Hi Mr Tan,
I find the calculation of the medical insurance claim to be difficult. Why should there be so many deductions from the hospital bill? Most people pay a premium, and want the insurance company to take care of the entire bill. Is there a simpler insurance plan?
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REPLY
The simpler plan (which I prefer) is a plan that pays a fixed sum (say $200) for each day of stay in a hospital. This is simple for the customer, and for the insurance company. It is call a "hospital cash" plan.
This plan will pay a substantial part of the hospital bill. It also gives the incentive for the patient to find out the most cost effective treatment (rather than incur a large bill). The patient can consult the insurance company for advice on where to get the cost effective treatment.
This approach is best for all parties - the consumer, the insurance company and the medical provider.
Saturday, July 14, 2007
What product is suitable for my age group?
FIRST POSTED IN FEBUARY, 2007 (EDITED)
Dear Mr Tan,
Read with interest on buying insurance products from the NTUC income portal.
I don't believe that there is an ideal insurance package solution for all.
It really depends on the age, size of family, living standards, of the individual.
What I would like to know is an ideal case of persons aged:
20-30: Just started work, planning on getting married
30-40: Married, steady career, with 1 or 2 kids
40-50: Achieved good mid-income (say $5K-7K/mth), higher educational needs (JC, university, worst case medical school)
50-60: Approaching retirement age, or continue working because of financial commits
60+: ???
What then are the range of insurance products/ investment funds would you recommend for these age groups.
----------------------
REPLY
The best plan is to buy a decreasing term insurance to provide the insurance coverage and to invest your savings (say 10% to 20% of your regular earnings) in a mutual fund or an invesment fund. You can read this FAQ for the young, and for seniors.
You should choose a flexible savings plan, as it gives you the flexibility to change your savings and the investment fund. Normally, you should choose a large, well diversified fund.
Dear Mr Tan,
Read with interest on buying insurance products from the NTUC income portal.
I don't believe that there is an ideal insurance package solution for all.
It really depends on the age, size of family, living standards, of the individual.
What I would like to know is an ideal case of persons aged:
20-30: Just started work, planning on getting married
30-40: Married, steady career, with 1 or 2 kids
40-50: Achieved good mid-income (say $5K-7K/mth), higher educational needs (JC, university, worst case medical school)
50-60: Approaching retirement age, or continue working because of financial commits
60+: ???
What then are the range of insurance products/ investment funds would you recommend for these age groups.
----------------------
REPLY
The best plan is to buy a decreasing term insurance to provide the insurance coverage and to invest your savings (say 10% to 20% of your regular earnings) in a mutual fund or an invesment fund. You can read this FAQ for the young, and for seniors.
You should choose a flexible savings plan, as it gives you the flexibility to change your savings and the investment fund. Normally, you should choose a large, well diversified fund.
How can CPF be improved to give a better return?
FIRST POSTED IN MARCH 2007.
My views about investing CPF savings
1. A Member of Parliament said the Government should aim to help CPF members grow their money by 8 to 10 per cent a year. Do you agree with this target?
Reply: I believe that a reasonable long term target is 5% to 6% per annum. This is higher than the rate of inflation and represents an attractive real rate of return.
2. Should the CPF improve its rate of return?
Reply: The CPF should make it easy for its members to invest in a large, well diversified, low cost fund of global equities and bonds. Although the return may fluctuate from one year to another, the fluctuation should average out over a period of 10 years or longer. The average return can meet the target that I have indicated. I believe that the CPF is actively considering this option, as reported in the newspapers. I agree with this approach.
3. What are the obstacles to raising the rate of returns? How to overcome them?
Reply: They key obstacle is the need to provide a guaranteed rate of return. This forces the CPF to adopt a safe investment strategy which produces a low rate of return. If the member is willing to take the risk and fluctuation in an investment fund, they will be able to get a higher average return over the long term. The risk can be reduced by investing in a large, well diversified, low cost fund.
4. Are Singaporeans ready to bear higher risks that comes with higher returns?
Reply: I believe that Singaporeans will prefer to invest in a large, well diversified, low cost fund. It will actually reduce the risk (through diversification in many investments and over man years) and give a higher return over the long term. A low cost fund charges can charge as low as 0.5% to 1% per annum, giving most of the return back to the investor.
5. Are there any lessons from pension plans in other countries that Singapore can study and learn from?
Reply: We should study the success of the indexed funds and the exchange traded funds in the United States. They are large, well diversified, low cost funds. They offer an attractive return to their investors over a period of 10 years or longer.
