting and training the employee.
UNQUOTE
The wording is not legally tight, but it is generally respected by the employee. In practice, the employer may waive this requirement under special circumstances. Most employees will think carefully before they join the company, and will only accept the employment if they are quite sure that they will stay for at least one year, or longer. It helps to weed out the employees that accept a job and continue to look for another job.
I hope that you find my comments to be helpful. Wish you all the best.
I surf the net and found about your blog, that has short article about training bond. I would like to know, would it be possible if i request for some sample from you for my reference. How is the calculation being made, terms and conditions and what are the procedures involve. I m still searching for more samples on the net but not much can be found. Hope you can help me with that. Thank you.
REPLY
When I was in NTUC Income, we introduced a condition in the letter of appointment. It reads as follows (not the exact words):
QUOTE
In the event that the employee leaves the service for any reason during the first 12 months from the commencing date of service, the employee agrees to reimburse the employer an amount equal to one month's salary to compensate the employer for the cost of recruiting and training the employee.
UNQUOTE
The wording is not legally tight, but it is generally respected by the employee. In practice, the employer may waive this requirement under special circumstances. Most employees will think carefully before they join the company, and will only accept the employment if they are quite sure that they will stay for at least one year, or longer. It helps to weed out the employees that accept a job and continue to look for another job.
I hope that you find my comments to be helpful. Wish you all the best.
Cysts and cancer
Mr. Tan,
I found some breast lumps and was referred to TTSH for followup. The lumps turned out to be cysts, which are very common in women and which have no correlation to the incidence of subsequent breast cancer.
When I bought a H&S policy from income, I declared this verbally to the agent, but the agent decided that it was trivial and thus did not write down on the declaration form. Would you advise me to do a re-declaration?
How reasonable are the actuaries in assessing the risk of cancer in case of a benign condition like cysts. Why is it that the actuaries cannot accept doctor's letters stating that the presence of a benign condition does not increase the risk of cancer? I had to keep fighting for coverage on another condition I had and even then, NTUC didn't give me full coverage.
REPLY
It is better for you to make a re-declaration now. Tell the insurance company that you did disclose it to the agent who decided that it did not need to be recorded. If the company accepts the declaration, then it is good for all parties. If not, the company has to deal with the agent.
I am not familiar with the probably of cyst and its impact on cancer. Sorry, I cannot comment on this matter. Let me ask a doctor.
I found some breast lumps and was referred to TTSH for followup. The lumps turned out to be cysts, which are very common in women and which have no correlation to the incidence of subsequent breast cancer.
When I bought a H&S policy from income, I declared this verbally to the agent, but the agent decided that it was trivial and thus did not write down on the declaration form. Would you advise me to do a re-declaration?
How reasonable are the actuaries in assessing the risk of cancer in case of a benign condition like cysts. Why is it that the actuaries cannot accept doctor's letters stating that the presence of a benign condition does not increase the risk of cancer? I had to keep fighting for coverage on another condition I had and even then, NTUC didn't give me full coverage.
REPLY
It is better for you to make a re-declaration now. Tell the insurance company that you did disclose it to the agent who decided that it did not need to be recorded. If the company accepts the declaration, then it is good for all parties. If not, the company has to deal with the agent.
I am not familiar with the probably of cyst and its impact on cancer. Sorry, I cannot comment on this matter. Let me ask a doctor.
Send your questions by e-mail
If you wish to ask a question, send an e-mail to me. Do not post it as a comment in my blog, as I may overlook it.
Non Disclosure
Claim officers are quick to use the non-disclosure clause to reject life and health insurance claims. They are treading on dangerous grounds.
Most life insurance policies have an "indisputable clause". The insurance company is not allowed to dispute a claim after a certain period (say 1 or 2 years), except in the event of fraud. To dispute the claim, the insurance company has to prove that the policyholder intends to commit fraud. The burden of proof is on the insurance company.
To reject a claim within the disputable period, the insurance company has to show that the non-disclosure is deliberate, i.e. that the policyholder knows about the medical condition and deliberately withhold it to get the insurance accepted.
Here is my advice to a policyholder who faces a rejected claim on the grounds of non-disclosure.
1. Ask the claim officer to state the following:
a) The wording of the non-disclosure and indusputability clause.
b) The facts and evidence to support their decision to reject the claim
2. Present your facts in writing to support your position that the policyholder acted in disclosing relevant information.
3. Meet with the claim officer and manager to resolve the matter. Have any formal decision recorded in writing.
If you decide, at a later stage, to bring a complant to FiDREC or to take up a legal case, your position will be supported by the written evidence.
Most life insurance policies have an "indisputable clause". The insurance company is not allowed to dispute a claim after a certain period (say 1 or 2 years), except in the event of fraud. To dispute the claim, the insurance company has to prove that the policyholder intends to commit fraud. The burden of proof is on the insurance company.
To reject a claim within the disputable period, the insurance company has to show that the non-disclosure is deliberate, i.e. that the policyholder knows about the medical condition and deliberately withhold it to get the insurance accepted.
Here is my advice to a policyholder who faces a rejected claim on the grounds of non-disclosure.
1. Ask the claim officer to state the following:
a) The wording of the non-disclosure and indusputability clause.
b) The facts and evidence to support their decision to reject the claim
2. Present your facts in writing to support your position that the policyholder acted in disclosing relevant information.
3. Meet with the claim officer and manager to resolve the matter. Have any formal decision recorded in writing.
If you decide, at a later stage, to bring a complant to FiDREC or to take up a legal case, your position will be supported by the written evidence.
U.S. Presidential Election
I have been following the primary election with great interest. The Republican Party has selected their candidate, John McCain, quite early. The Democratic Party is still at a deadlock.
The headline in MyPaper said, "The Democratic Conundrum"
Hillary Clinton: "She can't win but won't quit"
Barack Obama: "He's going to win but can't close it out".
I hope that the Democratic Party can sort out its conundrum early and field a strong candidate in the election in November.
Here is my suggestion. Clinton and Obama work together as a team. Clinton will be the Presidential candidate and Obama will be the Vice Presidential candidate in 2008. In 2012, Clinton will step down (i.e. a prior agreement) and support Obama as the Presidential candidate.
Clinton is now 60 years old and has more experience in Government. She should take the leadership in 2008. Obama is mid 40s. In 4 years time, Obama will have the experience to take over.
My personal wish is that a Democrat will be the next USA President.
The headline in MyPaper said, "The Democratic Conundrum"
Hillary Clinton: "She can't win but won't quit"
Barack Obama: "He's going to win but can't close it out".
I hope that the Democratic Party can sort out its conundrum early and field a strong candidate in the election in November.
Here is my suggestion. Clinton and Obama work together as a team. Clinton will be the Presidential candidate and Obama will be the Vice Presidential candidate in 2008. In 2012, Clinton will step down (i.e. a prior agreement) and support Obama as the Presidential candidate.
Clinton is now 60 years old and has more experience in Government. She should take the leadership in 2008. Obama is mid 40s. In 4 years time, Obama will have the experience to take over.
My personal wish is that a Democrat will be the next USA President.
Rejection of a critical illness claim
Dear Mr. Tan,
I bought a critical illness cover for my wife two years ago. Recently, she felt some pain on her breast and saw a doctor at the polyclinic. The doctor examined her and refererred her to Tan Tock Seng for further examination. She was diagnosed with breast cancer.
