Sunday, May 31, 2009

Shield Plan Comparison

I always advocate to my clients on the importance of having a good medical coverage. I don't understand why some people will choose to spend that extra $20/mth on good food or shopping but save that similar $20 on a medical insurance.

However, most of my clients are confused because they have no idea how a shield plan works and what are the difference between the different insurers. I believe many advisers themselves are not sure as well.

I try to provide some info for you today but pls note that these info is not a comprehensive guide and can only be used for your quick reference. The data are updated as of today and I'll try not to clatter too many items and hence summarizes for you as below:

* I'd used the "As Charged" Private Hospital plans as the basis for comparison. I'm not going through every single point but will highlight one or two more significant ones for you.

NTUC Income
* Lowest Premium for most ages
* Provide Letter of gurantee (condition applies)
Great Eastern
* Highest Final Expenses Benefit at $7,000
* Only insurer that did not put a unlimited lifetime benefit
* Lowest Day Surgery Deductible. $1,500 for Subsidized and $2,000 for non-Sub. Most insurers deductible stands at $3k for day surgery.
* Do not cover congenital abnormalities for kids but upto $5k for mother's policy for newborn below 1 yrs old.
* Allows for moratorium underwriting
* Free Plan 2 for children below 20 yrs old when both parents on Plan 1 or 2.
* Highest premium for all ages
* Also provide for LOG (condition applies)

How about the Riders?
Riders are added to the main plan to cover the deductible and Co-insurance so that we do not need to worry about the smaller bills below $2k or $3k.
However, insurers have made these riders more complicating by adding many features which we do not know if we really need or not.

Let me try summarise for you below:
a) Prudential, Great Eastern and AIA are able to give 100% coverage because they cover both deductible and Co-insurance
b) NTUC Income covers Deductible but not Co-insurance. Eg. For any bill size, NTUC Income will cover 90% and Policyholder 10%. However Policyholder co-payment is capped at $3,000 for their plan preferred.
c) Aviva covers the Co-insurance but not the deductible. Eg, For any bill size, Aviva will only start to pay provided policyholder pay up to $3,000 first.

Now comparing the 3 companies that gives 100%
* Prudential Hospital Benefit for lower ward stay seems good
* GE and Pru emergency outpatient treatment looks attractive but I wonder what is the chance of emergency yet only outpatient treatment.
* AIA post hospital home nursing benefit is certainly useful for those with mobility problem on discharge.
* In short, AIA provide the basics and you pay the least

e) How about the other 2?
* Aviva is the least comprehensive of all riders. The $3k deductible applies every policy year and if the condition is a prolonged one, policyholder will not lose out.
* Children free under plan 2 when parents under plan 1 or 2. Depends if you really want your children to be under a lower plan when you are on a higher one?
* The $300/day hospital benefit for staying in the lower ward is the highest among all insurer.
* For those who do not mind self-insuring himself or herself a larger portion of the bill and save by getting the free coverage for children, Aviva will be a good choice.
* NTUC Income stands in the middle between Aviva and the rest by covering 90% of a bill capping at $3k.
* The cover is rather comprehensive and premium are reasonable across all age group.

Which one the best?
* There will not be an answer because everyone view each benefits different. Some wants the least, some wants the most, some wants in between. Your adviser will guide you along in your decision.

The above information is not a comprehensive guide and may not be 100% accurate. It contains much of my personal opinion and you are free to agree or disagree with them.

Wednesday, May 27, 2009

One Year Free Term Insurance

Someone giving free lunch
I get to learn of a big IFA firm giving one year free term insurance from a particular insurance company(Insurer A). This is probably a marketing tactic to create new business for the company and their advisers. I get to know about it when one of my prospects went to that IFA firm and took up the Sum Assured that I’d recommended. The premium from that insurer is about 10% - 15% higher than the insurer(Insurer B) I’d recommended. (Example $1,190 Vs $1,060p.a; $130 more expensive).

