Mr. Tan
Thanks for the honest and objective comments on the types of insurance products. I guess the gist of your message is to get low cost insurance product and fund.
Like many of your readers, I have already bought quite a numbers of life insurance products for myself and children. Like many, I must confess that I was a bit dazed when my agent-cum-my-friend explaining to me all the details. Anyway, I bought them.
Over the years, from time to time, I would take out my insurance policies and trying to understand again what I'd bought. Well, you can call me naive.Now that, as one of your readers, I have a better understanding especially on certain products, mentioned in your posts, that I should not have invested. Thanks !
I think the next logical question is that should we terminate these policies. Yes, you had pointed your readers asking similar question to FAQ. But, I thoght, it would do us a lot better if you or anyone reading this post could come up an excel file avail for public use to help to assess if one should drop any particular policy bought, based on certain inputs mentioned in the insurance product. Just a suggestion!
REPLY
When the new life insurance company is able to provide low cost investment fund, it will offer a service to help existing policyholders to decide if they should keep or terminate their policies. It will be honest advice, given in the best interest of the consumer.
Thursday, April 10, 2008
Bonuses under Life Insurance Policies
Policyholders who try to analyse the bonuses paid under different life insurance policies found them to be complex and inconsistent. There is no reason why the bonuses should change significantly at certain durations and differ between different plans from the same company.
Here is the explanation. Life insurance companies have been "manipulating" their bonuses to allow their agents to sell the policies on the hope of a good yield, if they keep the policies for a long, long time. The yield on the earlier durations is extremely poor. The "manipulated" bonuses do not reflect the actual investment yield earned during the year.
Here are two big shortcomings:
a) Many people will not be keep the policies for the long duration, due to change in circumstance.
b) The jacked-up bonus at the "magic" duration is not guaranteed.
Due to the low investment yield (obtained from investing in low risk bonds) and the high marketing expenses (i.e advertisments and agent's commission), the life insurance policies give a poor yield. The company has to "manipulate" their bonuses to make them appear to give a good yield at the "magic" durations.
My advice:
a) Do not waste your time to understand the rationale of the bonuses. There is none.
b) Do not trust any life insurance company that has to resort to manipulating their bonuses.
Buy low cost insurance (i.e. term insurance) to protect your future earnings and invest in a low cost investment fund. Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Here is the explanation. Life insurance companies have been "manipulating" their bonuses to allow their agents to sell the policies on the hope of a good yield, if they keep the policies for a long, long time. The yield on the earlier durations is extremely poor. The "manipulated" bonuses do not reflect the actual investment yield earned during the year.
Here are two big shortcomings:
a) Many people will not be keep the policies for the long duration, due to change in circumstance.
b) The jacked-up bonus at the "magic" duration is not guaranteed.
Due to the low investment yield (obtained from investing in low risk bonds) and the high marketing expenses (i.e advertisments and agent's commission), the life insurance policies give a poor yield. The company has to "manipulate" their bonuses to make them appear to give a good yield at the "magic" durations.
My advice:
a) Do not waste your time to understand the rationale of the bonuses. There is none.
b) Do not trust any life insurance company that has to resort to manipulating their bonuses.
Buy low cost insurance (i.e. term insurance) to protect your future earnings and invest in a low cost investment fund. Read these FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html
Solve Parking Woes
I read an interesting story in MyPaper entitled "Can't solve parking woes? Stack your car".
There is a mechanised parking system that can stack 8 to 16 cars on its platforms. It occupies the the parking space for 2 cars. 400 of these systems are used in Korea. It is being exported to other countries.
The Singapore distributor thinks that it is suitable for popular spots like Geylang, Holland Village and Demsey.
The Land Transport Authority has built a car park that can accomodate 142 cars at Club Street. Motorists drive their car to a platform and leave it there. A computer system directs the platform to stack the car in the right place.
We need to use mechanised systems for car parking, as space will become more expensive in the future.
There is a mechanised parking system that can stack 8 to 16 cars on its platforms. It occupies the the parking space for 2 cars. 400 of these systems are used in Korea. It is being exported to other countries.
The Singapore distributor thinks that it is suitable for popular spots like Geylang, Holland Village and Demsey.
The Land Transport Authority has built a car park that can accomodate 142 cars at Club Street. Motorists drive their car to a platform and leave it there. A computer system directs the platform to stack the car in the right place.
We need to use mechanised systems for car parking, as space will become more expensive in the future.
Contact a high level person
Hi Mr. Tan,
Thank you for being ever so obliging and patient in answering your readers' queries.
I like to share with you an incident with NTUC. I called the call centre to request for a quote on term insurance and I was referred to an adviser. He called me back and I explained to him what I needed. I waited for 2 days and called him up to check if he had sent already. It was quite obvious that he had totally forgotten about me. I had to explain to him again and then gave him my email address.
Later in the day, I received the email from him. But to my shock, the attachment was a questionaire from another client about his medical condition. This is considered a really serious breach of the client's confidentiality and such carelessness cannot be tolerated.
I wish to bring this matter up to higher management. I hope you can provide me with a contact in NTUC who would be the most appropriate to handle this incident.
REPLY
I suggest that you write a registered letter addressed to the chief executive officer. I think that it should receive high level attention. If you want to send by e-mail, you can try sq@income.com.sg.
Thank you for being ever so obliging and patient in answering your readers' queries.