At the polyclinic, she told the doctor that she did a mammogram more than ten years ago. It showed a lumpy breast but The doctor at that time said that there was no need for repeat consultation. I called the clinic where she did her mammogram but was told that they could not find her previous record. My wife has all along been in good health until this unforseen illiness was detected last year.
The insurance company denied her claim becuase she did not disclosed the breast lump in her declaration form. There is no record on this matter except for her verbal conversation with the doctor at the polyclinic. Can the insurance company deny the claim? Please advise.
REPLY
I am sorry to learn about your wife's medical condition and the rejection of the claim by the insurance company.
I suggest that you write to the insurance company formally to request for the following facts to be put down in writing:
a) the coverage of the policy
b) the policy condition regarding non-disclose and incontestibility clause
c) the facts of the case, in particular the evidence of her previous medical condition
d) the reason for the rejection
If the insurance company wish to reject the claim, they have to duty to prove non-disclosure of a previous medical condition. It seems that the verbal conversation does not constitute sufficient evidence to support the rejection. You should keep a record of these correspendence. If you meet with the claim manager, you can also ask for their position to be put down in writing.
If you feel that the insurance company has been unfair in rejection of the claim, you can lodge a complaint with the FiDREC (Financial industry Dispute Resolution Center). http://www.fidrec.com.sg/website/faq.html
You can also refer this matter to a lawyer, but at a later stage.
I bought a critical illness cover for my wife two years ago. Recently, she felt some pain on her breast and saw a doctor at the polyclinic. The doctor examined her and refererred her to Tan Tock Seng for further examination. She was diagnosed with breast cancer.
At the polyclinic, she told the doctor that she did a mammogram more than ten years ago. It showed a lumpy breast but The doctor at that time said that there was no need for repeat consultation. I called the clinic where she did her mammogram but was told that they could not find her previous record. My wife has all along been in good health until this unforseen illiness was detected last year.
The insurance company denied her claim becuase she did not disclosed the breast lump in her declaration form. There is no record on this matter except for her verbal conversation with the doctor at the polyclinic. Can the insurance company deny the claim? Please advise.
REPLY
I am sorry to learn about your wife's medical condition and the rejection of the claim by the insurance company.
I suggest that you write to the insurance company formally to request for the following facts to be put down in writing:
a) the coverage of the policy
b) the policy condition regarding non-disclose and incontestibility clause
c) the facts of the case, in particular the evidence of her previous medical condition
d) the reason for the rejection
If the insurance company wish to reject the claim, they have to duty to prove non-disclosure of a previous medical condition. It seems that the verbal conversation does not constitute sufficient evidence to support the rejection. You should keep a record of these correspendence. If you meet with the claim manager, you can also ask for their position to be put down in writing.
If you feel that the insurance company has been unfair in rejection of the claim, you can lodge a complaint with the FiDREC (Financial industry Dispute Resolution Center). http://www.fidrec.com.sg/website/faq.html
You can also refer this matter to a lawyer, but at a later stage.
Dual Currency Investment
Dear Mr. Tan,
Dual currency premium deposit, if US$ is the base currrency and the dual currency deposit is Aud at intrerest of say 8.% with tenor to 1 month. How does it work and how should I set my strike price so that I do not lose my base currency principal
REPLY
Read this FAQ
http://www.tankinlian.com/faq/duali.html
Dual currency premium deposit, if US$ is the base currrency and the dual currency deposit is Aud at intrerest of say 8.% with tenor to 1 month. How does it work and how should I set my strike price so that I do not lose my base currency principal
REPLY
Read this FAQ
http://www.tankinlian.com/faq/duali.html
Tuesday, April 22, 2008
Soft commodity
A commodity such as coffee, cocoa, sugar and fruit. This term generally refers to commodities that are grown, rather than mined.
Soft commodities play a major part in the futures market. They are used both by farmers wishing to lock-in the future prices of their crops, and by speculative investors seeking a profit.
Soft commodities play a major part in the futures market. They are used both by farmers wishing to lock-in the future prices of their crops, and by speculative investors seeking a profit.
Beed cash? Rent out your HDB flat
Read the article by Dr. Money:
http://newpaper.asia1.com.sg/columnists/story/0,4136,152790,00.html
More Dr. Money's articles here:
http://www.tankinlian.com/drmoney/
http://newpaper.asia1.com.sg/columnists/story/0,4136,152790,00.html
More Dr. Money's articles here:
http://www.tankinlian.com/drmoney/
Monday, April 21, 2008
Credit Card Debt
Hello Mr. Tan,
I read your blog re: the subject matter above. And you mention cooperative society can be of assistance. What/who are the cooperative society? I don't understand that term, and would really appreciate it if you could clarify?
REPLY
I suggest that you contact Credit Counselling Singapore. They may be able to help you. http://www.ccs.org.sg/
To my knowledge, the coperative societies are not able to help someone who is already in debt. You should join a cooperative society and start saving with it. When you need a loan, they can provide it to you at lower cost, compared to a credit card.
I read your blog re: the subject matter above. And you mention cooperative society can be of assistance. What/who are the cooperative society? I don't understand that term, and would really appreciate it if you could clarify?
REPLY
I suggest that you contact Credit Counselling Singapore. They may be able to help you. http://www.ccs.org.sg/
To my knowledge, the coperative societies are not able to help someone who is already in debt. You should join a cooperative society and start saving with it. When you need a loan, they can provide it to you at lower cost, compared to a credit card.
New way of marketing
A blog reader asked how a new life insurance company can market its products in Singapore, without paying high commission to agents.
It can adopt an innovative "educational" approach:
a) Educate the customers through the website
b) Give educational talks at workplaces and public venues
c) Distribute educational materials on the street
d) Print articles in the print media
This educational materials will inform the consumers about the value of insurance and the difference in cost between the "low cost" and "high cost" products. I expect that many consumers will prefer to buy the "low cost" products directly.
It can adopt an innovative "educational" approach:
a) Educate the customers through the website
b) Give educational talks at workplaces and public venues
c) Distribute educational materials on the street
d) Print articles in the print media
This educational materials will inform the consumers about the value of insurance and the difference in cost between the "low cost" and "high cost" products. I expect that many consumers will prefer to buy the "low cost" products directly.
High prices of commodities
The prices of oil, gold, rice and other commodities have shot through the roof. The large increases are due to:
a) Shortage
b) Financial speculation
The actual shortage may be small and temporary. But the financial speculators, e.g. hedge funds, have taken advantage of the situation to push up prices beyond the fundamentals. Even ordinary people have jumped into the bandwagon.
These extreme price movements are a function of the free market. It is bad for the global economy and is hurting many poor people. It a weakness of the market mechanism.
I hope that there will be some measures to prevent the excessive speculation.
a) Shortage
b) Financial speculation
The actual shortage may be small and temporary. But the financial speculators, e.g. hedge funds, have taken advantage of the situation to push up prices beyond the fundamentals. Even ordinary people have jumped into the bandwagon.
These extreme price movements are a function of the free market. It is bad for the global economy and is hurting many poor people. It a weakness of the market mechanism.
I hope that there will be some measures to prevent the excessive speculation.
Avoid high cost ILP
Hi Mr. Tan,
I've been following your blog and it has been really great just reading your entries. You have come across as a very sincere and helpful person.
