Cut in maturity benefit just before maturity

Mr Tan,

I have a policy with X where I paid premium for 12 years which will mature in July. On  31 March 2009, upon my request I was given at estimated maturity sum. On April 24, I received a letter stating a maturity sum which differed by almost 10% lower.

I have emailed and spoken to X but without making much headway. Can an insurance company provide you with an estimate barely 3 months before maturity and then slashed it down by such a large sum?

I have emailed MAS and am thinking of approaching FIDREC. I would appreciate advice from you.

REPLY
X owes you a satisfactory explanation for the lower maturity sum. Between 31 March and now, the investment market had improved considerably. If there is any change, the maturity value should have been higher.

You can lodge a complaint with FIDREC. It will cost you only $50. If you wish to strengthen your case, you can consider asking CASE for help as well.

Is Animal Farm relevant to Singapore?

Read this article.

It is easy to be cheated (10) - Orphan money

A life insurance company is allowed to distribute only 10% of the surplus of the participating fund to its sharehohlders. The remaining 90% of its surplus has to be distributed to participating policyholders. 

In past years, most insurance companies distribute nearly all of the 90% to its policyholders in the form of annual bonuses. In recent years, more insurance companies have started to keep a large porportion of the surplus in the fund, without distributing them as annual bonuses. Some companies have reduced their annual bonus by 50% or more. They promised that the undistributed surplus will be paid as terminal bonus when the policy matures or is terminated.

Many insurance companies have accumulated a large amount of the undistirbuted surplus. This is called orphan money. Each policyholder has involuntarily contributed to this orphan money, but the amount contributed by each policyholder is not identified. This retention is made without the agreement of the policyholders and against their wishes. Most of them preferred the surplus to be declared as an annual bonus.

It is easy for the insurance company to use the orphan money in many ways that do not benefit the policyholders that had involuntarily contributed to it. They can be used to pay high commission to increase the sale of new policies (which do not benefit the old policyholders), or to pay high salaries and commissions.

When the policies mature or are terminated, the amount of terminal bonus given to the policyholder is likely to be much lower than they are entitled to, based on their actual contribution in past years. There is no way for the policyholder to find out if they have been fairly treated. There is lack of transparency and accountability. The insurance company can declare that they have been fair in distributing the bonsues, but there is no way for this statement to be verified. The policyholder has no say in this matter.

Is this fair? Are the policyholders being cheated? Can you trust the future management to be fair?

As many financial institutions have acted unfairly in recent years, it is better not to trust them. Do not invest in the financial products that give a lot of discretion to the financial institution and insufficent rights to protect the consumer.

Tan Kin Lian

Logic Quiz 5-2 (Vol 4)

There are five houses with different colours in a row. Each occupant plays a different sport, keeps a different pet and drinks a different beverage.

 1. The vodka drinker lives in the second house.
 2. The soccer player lives left of the tennis player.
 3. The lawyer lives right of the volleyball player.
 4. The yellow house is left of the red house.
 5. The salesman keeps dalmatian.
 6. The manager lives left of the accountant.
 7. The accountant drinks rum.
 8. The beer drinker lives in the white house.
 9. The schnauzer owner lives left of the collie owner.
10. The martini drinker lives in the red house.
11. The vodka drinker lives in the blue house.
12. The cricket player keeps pomeranian.
13. The doctor lives in the last house.
14. The spaniel owner lives in the brown house.
15. The doctor lives right of the wine drinker.

Question: Who plays golf?

Give your answer here. The correct answer will be displayed when you submit your entry.

Benchmark
1 to 10 mins: very good
10 to 15 min: good
15 to 20 mins: fair
more than 20 mins: need more practice! 

More of the quiz
It appears every Sunday in The New Paper.

You can buy my book at these bookstores: 

President Obama's plans to create new jobs

President Obama's plans to create new jobs is likely to make a better impact than the measures adopted in Singapore (which gives a subsidy to employers who are doing fairly well). Read this article.

It is easy to be cheated (9) - A better way to gamble

I consider investing to be similar to a gamble. The investor buys a financial product and hopes that the price will go up. If the price goes up, the investor makes a profit. If it comes down, the investor makes a loss. The investor has to take the invested asset does not fail and become valueless.

In recent times, it seems that even money kept in fixed deposit in a bank, which pays a low rate of interest, has the risk of default of the bank. Some people think that it is safer to keep the money under the bed!

To make the matter worse, financial institutions have created products that are risky and do not disclose the actual nature of the risk and do not pay a fair rate of return to the investor for the risk!

To avoid risk, it is better to invest in the following:

a) bonds that are issued by the AAA rated government. They offer a low yield, but is fair and safe.

b) A low cost, diversified fund invested in many bonds or shares, such as an indexed fund or exchange traded fund. Invest for the long term, to average out the good and bad years.

For investors who like the excitement of speculating on the price movement of shares or other assets, be honest and recognise that you are actually gambling. If you wish to gamble, it is better to go to a casino. The odds are fairer to the gambler, and the terms of the gamble are controlled by the authorities. You know the odds, and can decide on which side of the gamble to take!

Singapore is opening two world class casinos. When you gamble, make sure that you gamble an amount that you can afford to lose. Enjoy the gamble and good luck

Tan Kin Lian

Writing fee

Many magazines approach people to write articles, but they declined to make any payment or they pay a very low fee. It seems to be a habit in Singapore for people to be asked to write for free. I hope that mgazines are willing to pay writers at a fair rate, so that it is possible for writers to make a living.

I have been asked to contribute articles to magazines. Although I do not need the money, I asked for payment to be made to a non-profit organisation. If they refuse, I decline to write.