Analysing that free lunch
On analysing the remuneration structure from Insurer A, they are paying 60% commission and 95% over-riding to that IFA firm. This means that the IFA firm will get 60% + (60% x 0.95) = 117% of 1st year premium. For a premium of $1,190, the firm will get $1,392.30 as first year commission. We have not factored the 2nd to 6th year commission which adds up quite substantially too.

What if Client surrender policy after 1 year
Even if the client surrender the policy after 1 year, the firm will still earn $202.30. Why?
The firm received $1,392.30 from the insurer and premium paid for the client is $1,190. ($1,392.30 - $1,190 = $202.30)

If 100 of their advisers submit one such case, the IFA will get a revenue of $139,230. Even if 50% of such cases lapse, they will still get ($1,392.30 x 50 + $202.30 x 50) = $79,730. Even if 100% surrender the policies, they still get $20,230.

How about Insurer B?
For the insurer B that I'd recommended, it is paying 10% + (10% x 0.45) = 14.5% as first year commission. For a premium of $1,060, the IFA will only get $153.70 commission. If 100 of advisers like me recommended Insurer B, the company will get only $15,370. Even if all 100 clients surrender their policies in Insurer A and all 100 clients keep their policies in Insurer B, the firm that recommend Insurer A will still get $4,860 more than the firm that recommend insurer B.

Whose interest was served here?
I explained to my client that he may save the premium in the 1st year but over longer term, he will incur higher premium. The $1,190 that the adviser paid for him is able to absorb 9 out of the 30 years. He will eventually pay $2,730 more over that next 21 years. He decided to buy from that IFA firm and his reason is simple. He will get the free insurance for this one year and decide next year if he wants to switch back to me. I explained insurability issue and he told me that he’ll take the risk. So was the client's interest served?

The IFA firm is smart
The IFA firm is smart because someone already holding to an insurance may not take the trouble to terminate it and the person with a large term insurance may not seek alternative view from another adviser for comparison. The client will eventually pay $2,730 more over that 30 years for exactly the same cover. There will be surrenders but unlikely to be 100% or even 50%.

I'm angry and disappointed to see how IFAs themselves are undercutting each other in such intense environment. In my opinion, client interest is not served here and this is definitely not true professionalism at work. I hope that this particular IFA firm will stop telling their advisers to do such thing and Insurer A should revise their remuneration structure.

Thursday, May 21, 2009

Investing your CPF Monies

I'll like to share some common questions and answers that you may like to know about investing your CPF. Our Govt allows us to use this CPF Investment Scheme (CPFIS) to invest our CPF savings in a wide range of investment products to enhance our retirement nest egg and please take 2.5 minutes to read the 5 points that I'd summarised for you...

1) What Criteria must I fulfil before I can invest my CPF
a) Your CPFOA must have more than $20,000 if you want to invest your Ordinary Account
b) Your CPFSA must have more than $30,000 if you want to invest your Special Account
c) At least 18 years old
d) Not a undischarged bankrupt

2) How can I start my CPF investment?
a) You need to open a CPF Investment Account with DBS, OCBC or UOB to invest your OA. (Compulsory)
b) You do not need to open any investment account to invest your SA

3) What can I invest for my CPF Monies? (Note the 3 groups with different %)
* 100% of investible OA and SA can be invested in:
a) Fixed Deposits
b) Singapore Government Bonds
c) Singapore Government Treasury Bills
d) Bonds Guaranteed by Singapore Government
e) Annuities
f) Endowment Insurance Policies
g) Selected Investment-linked Insurance Products
h) Selected Unit Trusts
i) Selected Exchange Traded Funds (ETFs)

* Up to 35% of investible OA can be invested in:
a) Shares
b) Property Funds (or real estate investment trusts)
c) Corporate Bonds

* Up to 10% of investible OA can be invested in:
a) Gold
b) Gold ETFs
c) Other Gold products (only UOB offers these new gold products)

4) Do I pay tax for my investment returns?
Your investment profits and interest earned from investments are not taxable. However, dividends received are taxable at your individual tax rate

5) How about my discounted Singtel Shares? How much do I have and what will happen when I sell?
* The Special Discounted Share (SDS) Scheme is part of the Government’s asset enhancement programme to make Singapore a share-owning society, thus giving Singaporeans a greater stake in the country.
* Click here to find out how much Singtel Shares you have.
* You can sell your discounted ST shares through any Singapore Post office or if you have a trading account with a broking firm, you may sell your discounted ST shares through your stockbroker.
* When you sell the discounted ST shares, the sale proceeds will be refunded to your CPF Ordinary Account.