I would like to get some advise from you regarding insurance. I have bought an investment linked policy with an insurance company but would like to know if its wiser to just buy a pure insurance rather than an investment linked one?
REPLY
It is better to buy Term insurance for the insurance protection and invest in a low cost investment fund. This is explained in these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Most investment linked products have high charges that take away two years of your savings:
http://www.tankinlian.com/faq/ilp.html
I've been following your blog and it has been really great just reading your entries. You have come across as a very sincere and helpful person.
I would like to get some advise from you regarding insurance. I have bought an investment linked policy with an insurance company but would like to know if its wiser to just buy a pure insurance rather than an investment linked one?
REPLY
It is better to buy Term insurance for the insurance protection and invest in a low cost investment fund. This is explained in these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Most investment linked products have high charges that take away two years of your savings:
http://www.tankinlian.com/faq/ilp.html
Share your experience
If you like me to share your experience in the main section of my blog (and not as a comment), you have to send an e-mail to me. This is for me to contact you and verify the facts that you have posted. I will not put your actual name, if you wish to remain anonymous.
Buy Low cost insurance now
Dear Mr. Tan,
You advised your blog readers to wait for the new life insurance company to offer low cost products. What happens if there is a delay in the availability of these products? What if death or disabiilty occurs and the people are not insured?
REPLY
I advised them to buy low cost insurance (i.e. Term and Decreasing Term) now. They should avoid high cost life insurance policy that takes away two years of their savings.
In the meantime, they should keep their savings in the bank. Although the interest rate is low, at least the savings are intact and not taken away to pay commission.
If they have accumulated more than $3,000, they can buy 1,000 units of ST ETF. Or any other low cost investment funds with a small front end load (not more than 1%).
You advised your blog readers to wait for the new life insurance company to offer low cost products. What happens if there is a delay in the availability of these products? What if death or disabiilty occurs and the people are not insured?
REPLY
I advised them to buy low cost insurance (i.e. Term and Decreasing Term) now. They should avoid high cost life insurance policy that takes away two years of their savings.
In the meantime, they should keep their savings in the bank. Although the interest rate is low, at least the savings are intact and not taken away to pay commission.
If they have accumulated more than $3,000, they can buy 1,000 units of ST ETF. Or any other low cost investment funds with a small front end load (not more than 1%).
Sunday, April 20, 2008
Customer Care Hotline
Some companies have a Customer Care hotline. Actually, it is frustrating to call the hotline, due to the following:
a) Spend 1 to 2 minutes to listen to a voice recording
b) Have to press many buttons to get through
c) Have to wait for many cycles (3 to 5 minutes) for an agent to be available, before the caller gives up.
I gave up and sent the following e-mail to the company:
"I had a lot of difficulty in reaching your Customer Care. If you really care about your customers, how about making it easy for them to get through and talk to someone?"
a) Spend 1 to 2 minutes to listen to a voice recording
b) Have to press many buttons to get through
c) Have to wait for many cycles (3 to 5 minutes) for an agent to be available, before the caller gives up.
I gave up and sent the following e-mail to the company:
"I had a lot of difficulty in reaching your Customer Care. If you really care about your customers, how about making it easy for them to get through and talk to someone?"
Cancel a high cost ILP
Many people were shocked when they learn that the investment-linked policy (ILP) that they bought from the insurance agent (who is usually their friend) can take away up to 2 years of their savings.
They feel let down by their friend, who offered a policy that give so poor value, and lock them up for a lifetime.
What can they do?
It is best to terminate the policy early (say within the first two years) and take a loss. As the high cost is usually spread over the the first five years, the policyholder will only bear part of the full cost by early termination. The policyholder can save on the high charges on the future premiums.
What is the alternative?
a) Save in a bank account for the time being. When you accumulate more than $3,000, you can buy 1,000 shares of STI ETF or other low cost ETFs on the Singapore Exchange.
b) Buy a low cost investment fund with no upfront spread, and low expense ratio. This will be available soon.
They feel let down by their friend, who offered a policy that give so poor value, and lock them up for a lifetime.
What can they do?
It is best to terminate the policy early (say within the first two years) and take a loss. As the high cost is usually spread over the the first five years, the policyholder will only bear part of the full cost by early termination. The policyholder can save on the high charges on the future premiums.
What is the alternative?
a) Save in a bank account for the time being. When you accumulate more than $3,000, you can buy 1,000 shares of STI ETF or other low cost ETFs on the Singapore Exchange.
b) Buy a low cost investment fund with no upfront spread, and low expense ratio. This will be available soon.
Earn more than the rate of inflation
Hi Kin Lian,
Many people buy life insurance policies to save for their future needs. For most of them, these policies takes most of their long term savings. Why does the policies give a poor return, which is sometimes not enough to cover the rate of inflation? What can ordinary people do, to get a return that can beat inflation?
REPLY
You can read this FAQ to understand the true cost of life insurance. It is quite high, and represents a reduction of more than 4% from the actual yield. After taking this reduction, the net yield is not sufficient to cover the rate of inflation:
http://www.tankinlian.com/faq/true.html
To beat inflation, it is better to buy Term insurance and invest in a low cost investment fund. This is explained in these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Many people buy life insurance policies to save for their future needs. For most of them, these policies takes most of their long term savings. Why does the policies give a poor return, which is sometimes not enough to cover the rate of inflation? What can ordinary people do, to get a return that can beat inflation?
REPLY
You can read this FAQ to understand the true cost of life insurance. It is quite high, and represents a reduction of more than 4% from the actual yield. After taking this reduction, the net yield is not sufficient to cover the rate of inflation:
http://www.tankinlian.com/faq/true.html
To beat inflation, it is better to buy Term insurance and invest in a low cost investment fund. This is explained in these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Benefit Illustration
1. What is a benefit illustration?
A life insurance agent is required to provide a benefit illustration for the life insurance policy that they want to sell to you. This benefit illustration is mandatory, as a life insurance policy is a long term commitment. The format of this benefit illustration is approved by the Monetary Authority of Singapore. It can comprise of more than 10 pages and contain essential information about the policy.
The insurance agent is required to explain to you the key facts in the benefit illustration. In practice, the insurance agent is likely to avoid the key points that are important to the consumer, such as the yield on the policy and the commission earned by the agent.
2. What should the consumer look for in the benefit illustration?
You should ask the following questions to the agent:
a) What is the total premium paid, cash value and the net yield to the policyholder after 5, 10, 15 and 20 years
b) What is the amount paid as commission to the agent and the agency managers?
c) What is the gross yield expected from the insurance fund?
If you find the reduction in yield, i.e. difference between (c) and (a), to be more than 2%, then the life insurance policy is too expensive and give poor value to the consumer.
3. What yield should the consumer expect from the life insurance policy?
If you expect to pay premiums for 20 years in a savings type product (such as a whole life, endowment, critical illness or investment linked policy) , you should look for a net yield of at least 4% per annum. If you do not get this yield, the insurance policy gives poor value.
You should ask the agent to point out to you the paragraph in the benefit illustration that covers this point.
4. What is a fair rate of commission that should be earned by the agent?
As the consumer, you are paying for the commission earned by the agent and the agency managers. This is stated under the item of "distribution cost". You should ask the agent to point out this paragraph to you.
If you save a premium of $300 a month, the distribution cost can be more than $6,000. This is the money taken from you to pay the agent and the agency manager. This is too expensive. A fair rate of commision to the agent should be $200, and not a few thousand dollars.