I like to share with you an incident with NTUC. I called the call centre to request for a quote on term insurance and I was referred to an adviser. He called me back and I explained to him what I needed. I waited for 2 days and called him up to check if he had sent already. It was quite obvious that he had totally forgotten about me. I had to explain to him again and then gave him my email address.
Later in the day, I received the email from him. But to my shock, the attachment was a questionaire from another client about his medical condition. This is considered a really serious breach of the client's confidentiality and such carelessness cannot be tolerated.
I wish to bring this matter up to higher management. I hope you can provide me with a contact in NTUC who would be the most appropriate to handle this incident.
REPLY
I suggest that you write a registered letter addressed to the chief executive officer. I think that it should receive high level attention. If you want to send by e-mail, you can try sq@income.com.sg.
Exchange Traded Fund
Mr. Tan,
I just started investing in share and heard about ETF . Hope you can explain to me what is ETF?
REPLY
You can search "exchange traded fund" in Google.It gives you many references. Here is one of them:
http://en.wikipedia.org/wiki/Exchange-traded_fund
An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF represents a collection or "basket" of assets such as stocks, bonds, or futures. Institutional investors can redeem large blocks of shares of the ETF (known as "creation units") for the underlying assets or, alternately, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage and causes the value of the ETF to track the net asset value of the underlying assets. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500.
An ETF takes the form of a collective investment scheme and combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange.
ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs
I just started investing in share and heard about ETF . Hope you can explain to me what is ETF?
REPLY
You can search "exchange traded fund" in Google.It gives you many references. Here is one of them:
http://en.wikipedia.org/wiki/Exchange-traded_fund
An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF represents a collection or "basket" of assets such as stocks, bonds, or futures. Institutional investors can redeem large blocks of shares of the ETF (known as "creation units") for the underlying assets or, alternately, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage and causes the value of the ETF to track the net asset value of the underlying assets. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500.
An ETF takes the form of a collective investment scheme and combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange.
ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs
Wednesday, April 9, 2008
Bonus projections of life insurance policies
The bonus projections of life insurance policies are not guaranteed. They depend on the future investment yield earned by the insurance company.
Long, long ago, the bonuses were distributed yearly to the policyholders based on sound actuarial principles. During the old days, you can trust the bonuses are computed fairly, and reflect the underlying economic conditions.
In the early 1990s, life insurance companies in Singapore started to "manipulate" the bonuses. They pay lower bonuses during the earlier years and jacked-up bonuses from age 60 or 65. The policy appears to give a good yield for the long term. As these bonuses are not guaranteed, the policyholder has to wait for a long time to find out if the higher bonuses will be paid. (In many cases, the actual bonuses paid were lower).
Many policies were sold on the basis of these projections. Insurance agents used the bonus projections to sell the concept that the policyholder can stop paying premiums after a certain number of years, called the "critical year". In many cases, the policyholders had to pay the premium for many years more than the projected "critical year". This affected many tens of thousands of policyholders.
I used the term "manipulated" because the bonuses do not reflect the real yield on the investments during the years. There is lack of clarity of the principles on which the bonuses were calculated.
These bonus projections are used to hide the high cost of marketing the life insurance products, which reduces the yield of the policy considerably. The effective yield is less than 2% in most cases, lower than the future rate of inflation. The policyholder is guaranteed to lose out on buying a life insurance policy.
Lesson: Do not trust this type of haphazard bonus projection. Do not trust insurance companies that offer these type of "manipulated" products.
Read this FAQ on how to invest your savings for the future:
http://www.tankinlian.com/faq/savings.html
Long, long ago, the bonuses were distributed yearly to the policyholders based on sound actuarial principles. During the old days, you can trust the bonuses are computed fairly, and reflect the underlying economic conditions.
In the early 1990s, life insurance companies in Singapore started to "manipulate" the bonuses. They pay lower bonuses during the earlier years and jacked-up bonuses from age 60 or 65. The policy appears to give a good yield for the long term. As these bonuses are not guaranteed, the policyholder has to wait for a long time to find out if the higher bonuses will be paid. (In many cases, the actual bonuses paid were lower).
Many policies were sold on the basis of these projections. Insurance agents used the bonus projections to sell the concept that the policyholder can stop paying premiums after a certain number of years, called the "critical year". In many cases, the policyholders had to pay the premium for many years more than the projected "critical year". This affected many tens of thousands of policyholders.
I used the term "manipulated" because the bonuses do not reflect the real yield on the investments during the years. There is lack of clarity of the principles on which the bonuses were calculated.
These bonus projections are used to hide the high cost of marketing the life insurance products, which reduces the yield of the policy considerably. The effective yield is less than 2% in most cases, lower than the future rate of inflation. The policyholder is guaranteed to lose out on buying a life insurance policy.
Lesson: Do not trust this type of haphazard bonus projection. Do not trust insurance companies that offer these type of "manipulated" products.
Read this FAQ on how to invest your savings for the future:
http://www.tankinlian.com/faq/savings.html
Armed robbery in Singapore
There are more armed robbery and serious crimes in Singapore. They are a sign of hard times. People are becoming desperate, and have to resort to crime.
Sometimes, I wonder if the large number of foreign workers earning low wages in Singapore increase the exposure to criminal activities.
What can we do? We have to find more effective ways to help people to cope with inflation and high cost of living, for our locals and foreign workers.
Sometimes, I wonder if the large number of foreign workers earning low wages in Singapore increase the exposure to criminal activities.
What can we do? We have to find more effective ways to help people to cope with inflation and high cost of living, for our locals and foreign workers.
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