Saturday, May 16, 2009

Buying on Trust - The Mango Saga

Along my way home last week, I passed by this stall that sell mangoes outside Pasir Ris MRT Station. The mangoes really looks yummy and I decided to buy some back for my family.

There were 2 group of mangoes on 2 different tables. The first group cost $3 for 3 mangoes and the second group cost $5 for 4 mangoes. Both group of mangoes looks rather similar to me. I tried to analyse the mangoes by touching and smelling it. No matter how I tried to analyse, I couldn't spot the difference and it prompted me asking the stall owner.

Adrian: Uncle, may I know what is the difference between the 2 group of mangoes?
Uncle: Same same. 2 group also very nice.
Adrian: Then which one is sweeter?
Uncle: Also same. Both very sweet.
Adrian: If same, why both different price?
Uncle: Price different a bit only mah. You think expensive, then buy $3 one lor.

I couldn't decide which group of mango to buy and started walking off.
Just as I stepped away from the stall, the Auntie beside the Uncle shouted at me.

Auntie: Xiao Di, this one is smoother and the seed thinner.
She was pointing at the $3 for 3 table. Immediately, I buy that group of mangoes...

My lessons from this mango incident:
1) You have to know your stuff when you do sales. If you don't know what you are selling, you may lose your customer.
2) Something that looks exactly the same outside may not be the same inside. We may need help when we are not sure.
3) I am not a mango expert, I relied on that Auntie's statement to buy the mango. I trusted her fully and hope she is not lying to me.

This "Mango" saga brought me to think about those people who are ignorant about Financial Products just like how ignorant I am about "Mangoes" will tends to trust their Financial Adviser like how I trusted the Auntie about the mango.

Then I remembered reading about how Insurance companies are stepping up their recruitment drive to increase their insurance agency force from the newspaper and a blog article from Mr Eng Tiang Chuan on the implication of such move

I'm also not very optimistic about more new agents coming into this industry. I had met many new advisers along my career and some of them came into this industry because they saw the success of their managers, the promise of high income and the time flexibility. Some of them treated this job as temporary and was engaged with MLM, Property, Land Banking, Forex trading, etc at the same time.
When they realised that its not so rosy or attracted by other opportunities, they will totally leave the industry. Their clients will suddenly realise that they do not have a agent anymore.

Many of these new agents are told to sell only specific products by their companies and managers. They are enticed with large bonuses, posh holiday trips, etc. Some do not have the relevant knowledge and experience to identify what is good and bad for their clients and they just follow what they company and managers teach them to do.

Any ignorant prospect will have a very high chance of buying what they may not urgently need because they trust their adviser and the brand of the company.

2 things crossed my mind
1) I'm wondering if there is a need to have so many insurance advisers around.
2) Knowledge or experience can be gained over time but Integrity of the adviser is even more important in this field in order that the consumers are really getting the right plans.

There are good and bad advisers, whether they are fresh or old. I'm not against any new adviser when I wrote this...

Thursday, May 14, 2009

Eldershield Supplements

I had wrote about Eldershield several times in my blog but nothing mentioned about the supplements. A lot of people are already confused with Eldershield, not to say about the supplement. Even many advisers are confused about these plans.

Today, I like to share a bit about it and the difference between 3 insurers providing this insurance.