If the agent cannot provide the information or a clear explanation to you, you should avoid the agent as he or she is incompetent or dishonest.
End of FAQ
A life insurance agent is required to provide a benefit illustration for the life insurance policy that they want to sell to you. This benefit illustration is mandatory, as a life insurance policy is a long term commitment. The format of this benefit illustration is approved by the Monetary Authority of Singapore. It can comprise of more than 10 pages and contain essential information about the policy.
The insurance agent is required to explain to you the key facts in the benefit illustration. In practice, the insurance agent is likely to avoid the key points that are important to the consumer, such as the yield on the policy and the commission earned by the agent.
2. What should the consumer look for in the benefit illustration?
You should ask the following questions to the agent:
a) What is the total premium paid, cash value and the net yield to the policyholder after 5, 10, 15 and 20 years
b) What is the amount paid as commission to the agent and the agency managers?
c) What is the gross yield expected from the insurance fund?
If you find the reduction in yield, i.e. difference between (c) and (a), to be more than 2%, then the life insurance policy is too expensive and give poor value to the consumer.
3. What yield should the consumer expect from the life insurance policy?
If you expect to pay premiums for 20 years in a savings type product (such as a whole life, endowment, critical illness or investment linked policy) , you should look for a net yield of at least 4% per annum. If you do not get this yield, the insurance policy gives poor value.
You should ask the agent to point out to you the paragraph in the benefit illustration that covers this point.
4. What is a fair rate of commission that should be earned by the agent?
As the consumer, you are paying for the commission earned by the agent and the agency managers. This is stated under the item of "distribution cost". You should ask the agent to point out this paragraph to you.
If you save a premium of $300 a month, the distribution cost can be more than $6,000. This is the money taken from you to pay the agent and the agency manager. This is too expensive. A fair rate of commision to the agent should be $200, and not a few thousand dollars.
If the agent cannot provide the information or a clear explanation to you, you should avoid the agent as he or she is incompetent or dishonest.
End of FAQ
Avoid buying life insurance on the street
Dear Mr. Tan,
I need your advice. I was hard sell into buying an insurance policy outside a MRT station. The agent was hard sell, giving me a lot of attractions of the product, such as cash back and unemployment benefit. When I returned home, my family told me that this policy gives a bad return. What can I do?
REPLY
You can write to cancel the policy within 14 days and ask for a full refund of the premium.
Do not buy any insurance or financial product from sales people on the street. As a life insurance policy is a long term commitment, you need to understand it clearly. You cannot get a clear picture by listening to a presentation on the street.
Lesson: Do not buy a life insurance policy on the street
I need your advice. I was hard sell into buying an insurance policy outside a MRT station. The agent was hard sell, giving me a lot of attractions of the product, such as cash back and unemployment benefit. When I returned home, my family told me that this policy gives a bad return. What can I do?
REPLY
You can write to cancel the policy within 14 days and ask for a full refund of the premium.
Do not buy any insurance or financial product from sales people on the street. As a life insurance policy is a long term commitment, you need to understand it clearly. You cannot get a clear picture by listening to a presentation on the street.
Lesson: Do not buy a life insurance policy on the street
Opportunities in a Life Insurance Company
Policy Administration Executive/Senior Executive
The Policy Administration Executive/Senior Executive plays an important role to ensure smooth and efficient support for our group and individual business. This includes administration of new business and renewal of existing business, ensuring policies are issued and membership databases updated in a timely manner, followed by generation of accurate invoices.
The ideal candidate should have at least 1-2 years of relevant working experience, be matured, independent and self-driven. He/she should be meticulous, possess leadership qualities and be able to work with internal and external customers. A degree in Insurance, Finance or Business will be an advantage but Diploma holders with relevant working experience will be considered.
Policy Administration Supervisor/Administrative Assistant
The Policy Administration team is responsible for upkeep and maintaining policies and membership database of new and existing clients. Duties will include management of new business and renewals of existing clients, change in client database, premium adjustments and generating policy documents.
As a member of a dynamic and fast-growing organization, you should be meticulous, self-motivated and have an analytical mind. You will report to the team leader of the Policy Administration department.
A supervisor should possess a Diploma, ideally in Business, Finance or Insurance, preferably with at least 1 year’s working experience. However, fresh graduates who are willing to learn and work hard are welcome.
Interested? Send your resume to kinlian@gmail.com
The Policy Administration Executive/Senior Executive plays an important role to ensure smooth and efficient support for our group and individual business. This includes administration of new business and renewal of existing business, ensuring policies are issued and membership databases updated in a timely manner, followed by generation of accurate invoices.
The ideal candidate should have at least 1-2 years of relevant working experience, be matured, independent and self-driven. He/she should be meticulous, possess leadership qualities and be able to work with internal and external customers. A degree in Insurance, Finance or Business will be an advantage but Diploma holders with relevant working experience will be considered.
Policy Administration Supervisor/Administrative Assistant
The Policy Administration team is responsible for upkeep and maintaining policies and membership database of new and existing clients. Duties will include management of new business and renewals of existing clients, change in client database, premium adjustments and generating policy documents.
As a member of a dynamic and fast-growing organization, you should be meticulous, self-motivated and have an analytical mind. You will report to the team leader of the Policy Administration department.
A supervisor should possess a Diploma, ideally in Business, Finance or Insurance, preferably with at least 1 year’s working experience. However, fresh graduates who are willing to learn and work hard are welcome.
Interested? Send your resume to kinlian@gmail.com
Saturday, April 19, 2008
Regular savings in Wealth Accumulator
Dear Mr. Tan,
I have already committed to a investment linked policy with X. I have been paying $300 a month for the past year. My cash value is very low. I learn from your blog that this is due to the high commission earned by the insurance agent. If I swtich to the Wealth Accumulator, will I earn a better yield?
REPLY
The investment linked policy that you have bought could take away up to two years of your savings, or $7,000. If you terminate it earlier, you will reduce your loss. If you invest in a fund with no front-end load, there is no additional cost to you. You will benefit from the savings in the remaining charges under the ILP.
As the low cost investment fund has smaller expense ratio, your investments will earn a better return over the longer term. This is in additional to the saving in the front end load. You will get a double benefit.
In general, it is advisable for you to terminate your existing regular premium ILP and move to the Wealth Accumulator.
I have already committed to a investment linked policy with X. I have been paying $300 a month for the past year. My cash value is very low. I learn from your blog that this is due to the high commission earned by the insurance agent. If I swtich to the Wealth Accumulator, will I earn a better yield?
REPLY
The investment linked policy that you have bought could take away up to two years of your savings, or $7,000. If you terminate it earlier, you will reduce your loss. If you invest in a fund with no front-end load, there is no additional cost to you. You will benefit from the savings in the remaining charges under the ILP.
As the low cost investment fund has smaller expense ratio, your investments will earn a better return over the longer term. This is in additional to the saving in the front end load. You will get a double benefit.
In general, it is advisable for you to terminate your existing regular premium ILP and move to the Wealth Accumulator.
Switch into the Wealth Accumulator account
Hi Mr. Tan,
I have a lot of money invested in NTUC's combined fund. Will it be better for me to switch my investment into the low cost investment fund that it becomes available, i.e. the Wealth Accumulator account?
