A friend asked me for the reason why I decided to set aside the Collective Protest. He said that there was a rumour that I was threatened by Mr. Lim Boon Heng and Mr. Matthias Yao.
I replied that the main reason for my action was the assurance that I have received from Mr. Lim and Mr. Yao on fair treatment of policyholders. This was subsequently stated by Mr. Ng Kee Choe in his address in his address to the Annual General Meeting.
The first two assurances relate to the restructuring of the bonus. I felt that the assurance was adequate in ensuring that policyholders would not be placed in a worse off position. The third assurance, which I asked for, was more important - that "policyholders will receive bonuses that reflect the actual experience".
I have subsequently pointed out to Mr. Lim and Mr. Matthias Yao that the bonuses declared were too low, and did not reflect the actual experience. Mr. Ken Ng (the chief actuary) replied to me that this will be adjusted in 2009 and later years.
I pointed out to Mr. Ken Ng that policies maturing in 2008 would be receiving a maturity value that was far less than the "actual experience". This would be unfair to the policyholders. I quoted the specific case of the Growth policy taken by my wife. I asked for this matter to be reviewed to give a fair payout on the policies that are maturing this year.
After two weeks, I have not received a satisfactory reply from NTUC Income. I intend to lodge a complaint on this matter with the regulator. I am quite disappointed that, after receiving the assurance that the bonuses will reflect the actual exprience, nothing is being done for the policyholders of the maturing policyholders.
I have two policies affecting by the bonus restructuring. The bonuses declared in the past and the cash values are significantly less than the values that reflect "the actual experience". As these policies will not be maturing this year, I am prepared to wait for one or two more years for the bonuses and cash values to be adjusted to reflect "the actual experience". So far, I have not received any indication that this will be done.
Saturday, July 12, 2008
Insuring against critical illness
If you are 30 years old, and you wish to insure against critical illness for $100,000, you have the following choice:
1. Buy a "whole life" critical illness policy and pay $200 a month
2. Buy a 30 year critical illness cover and pay $40 a month
If you choose option 2, you can invest $160 a month in a low cost fund to earn an average of 5% per annum, you will get give you $128,000 in cash at the end of 30 years. (This is not a guaranteed return, but it is the likely return).
If you pay $20 a month on a decreasing critical illness cover, you will get $144,000 (estimated)
If you put $200 a month in the critical illness cover, you are likely to get a cash value at the end of 30 years of around $100,000 (plus or minus $10,000).
1. Buy a "whole life" critical illness policy and pay $200 a month
2. Buy a 30 year critical illness cover and pay $40 a month
If you choose option 2, you can invest $160 a month in a low cost fund to earn an average of 5% per annum, you will get give you $128,000 in cash at the end of 30 years. (This is not a guaranteed return, but it is the likely return).
If you pay $20 a month on a decreasing critical illness cover, you will get $144,000 (estimated)
If you put $200 a month in the critical illness cover, you are likely to get a cash value at the end of 30 years of around $100,000 (plus or minus $10,000).
Regulation of financial products
Read the debate in this blog:
http://kwayteowman.blogspot.com/2008/05/to-regulate-or-not-to-regulate.html
http://kwayteowman.blogspot.com/2008/05/to-regulate-or-not-to-regulate.html
Blog on public transport in Singaore
The Straits Times Review section published my article about the "world class transport system". the article can be located here:
http://news.asiaone.com/News/the%2BStraits%2BTimes/Story/A1Story20080712-76200.html
The article mentioned that my blog on public transport can be found in this website. The actual website is:
www.singaporepublictransport.blogspot.com
http://news.asiaone.com/News/the%2BStraits%2BTimes/Story/A1Story20080712-76200.html
The article mentioned that my blog on public transport can be found in this website. The actual website is:
www.singaporepublictransport.blogspot.com
Friday, July 11, 2008
Low yield for policies with restructured bonuses
FIRST POSTED ON 10 MAY 2008
NTUC Income earned an investment yield of 10.7% on the participating fund in 2007. The average long term yield (computed over the past 10 years) is 7.8% per annum.