In my comparison, I'd used a few assumptions:
a) Disability Period = 10 and 15 years (Amount paid out)
b) Presuming disabled at an age of 72
c) The insured is 50 years old today when he/she take up this plan
d) Total Premium paid will be from age 50 to 72

The Yellow Portion is the part payable via Basic Eldershield.
The Green Portion is the part payable via Eldershield Supplement
The Blue Portion is the extra/bonus payout from the Supplement plan

NTUC Income - Eldershield Lifetime Care Series

Strength and Weaknesses of the NTUC Income Plan
* The Eldershield Care plan gives additional cover for short period. Value for money only if disabled for short period
* The Eldershield Lifetime plan gives additional cover beyond the basic Eldershield for life
* Eldershield Care and Lifetime Plan combined make the cover very comprehensive
* Premium payable till age 65 and hence higher premium. The high premium paid in initial years hinders growth of Medisave fund.
* Value for money if disabled at a very late age, say 82 yrs old.

Great Eastern - Value Plus and Eldershield Comprehensive Series

Strength and Weaknesses of the GE Plan
* No Lifetime cover and limited benefits
* Yearly Renewable premium and hence need to pay little in the beginning
* Very basic and for budget constraint policyholders
* Value for money if disabled at a very young age and for 9-10 yrs.

Aviva - MyCare Series

Strength and Weaknesses of Plan
* Very comprehensive and include Rehabilitation and Dependent Care Benefits
* Flexibility of limited premium term of up to 20 years and Benefit payout term of 12 years
* Value for money if disabled early and for a long period
Hope above info are useful for you.

Friday, May 8, 2009

Social or Commercial???

I have serveral hundreds of Shield Plan policyholders over my 6 years in the industry as I believe in ensuring all my client are covered in this aspect. I noted a marked change in underwriting for this particular insurer and my best guess is either they are losing big money or they are aiming to earn big money.

Meow Meow......
I'm very disappointed with the change in underwriting style towards being as "猫" as possible. They are now no different from any other insurers, in fact more "猫" than some. In short, they only want the 100% perfectly healthy people.

Are you slightly less than perfect?
If you are slightly less than perfect, you may not be able to get a Shield Plan from them.
When I say "less than perfect", Its perhaps
* you did a simple scope because you have a bad stomachache as long as 3 years ago or
* you were unfortunately sent to hospital by passer-by when you feel dizzy in MRT station, probably due to stress or lack of sleep the night before or
* you went physiotheraphy voluntary for a back strain even when the doctor did not require it
* You have a snoring problem which you went seek treatment voluntarily

* Standard wordings in their letters
In the event that you do not have all of the above report(s) readily available for submission, we regret that we might not be able to proceed on with your application. Please note that should you wish to undergo any of the above test(s), or obtain the above report(s) from the hospital(s) and/or clinic(s), the cost of the test(s) and the cost of the medical report(s) will not be borne by XXXX.

* You will need go get a medical reports at your own cost to prove that your flaw is minor.
* With the hundreds you spent for the medical reports or medical examination, they will most probably tell you that they exclude you for that minor flaw.
* If you are not able to give them a medical report, they will not even continue underwrite this case

They had make the process very difficult by insisting clients to go to the Medical Records Department of the hospital and pay $85 to $100 for an old report before they are willing to underwrite their case again.

I understand that strict underwriting is crucial but the insistent on obtaining medical reports and going for medical check-ups at their own cost before they are willing to underwrite disappoints me.

In the past, if this insurer feel that they have problem in this area, they may offer to exclude this condition in which policyholder can choose to accept or not. When policyholder went medical checks years down the road and proved to be okay, they can appeal to remove that special term.
Social or Commercial???
* Commercial driven sense wise, they should do it because they must make profit for stakeholders.
* Social driven wise, I hope this insurer will not deprived Singaporeans of getting a medical insurance, not because they are not healthy but because they couldn't find the medical report of all sort of minor problems that they truthfully declared.

Wednesday, May 6, 2009

What exactly is this Bank Stress Testing?

In recent weeks, Federal Regulators have been conducting so-called stress tests at 19 of the US largest financial institutions. The tests were designed to determine just how well or not these most important US banks are able to hold under their current bad loans. These banks are the so called "Too big to fail" banks and as a group, they hold an estimated 2/3 of the assets in the whole US banking system. Among those being tested are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs.

These bank stress tests are important because they could improve public confidence in the financial system. In large part, the economy is hurting because investors lack confidence and the banks themselves are unsure about lending more money even to each other.