REPLY
I expect a new life insurance company will introduce the Wealth Accumulator plan in 6 to 12 months time. As it will have no front-end charge, you can switch from any existing fund or unit trust, at no switching cost.
You will benefit from the lower expense ratio of the low cost investment fund. The difference could be 0.5% to 2% for each year of investment. You may be able to get 5% to 40% more, over 10 to 20 years, by switching.
I hope that you will also be able to enjoy better customer service from the new company, as it will have a new computer system and call center to serve the customers better.
You can wait for details to be announced, before you make this decision.
I have a lot of money invested in NTUC's combined fund. Will it be better for me to switch my investment into the low cost investment fund that it becomes available, i.e. the Wealth Accumulator account?
REPLY
I expect a new life insurance company will introduce the Wealth Accumulator plan in 6 to 12 months time. As it will have no front-end charge, you can switch from any existing fund or unit trust, at no switching cost.
You will benefit from the lower expense ratio of the low cost investment fund. The difference could be 0.5% to 2% for each year of investment. You may be able to get 5% to 40% more, over 10 to 20 years, by switching.
I hope that you will also be able to enjoy better customer service from the new company, as it will have a new computer system and call center to serve the customers better.
You can wait for details to be announced, before you make this decision.
New Life Insurance Company
Hi Mr. Tan,
I'm sure I'm not the first to tell you this. You give great advices on insurance buying and investments.I truly enjoy reading your blog and FAQs.
I'd like to have some suggestions for life insurance I'm planning to purchase. I'm 23 years old this year and just started working full-time with little or no savings.
I am thinking of getting the SAF Group Term policy with a Sum Assured of $200k with monthly premium of $25.60. Or shall I just get a decreasing term insurance and invest the rest like you always mention?
I can't seem to find good Decreasing Term insurance. Could you give me some advices on which particular insurance and ETF fund?
REPLY
If you wait a few months, there will be a new life insurance company that will offer Decreasing Term and low cost investment funds.
Meanwhile, you can keep your savings in the bank account. Although it earns 1%, at least the saving is intact and is not used to pay hefty commission to the insurance agent.
You can buy the SAF Group Insurance. It offers a high protection at a very low cost. You will probably find the premium to be even lower than the benchmark rates shown here:
http://www.tankinlian.com/faq/benchmark.html
I'm sure I'm not the first to tell you this. You give great advices on insurance buying and investments.I truly enjoy reading your blog and FAQs.
I'd like to have some suggestions for life insurance I'm planning to purchase. I'm 23 years old this year and just started working full-time with little or no savings.
I am thinking of getting the SAF Group Term policy with a Sum Assured of $200k with monthly premium of $25.60. Or shall I just get a decreasing term insurance and invest the rest like you always mention?
I can't seem to find good Decreasing Term insurance. Could you give me some advices on which particular insurance and ETF fund?
REPLY
If you wait a few months, there will be a new life insurance company that will offer Decreasing Term and low cost investment funds.
Meanwhile, you can keep your savings in the bank account. Although it earns 1%, at least the saving is intact and is not used to pay hefty commission to the insurance agent.
You can buy the SAF Group Insurance. It offers a high protection at a very low cost. You will probably find the premium to be even lower than the benchmark rates shown here:
http://www.tankinlian.com/faq/benchmark.html
Decreasing Term
Dear Mr. Tan,
I am a 27 years old. I have bought life insurance with insurred sum of $30,000 which cost $50 premium a month.
I realised the insurred amount is far from sufficient for me especially I have parents in their fifties who will be retire soon, with insufficient savings for their retirement.
After reading from your website, I realised that the decreasing term insurance is affordable for me to provide a monthly income of $3,000 to my parents till they're 80yrs old, should anything happen to me.
However, when I have tried contacting Aviva and Ntuc Income on decreasing term insurance for insured amount for $900,000. They told me they do not offer decreasing term insurance. Do you have any idea which insurance companies still offer this? I know they do offer this level term insurance?
REPLY
You have to buy a level Term for the time being. Perhaps you can insure for 5 to 10 years.
If you wait a few months, I expect a new life insurance company to offer the decreasing Term plan.
This FAQ shows you the cost of providing a monthly income of $3,000 under a Family Income benefit:
http://www.tankinlian.com/faq/benchmark.html
I am a 27 years old. I have bought life insurance with insurred sum of $30,000 which cost $50 premium a month.
I realised the insurred amount is far from sufficient for me especially I have parents in their fifties who will be retire soon, with insufficient savings for their retirement.
After reading from your website, I realised that the decreasing term insurance is affordable for me to provide a monthly income of $3,000 to my parents till they're 80yrs old, should anything happen to me.
However, when I have tried contacting Aviva and Ntuc Income on decreasing term insurance for insured amount for $900,000. They told me they do not offer decreasing term insurance. Do you have any idea which insurance companies still offer this? I know they do offer this level term insurance?
REPLY
You have to buy a level Term for the time being. Perhaps you can insure for 5 to 10 years.
If you wait a few months, I expect a new life insurance company to offer the decreasing Term plan.
This FAQ shows you the cost of providing a monthly income of $3,000 under a Family Income benefit:
http://www.tankinlian.com/faq/benchmark.html
Avoid structured products
Dear Mr Tan,
What's your opinion of the above investment ? More details here..
http://masnet.mas.gov.sg/opera/sdrprosp.nsf/64371117c74b5e3548256b45002829a5/5D19C104BD374A3948257428003AA880/$File/Pricing%20Statement%20-%20Registration%20(with%20MM).pdf
REPLY
This is a structured product. I advice people to avoid all structured products.
Read this FAQ:
http://www.tankinlian.com/faq/sinvest.html
What's your opinion of the above investment ? More details here..
http://masnet.mas.gov.sg/opera/sdrprosp.nsf/64371117c74b5e3548256b45002829a5/5D19C104BD374A3948257428003AA880/$File/Pricing%20Statement%20-%20Registration%20(with%20MM).pdf
REPLY
This is a structured product. I advice people to avoid all structured products.
Read this FAQ:
http://www.tankinlian.com/faq/sinvest.html
Time Honoured Values
Dr. Lee Kum Tatt has spent a great deal of time studying how values affected his life, his family’s and that of others. Read some of his views on the importance of values to our lives in his Blog www.leekumtatt.blogspot.com.
Some of these articles were written many years ago but they are still valid.
Some of these articles were written many years ago but they are still valid.
Friday, April 18, 2008
Higher bonuses for policyholders
Dear Mr. Tan
I bought several life insurance policies from X. In recent years, it started to spend a lot of money in advertising and in paying high commission and incentives to its insurance agents. I heard that it will be reducing its yearly bonuses, to be compensated by higher bonuses in the later years. I am not sure if I can trust X to pay a high return on these policies. Should I continue these policies or cancel them?
REPLY
The investment gain for 2007 is high. Life insurance companies should be paying higher bonuses for this year, rather than reducing the bonuses. If your insurance company reduces the bonuses for 2007, you can lodge a complaint to the Monetary Authority of Singapore. It is not correct for the company to manipulate its bonuses and deny a fair return to its policyholders.
Most life insurance companies in Singapore give a poor return to their policyholders, due to high marketing expenses. It is best to avoid buying these life insurance policies in the first place. You should consider cancelling your policies and take a loss, if you find that the company cannot be trusted to take care of the long term interest of its policyholders.
