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.
Friday, April 18, 2008
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
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