One scenario looks at how banks would fare over the next two years based on how the economy was doing in February. The second, more important scenario assumes the economy will sink into a deeper recession than analysts expect. They are also term as baseline and a adverse scenario.

Baseline scenario Economy
a) GDP Shrinks by 2% (adjusted for inflation) in 2009 and grows by 2.1% in 2010.
b) Unemployment -- Averages 8.4% in 2009 and 8.8% in 2010.
c) Home prices -- Drop by 14% in 2009 (from where they ended December 2008) and drop 4% in 2010 (from December 2009).

More adverse scenario Economy
a) GDP Shrinks by 3.3% in 2009 and grows by 0.5% in 2010.
b) Unemployment -- Averages 8.9% in 2009 and 10.3% in 2010.
c) Home prices -- Drop 22% in 2009 (from where they ended December 2008) and drop 7% in 2010 (from December 2009).

Though the result are expected to be announced on the 7th May, Investors are expecting good news and hence reflected the huge surge of equities prices in recent weeks. As these good news are most likely factored into the recent stock prices, we must note that we should take this stress testing with a pinch of salt before we can say the worst are over.
a) The banks might use accounting dodges to keep them away from revealing all the bad loans they have made.
b) The Federal Officials might be too eager to reassure Americans that the worst of the credit crisis is over, and reveal nicer data than they actually looks.

Friday, May 1, 2009

My 2nd Colorectal Cancer Client

Since 1st Jan 09, I had received around 16-18 medical claims from my clients. On average, I received 1 claim notification from NTUC Income every 1-2 weeks. I'm probably one FA Rep who helped NTUC Income lose money...

One of them was diagnosed with Colorectal Cancer. She started her treatment since late last year. Todate, she had made at least 9 claims, Pre and Post Hospital Treatments as well as 3 inpatient stays of which 1 was in a private hospital. She switched to a restructured hospital even though she prefer the previous doctor because she was under a B plan and was not sufficent to pay the bill in private hospital. She is my 2nd client with Colorectal Cancer. The first one went though the whole course of treatment over 1 year and was cured. Hope things will turn out well for her too.

Life is very fragile. She is already my 7th Cancer client of which 3 had passed away.
Let me recap:
2 x Colorectal Cancer (One survived and One under treatment)
2 x Lung Cancer (Both passed away)
1 x Nasal Cancer (Passed away)
1 x Lymphoma (Survived)
1 x Breast Cancer (Not sure status as she was a client I never contacted since taking over from previous adviser - only know she claim from her CI Plan when NTUC Income informed me about it)

Today, I like to share with you what Colorectal Cancer is about.

Colorectal Cancer
* Colorectal cancer, also called colon cancer or large bowel cancer, includes cancerous growths in the colon, rectum and appendix
* It is 2nd most common cancer only second to Lung Cancer. Currently, more than half of those affected will die from this disease. However, this is a very curable illness if diagnosed in the earlier stage.
* About 90% of those with Colorectal Cancer are above 40 years of age. This Cancer can be hereditary and if you have a first degree relative with colorectal cancer, you have a 6-12 fold increased risk of developing this illness.

* Bleeding from the rectrum
* Recent change in bowel habit
* Incomplete evacuation of stools
* Narrow Calibre Stools
* Unexplained weight loss
* Poor appetite, etc...

* Primary Treatment for Colorectal cancer is surgery. Chemotheraphy and Radiotheraphy are sometimes used in addition to surgery. Between 80%-90% of coloeectal cancer patients recover if discovered and treated early but will drop to less than 50% if detected at the later stage.

* Nearly all colon cancers begin as polyps. These growths occur on the bowel wall and may eventually grow in size and become cancerous. Removal of polyps will effectively treat the "cancer" even before it is cancerous
* To reduce risk of contacting colorectal cancer, you can have benign polyps removed through a colonoscopy.
* There is some evidence that a high-fibre low fat diet may play a role in preventing colorectal cancer.
* Go for regular screening especially if you fall in the high risk category of hereditary situations.