Lesson: Do not buy any life insurance policy that has high upfront charges. Do not keep your policy with a company that does not take care of the long term interest of its policyholders.
I bought several life insurance policies from X. In recent years, it started to spend a lot of money in advertising and in paying high commission and incentives to its insurance agents. I heard that it will be reducing its yearly bonuses, to be compensated by higher bonuses in the later years. I am not sure if I can trust X to pay a high return on these policies. Should I continue these policies or cancel them?
REPLY
The investment gain for 2007 is high. Life insurance companies should be paying higher bonuses for this year, rather than reducing the bonuses. If your insurance company reduces the bonuses for 2007, you can lodge a complaint to the Monetary Authority of Singapore. It is not correct for the company to manipulate its bonuses and deny a fair return to its policyholders.
Most life insurance companies in Singapore give a poor return to their policyholders, due to high marketing expenses. It is best to avoid buying these life insurance policies in the first place. You should consider cancelling your policies and take a loss, if you find that the company cannot be trusted to take care of the long term interest of its policyholders.
Lesson: Do not buy any life insurance policy that has high upfront charges. Do not keep your policy with a company that does not take care of the long term interest of its policyholders.
Transparent, Flexible Products
If you are investing for the long term, you should buy transparent, flexible products.
A flexible product allows you to cancel the product and take out your savings, without any penalty, except for a reasonable transaction cost. Examples are a bank savings account, no-load unit trust or shares bought through the Singapore Exchange.
A transparent product gives you a return that is linked to an external indicator, and is not subject to manipulation by the issuing party. For example, the prices of shares are based to the market price traded on the exchange.
Life insurance products, such as endowment, whole life and investment linked policies, have the following unsatisfactory features:
a) It has high front-end charge (up to two years of premium)
b) It takes more than 10 years for the consumer to earn sufficient gains to recover the front-end charge
c) The bonuses payable on endowment and whole life policies are subject to manipulation by the insurance company
d) The policyholder has to suffer a large loss on cancelling the contract.
Lesson: avoid life insurance policy as a vehicle of savings for the future. Buy a low cost term insurance policy to provide adequate protection for your family.
http://www.tankinlian.com/faq/benchmark.html
A flexible product allows you to cancel the product and take out your savings, without any penalty, except for a reasonable transaction cost. Examples are a bank savings account, no-load unit trust or shares bought through the Singapore Exchange.
A transparent product gives you a return that is linked to an external indicator, and is not subject to manipulation by the issuing party. For example, the prices of shares are based to the market price traded on the exchange.
Life insurance products, such as endowment, whole life and investment linked policies, have the following unsatisfactory features:
a) It has high front-end charge (up to two years of premium)
b) It takes more than 10 years for the consumer to earn sufficient gains to recover the front-end charge
c) The bonuses payable on endowment and whole life policies are subject to manipulation by the insurance company
d) The policyholder has to suffer a large loss on cancelling the contract.
Lesson: avoid life insurance policy as a vehicle of savings for the future. Buy a low cost term insurance policy to provide adequate protection for your family.
http://www.tankinlian.com/faq/benchmark.html
Idac centers
Dear Mr. Tan,
I read a news report that most insurance companies have left the Idac scheme, except for NTUC. How does this scheme help to control the repair cost? Why do the other insurance companies leave the scheme?
REPLY
The Idac centers provide a one-stop service to report an accident and to assess the damage to the vehicle. This helps to prevent some unscrupulous workshops from aggravating the damage and inflating the repair bills.
By using Idac, the insurance company can reduce its repair bill and other costs, if they use the services well. If they do not use Idac effectively, the charges by Idac adds to their total processing cost.
From 1 May, the insurance companies wish to introduce a new system and send the assessor to the site of the accident to carry out the assessment. I believe that this will create a lot of logistics and other problems. I hope that I am wrong, and that they are able to manage this service well. Only time will tell.
Read this article:
http://www.tankinlian.com/articles/motor.html
I read a news report that most insurance companies have left the Idac scheme, except for NTUC. How does this scheme help to control the repair cost? Why do the other insurance companies leave the scheme?
REPLY
The Idac centers provide a one-stop service to report an accident and to assess the damage to the vehicle. This helps to prevent some unscrupulous workshops from aggravating the damage and inflating the repair bills.
By using Idac, the insurance company can reduce its repair bill and other costs, if they use the services well. If they do not use Idac effectively, the charges by Idac adds to their total processing cost.
From 1 May, the insurance companies wish to introduce a new system and send the assessor to the site of the accident to carry out the assessment. I believe that this will create a lot of logistics and other problems. I hope that I am wrong, and that they are able to manage this service well. Only time will tell.
Read this article:
http://www.tankinlian.com/articles/motor.html
Thursday, April 17, 2008
Reasonable margin for expenses and profit
Someone posted a comment that the insurance c0mpany has to make a reasonable margin to cover its expenses and make a profit. I agree.
The cost of a life insurance cover for a person to provide an adequate sum for a family should be $200 a year (e.g. to cover $300,000). It is all right for the insurance company to charge $300 a year, and have $100 as a margin to cover expenses and earn a profit.
Unfortunately, most insurance products (e.g. whole life, endowment or investment-linked policies) require a premium of $3,000 to provide the same amount of cover. About $6,000 is taken away to pay the commission and marketing expenses. This is too expensive and does not provide value to the consumer. These policies should be avoided. The agent who sell these policies are not taking care of the interest of their clients.
I hope that insurance companies and agents will act in the interest of consumers and offer the right products.
The cost of a life insurance cover for a person to provide an adequate sum for a family should be $200 a year (e.g. to cover $300,000). It is all right for the insurance company to charge $300 a year, and have $100 as a margin to cover expenses and earn a profit.
Unfortunately, most insurance products (e.g. whole life, endowment or investment-linked policies) require a premium of $3,000 to provide the same amount of cover. About $6,000 is taken away to pay the commission and marketing expenses. This is too expensive and does not provide value to the consumer. These policies should be avoided. The agent who sell these policies are not taking care of the interest of their clients.
I hope that insurance companies and agents will act in the interest of consumers and offer the right products.
Petrol consumption
During the past 14 days, my Toyota Camry car consumed $105 in petrol (50 litres) and travelled 442 kms. The consumption is 8.7 km per litre ($2.08), or 24 cents per km.
Call centers of insurance companies
I gave a practical project to the studnets in my class on Risk Management & Insurance. They had to call the insurance companies in Singapore to ask for quotations for motor, term, accident and medical insurance.
The general conclusion from the projects are:
a) Most insurance c0mpanies were not well organised to handle direct enquiries
b) Many companies took a long time to respond to a simple requests
There is big potential for a new insurance companies to develop its business by organising a well managed call center that can respond to direct enquiries from customers.
The general conclusion from the projects are:
a) Most insurance c0mpanies were not well organised to handle direct enquiries
b) Many companies took a long time to respond to a simple requests
There is big potential for a new insurance companies to develop its business by organising a well managed call center that can respond to direct enquiries from customers.
Risk Management & Insurance at SMU
I taught a class of 29 students at SMU on the subject Risk Management and Insurance. I have completed all the classes. The final exmaination was held yesterday. I had to invigilate it.
It was quite enjoyable. I learned a lot about the subject as well. I had to brush up on the theory to present to the class. The students enjoyed the practical aspects of the subject that came from my personal experience.