I have two policies that are affected by the restructuring of the bonues. I calculated the yields on these policies as follows.
1. GROWTH (LG SERIES)
This policy commenced in December 2003 with a single premium of $75,000. The estimated cash value at December 2008 (5 year duration) is $85,127, giving a policy yield of 2.5%. There is a gap of 5.3% compared to the fund yield of 7.8%.
If I keep the policy to the maturity date in December 2013, the projected maturity benefit is $112,795 giving a yield of 4.2%. This is still somewhat low, giving a gap of 3.6% compared to the fund yield.
This single premium policy has low expenses and low cost of insurance. I estimate that a fair reduction in yield should be 1%. The actual gap is somewhat high.
2. LIVING (LW SERIES)
This policy commenced in October 1996 with an annual premium of $2,567. The estimated cash value in October 2008 (12 year duration) is $28,383, giving a negative yield of -1.5%. There is a gap of 9.3% compared to the fund yield.
Although a Living policy has higher expenses and a bigger cost of insurance protection, the gap appears to be excessive.
Over the next 3 years, the cash value grows by only 1.8% per annum. This is low compared to the fund yield.
I have three other policies not affected by the restructuring of the bonus. The cash value for two policies increase by more than 4% per annum over the next 3 years and by 2.8% for the Living policy.
CONCLUSION
I believe that the policies affected by the bonus restructuring have not been given a fair rate of annual and special bonuses. This has resulted in a poor policy yield, compared to the long term average yield.
NTUC Income earned an investment yield of 10.7% on the participating fund in 2007. The average long term yield (computed over the past 10 years) is 7.8% per annum.
I have two policies that are affected by the restructuring of the bonues. I calculated the yields on these policies as follows.
1. GROWTH (LG SERIES)
This policy commenced in December 2003 with a single premium of $75,000. The estimated cash value at December 2008 (5 year duration) is $85,127, giving a policy yield of 2.5%. There is a gap of 5.3% compared to the fund yield of 7.8%.
If I keep the policy to the maturity date in December 2013, the projected maturity benefit is $112,795 giving a yield of 4.2%. This is still somewhat low, giving a gap of 3.6% compared to the fund yield.
This single premium policy has low expenses and low cost of insurance. I estimate that a fair reduction in yield should be 1%. The actual gap is somewhat high.
2. LIVING (LW SERIES)
This policy commenced in October 1996 with an annual premium of $2,567. The estimated cash value in October 2008 (12 year duration) is $28,383, giving a negative yield of -1.5%. There is a gap of 9.3% compared to the fund yield.
Although a Living policy has higher expenses and a bigger cost of insurance protection, the gap appears to be excessive.
Over the next 3 years, the cash value grows by only 1.8% per annum. This is low compared to the fund yield.
I have three other policies not affected by the restructuring of the bonus. The cash value for two policies increase by more than 4% per annum over the next 3 years and by 2.8% for the Living policy.
CONCLUSION
I believe that the policies affected by the bonus restructuring have not been given a fair rate of annual and special bonuses. This has resulted in a poor policy yield, compared to the long term average yield.
False advertising
I passed by a shop in Toa Payoh. They were playing a recorded advertisement, announcing that the shop is closing down and they have to sell the products at a low price. I looked at the price labels and found that they were actually charging more than other shops. This is false advertising and amounts to cheating.
There is a similar situation with financial products sold by agents. The agents are able to make mis-representation on the products that are not backed by the printed materials. The printed materials are quite confusing, so the buyer needs an agent to explain the product. The agent has the opportunity to make a mis-representation and get away with it.
Many types of high cost, poor value financial products are sold in this way. You should avoid these products.
There is a similar situation with financial products sold by agents. The agents are able to make mis-representation on the products that are not backed by the printed materials. The printed materials are quite confusing, so the buyer needs an agent to explain the product. The agent has the opportunity to make a mis-representation and get away with it.
Many types of high cost, poor value financial products are sold in this way. You should avoid these products.
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