I intend to repeat the course for the next semester. It will be easier for me (having done it already) and more interesting for the next batch of students.
It was quite enjoyable. I learned a lot about the subject as well. I had to brush up on the theory to present to the class. The students enjoyed the practical aspects of the subject that came from my personal experience.
I intend to repeat the course for the next semester. It will be easier for me (having done it already) and more interesting for the next batch of students.
Friend gave bad advice
Hi Mr. Tan,
Being a fresh grad (with loans to bear), it is really not easy for me to part with the $2000 premium paid so far. Your kind advice has made me reconsider my choice. How did you arrive at the net yield/gross yield? I tried to calculate it but could not get it right. I just want to understand the logic behind and fully convince myself to give up this plan, $2000 and possibly my friendship with that agent friend.
REPLY
The yield is calculated using a financial calculator. Some of your colleagues have this calculator and will be able to show you how the yield is calculated.
Please help to pass the message to your other friends. Their priority is to pay off the loan and not to waste money on a life insurance policy that takes away so much savings to pay commission to the agent.
If you need life insurance protection, you should buy a decreasing term insurance, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
Being a fresh grad (with loans to bear), it is really not easy for me to part with the $2000 premium paid so far. Your kind advice has made me reconsider my choice. How did you arrive at the net yield/gross yield? I tried to calculate it but could not get it right. I just want to understand the logic behind and fully convince myself to give up this plan, $2000 and possibly my friendship with that agent friend.
REPLY
The yield is calculated using a financial calculator. Some of your colleagues have this calculator and will be able to show you how the yield is calculated.
Please help to pass the message to your other friends. Their priority is to pay off the loan and not to waste money on a life insurance policy that takes away so much savings to pay commission to the agent.
If you need life insurance protection, you should buy a decreasing term insurance, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
Demand a net yield of 3% on your regular savings
If you pay premium towards a "savings-type" life insurance policy, you should demand a net yield of 3% for 10 years. These products include endowment, whole life, investment-linked, critical illness and their variations, such as limited premium and cash back.
If you save $100 a month for 10 years, the life insurance policy must give you a net return of at least $13,900. Your total savings is $12,000. The gain is $1,900 (i.e 15.8% on $12,000). If you are not getting this gain of 15.8% on the total savings, you should avoid the life insurance policy.
If you save $300 a month, you should check if the cash value at the end of 10 years is at least $13,900 X 3 = $41,700.
Most life insurance products give you a poor yield, as a large portion of your premium is used to pay commission to the agent and the agency manager. The true cost of the life insurance protection is a small proportion of the premium that is spend in marketing and sales.
Lesson: Demand a net yield of 3% on your savings. Look at the benefit illustration on your life insurance policy. Look at the figures for 10 years duration. Compare the cash value with the total premiums. If you do not get the gain of 15.8%, do not buy the life insurance policy.
If you save $100 a month for 10 years, the life insurance policy must give you a net return of at least $13,900. Your total savings is $12,000. The gain is $1,900 (i.e 15.8% on $12,000). If you are not getting this gain of 15.8% on the total savings, you should avoid the life insurance policy.
If you save $300 a month, you should check if the cash value at the end of 10 years is at least $13,900 X 3 = $41,700.
Most life insurance products give you a poor yield, as a large portion of your premium is used to pay commission to the agent and the agency manager. The true cost of the life insurance protection is a small proportion of the premium that is spend in marketing and sales.
Lesson: Demand a net yield of 3% on your savings. Look at the benefit illustration on your life insurance policy. Look at the figures for 10 years duration. Compare the cash value with the total premiums. If you do not get the gain of 15.8%, do not buy the life insurance policy.
Not able to offer the Rider
Hi Kin Lian,
Having dealt with and experienced your customer- centric approach, it’s with disappointment that you are no longer helming Income.It’s a real great loss to NTUC policy holders and NTUC.
I am hitting a brick wall with NTUC.I have a question and would appreciate your advice. I was trying to apply for a rider for my NTUC hospital insurance policy transferred from CPF Medishield plus.
I had an angioplasty some 18 years ago. My cardiologist offered his professional assessment that as the angio was done a long time ago, the condition has stabilized and there are no symptom suggesting a recurrence.
NTUC rejected rider outright. I even sugested to NTUC if they are concerned about heart disease I am open for a rider that limits heart disease to existing plan. My sense NTUC just taking an easy way out to blanket reject all prior conditions without any interest to study each case professionally.
Its simpler to advise anyone with prior conditions not to apply.Appreciate your suggestions how best to move forward.
REPLY
You are already covered under the main Shield plan. There is no need for you to take the rider (to cover the Deductible). If you need to be bospitalised, you can pay the deductible from your Medisave account. The larger bills can be paid by the main Shield plan.
There is no point to buy the Rider, if NTUC Income is not keen to offer it to you. All the best.
Having dealt with and experienced your customer- centric approach, it’s with disappointment that you are no longer helming Income.It’s a real great loss to NTUC policy holders and NTUC.
I am hitting a brick wall with NTUC.I have a question and would appreciate your advice. I was trying to apply for a rider for my NTUC hospital insurance policy transferred from CPF Medishield plus.
I had an angioplasty some 18 years ago. My cardiologist offered his professional assessment that as the angio was done a long time ago, the condition has stabilized and there are no symptom suggesting a recurrence.
NTUC rejected rider outright. I even sugested to NTUC if they are concerned about heart disease I am open for a rider that limits heart disease to existing plan. My sense NTUC just taking an easy way out to blanket reject all prior conditions without any interest to study each case professionally.
Its simpler to advise anyone with prior conditions not to apply.Appreciate your suggestions how best to move forward.
REPLY
You are already covered under the main Shield plan. There is no need for you to take the rider (to cover the Deductible). If you need to be bospitalised, you can pay the deductible from your Medisave account. The larger bills can be paid by the main Shield plan.
There is no point to buy the Rider, if NTUC Income is not keen to offer it to you. All the best.
Wednesday, April 16, 2008
Whole Life by Limited Payment
1. An insurance agent offered two whole life policies to a parent to buy for the children. The premiums are payable for 10 years and becomes fully paid.
2. The benefit illustration shows the following:
3. Here is my advice:
If you pay premium for 10 years, the total premium is shown in (2). The cash value (both guaranteed and non-guaranteed) is shown in (3). It is lower than the total premiums that you have paid for 10 years. It does not make sense to put your money into these two policies, as you are sure to get a bad deal after 10 years.
If you invested the premium for 10 years to earn 4% per annum, you will get the figure shown in (4). The Opportuity Loss to you, by buying the Vivolife policy is shown in (5). This large cost goes to pay the insurance agent's commission and the company's profits. They are at the expense of the customer.
Conclusion: Do not buy these two policies, due to the poor return and opportunity cost. It is better to save for your children separately and give them the accumulated savings (say 20% more) at the end of 10 years. They can buy a low cost Term insurance when they start work.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
2. The benefit illustration shows the following:
Annual Premium Cash Assume Opport
premium for 10 yr Value 4% p.a. Loss
Child 1 $1,252 $12,520 $12,192 $15,632 $3,440
Child 2 $1,598 $15,980 $15,573 $19,954 $4,387
3. Here is my advice:
If you pay premium for 10 years, the total premium is shown in (2). The cash value (both guaranteed and non-guaranteed) is shown in (3). It is lower than the total premiums that you have paid for 10 years. It does not make sense to put your money into these two policies, as you are sure to get a bad deal after 10 years.
If you invested the premium for 10 years to earn 4% per annum, you will get the figure shown in (4). The Opportuity Loss to you, by buying the Vivolife policy is shown in (5). This large cost goes to pay the insurance agent's commission and the company's profits. They are at the expense of the customer.
Conclusion: Do not buy these two policies, due to the poor return and opportunity cost. It is better to save for your children separately and give them the accumulated savings (say 20% more) at the end of 10 years. They can buy a low cost Term insurance when they start work.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Lippo Karawaci in Jakarta
I visited a new town called Lippo Karawaci in Jakarta. It is developed by the Lippo Group. It is a well contained town with excellent shopping malls, golf club, university, commercial buildings, shops, medical centers and residential houses.
I like the internal transport system. Light buses take people along most of the internal roads to bring them to the public buildings and malls and also to the bus stops to tke the big buses that travel to other parts of Jakarta.
The traffic in Karawaci is not so heavy. The living condition appears to be quite pleasant. It is nicer to live in a town that is well planned and not so congested.
I like the internal transport system. Light buses take people along most of the internal roads to bring them to the public buildings and malls and also to the bus stops to tke the big buses that travel to other parts of Jakarta.
The traffic in Karawaci is not so heavy. The living condition appears to be quite pleasant. It is nicer to live in a town that is well planned and not so congested.
Tianjin Eco-city
Singapore is helping Tianjin to build an eco-city. It will rely on a well developed public transport comprising of bus and light rail, and reduce the dependence on cars.
I hope that some of these concepts can be adopted in the new towns and business districts to be developed in Singapore, e.g. Marina South and Jurong Lake District.
I suggest that we should have light rail transport or light buses to run along Orchard Road and in the Central Business District. We should reduce the private cars that travels on these congested roads.
I hope that some of these concepts can be adopted in the new towns and business districts to be developed in Singapore, e.g. Marina South and Jurong Lake District.
I suggest that we should have light rail transport or light buses to run along Orchard Road and in the Central Business District. We should reduce the private cars that travels on these congested roads.
Simplify the bureaucratic requirements
I sent this e-mail to a large organisation in Singapore that engaged me to give a talk on financial planning.
Dear
Please pass this feedback to your Finance Department. I had a lot of trouble in complying with the financial requirements in getting this payment. For a person who works from home, without the support of full time staff, I had a lot of trouble in preparing and mailing an invoice, to be accompanied with a photocopy of the bank statement.
After preparing the invoice, I forgot to mail it for more than a week. Fortunately, I did not run out of stamps.
I have received many payments from other parties, from much larger sums. They are willing to accept an instruction through e-mails and do not require so much trouble from me. I hope that you Finance Department will update their requirements to make things easier for other people, especially for small payments.
Dear
Please pass this feedback to your Finance Department. I had a lot of trouble in complying with the financial requirements in getting this payment. For a person who works from home, without the support of full time staff, I had a lot of trouble in preparing and mailing an invoice, to be accompanied with a photocopy of the bank statement.
After preparing the invoice, I forgot to mail it for more than a week. Fortunately, I did not run out of stamps.
I have received many payments from other parties, from much larger sums. They are willing to accept an instruction through e-mails and do not require so much trouble from me. I hope that you Finance Department will update their requirements to make things easier for other people, especially for small payments.
Lawyer acting on third party claim
Dear Mr. Tan
I read with interest on the post below on your blog:http://tankinlian.blogspot.com/2008/04/inflated-injury-claims.html
Recently, my parents also met with the same situation as the person who made the comment in this post. i.e. engage a lawyer.
Is there really nothing much we could do about it, besides waiting for the government to take action? Your blog has been very informative.
REPLY
If you get a letter from a lawyer acting for the other party, you can send it to your insurance company to handle the third party claim.
If you feel that the system is unsatisfactory, you should write to the consumer association or the media. If more people write about it, the Government may act to reduce the wasteful legal cost in handling third party claims.
I read with interest on the post below on your blog:http://tankinlian.blogspot.com/2008/04/inflated-injury-claims.html
Recently, my parents also met with the same situation as the person who made the comment in this post. i.e. engage a lawyer.
Is there really nothing much we could do about it, besides waiting for the government to take action? Your blog has been very informative.
REPLY
If you get a letter from a lawyer acting for the other party, you can send it to your insurance company to handle the third party claim.
If you feel that the system is unsatisfactory, you should write to the consumer association or the media. If more people write about it, the Government may act to reduce the wasteful legal cost in handling third party claims.
Cut the loss in an ILP
Hi Mr. Tan,
Thank for your quick advice, seems like I had really made a bad investment decision by over-trusting this insurance agent friend of mine. A painful lesson learnt for me, but the plan will be 1 year old soon, all I can do is to keep it. Will continue to read your blog! It's really interesting!
REPLY
You can consider terminating the plan. As only half of the upfront charge has been incurred, you may be able to reduce your loss by terminating it. It is better to invest your savings in the STI ETF or just to keep it in the bank account for the time being.
Thank for your quick advice, seems like I had really made a bad investment decision by over-trusting this insurance agent friend of mine. A painful lesson learnt for me, but the plan will be 1 year old soon, all I can do is to keep it. Will continue to read your blog! It's really interesting!
REPLY
You can consider terminating the plan. As only half of the upfront charge has been incurred, you may be able to reduce your loss by terminating it. It is better to invest your savings in the STI ETF or just to keep it in the bank account for the time being.
High cost of Investment Linked Policy
A policyholder sent the projection of his investment linked policy. I calculated the result as follows:
Annual premium: $2,160
Projected yield at end of 20 years:
Gross yield: 5% p.a.
Projected cash value: $47,400
Net yield: 0.9%
Reduction in yield: 4.1%
Projected yield at end of 20 years:
Gross yield: 9% p.a.
Projected cash value: $64,200
Net yield: 3.8%
Reduction in yield: 5.2%
The reduction in yield varies from 4.1% to 5.2%. This is excessive. The ILP is extremely costly and gives a poor return to the policyholder. The charges taken away from the policy are far too high.
If the policyholder buys a decreasing term assurance and invest the remaining savings in a low cost investment fund, the reduction in yield is likely to be 1.5%.
The difference in yield of 3% can give the policyholder about 35% more in cash value at the end of 20 years. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Lesson: Avoid high cost investment-linked plans. It gives a poor yield due to high charges.
Annual premium: $2,160
Projected yield at end of 20 years:
Gross yield: 5% p.a.
Projected cash value: $47,400
Net yield: 0.9%
Reduction in yield: 4.1%
Projected yield at end of 20 years:
Gross yield: 9% p.a.
Projected cash value: $64,200
Net yield: 3.8%
Reduction in yield: 5.2%
The reduction in yield varies from 4.1% to 5.2%. This is excessive. The ILP is extremely costly and gives a poor return to the policyholder. The charges taken away from the policy are far too high.
If the policyholder buys a decreasing term assurance and invest the remaining savings in a low cost investment fund, the reduction in yield is likely to be 1.5%.
The difference in yield of 3% can give the policyholder about 35% more in cash value at the end of 20 years. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Lesson: Avoid high cost investment-linked plans. It gives a poor yield due to high charges.
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