6. The Manpower Minister said that CPF now provides risk-free return and safeguards members' savings against interest rate changes and stock market volatility. Its returns are above market rates, when compared against products of similar risk and tenure. Do you agree?
Reply: The guaranteed rate of 4% per annum on the special account is attractive, as it is risk free. CPF members should be given the option of investing in large, well diversified, low cost funds, to get a better return for their ordinary account. Many of the approved funds under the CPF Investment Scheme are too small and their charges are too high. The CPF has recognised this deficiency and have taken steps to get the funds to reduce their charges. It is a good time to introduce the PPP type of funds.
To read more about investing in large, well diversified, low cost funds:
FAQ
My views about investing CPF savings
1. A Member of Parliament said the Government should aim to help CPF members grow their money by 8 to 10 per cent a year. Do you agree with this target?
Reply: I believe that a reasonable long term target is 5% to 6% per annum. This is higher than the rate of inflation and represents an attractive real rate of return.
2. Should the CPF improve its rate of return?
Reply: The CPF should make it easy for its members to invest in a large, well diversified, low cost fund of global equities and bonds. Although the return may fluctuate from one year to another, the fluctuation should average out over a period of 10 years or longer. The average return can meet the target that I have indicated. I believe that the CPF is actively considering this option, as reported in the newspapers. I agree with this approach.
3. What are the obstacles to raising the rate of returns? How to overcome them?
Reply: They key obstacle is the need to provide a guaranteed rate of return. This forces the CPF to adopt a safe investment strategy which produces a low rate of return. If the member is willing to take the risk and fluctuation in an investment fund, they will be able to get a higher average return over the long term. The risk can be reduced by investing in a large, well diversified, low cost fund.
4. Are Singaporeans ready to bear higher risks that comes with higher returns?
Reply: I believe that Singaporeans will prefer to invest in a large, well diversified, low cost fund. It will actually reduce the risk (through diversification in many investments and over man years) and give a higher return over the long term. A low cost fund charges can charge as low as 0.5% to 1% per annum, giving most of the return back to the investor.
5. Are there any lessons from pension plans in other countries that Singapore can study and learn from?
Reply: We should study the success of the indexed funds and the exchange traded funds in the United States. They are large, well diversified, low cost funds. They offer an attractive return to their investors over a period of 10 years or longer.
6. The Manpower Minister said that CPF now provides risk-free return and safeguards members' savings against interest rate changes and stock market volatility. Its returns are above market rates, when compared against products of similar risk and tenure. Do you agree?
Reply: The guaranteed rate of 4% per annum on the special account is attractive, as it is risk free. CPF members should be given the option of investing in large, well diversified, low cost funds, to get a better return for their ordinary account. Many of the approved funds under the CPF Investment Scheme are too small and their charges are too high. The CPF has recognised this deficiency and have taken steps to get the funds to reduce their charges. It is a good time to introduce the PPP type of funds.
To read more about investing in large, well diversified, low cost funds:
FAQ
What's good about Singapore
Here are my views about what is good with the Singapore system:
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
Let me elaborate on these points.
Low corruption: Easy to get things done. Criteria and procedures are clear. If we follow the rules, we know that our requests will be approved. We do not have to worry about making "additional payments".
Meritocracy: Everyone can move up the career ladder. The best rewards go to the most able.
Economic development: Our economy has developed well. Many good paying jobs are produced. Asset and property prices have gone up.
Efficiency: Things work. We can rely on efficient transport, utilities and services. We save on time to do many things.
Stable and good government: We have a safe envifonment. We do not have to worry about strikes, crime, financial crisis and other uncertainties.
Now, what's bad about Singapore? I shall discuss them in a few days time.
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
Let me elaborate on these points.
Low corruption: Easy to get things done. Criteria and procedures are clear. If we follow the rules, we know that our requests will be approved. We do not have to worry about making "additional payments".
Meritocracy: Everyone can move up the career ladder. The best rewards go to the most able.
Economic development: Our economy has developed well. Many good paying jobs are produced. Asset and property prices have gone up.
Efficiency: Things work. We can rely on efficient transport, utilities and services. We save on time to do many things.
Stable and good government: We have a safe envifonment. We do not have to worry about strikes, crime, financial crisis and other uncertainties.
Now, what's bad about Singapore? I shall discuss them in a few days time.
National Day - Sudoku (Logic9)
National Day is coming soon.
How about trying to solve a Sudoku puzzle (Logic9) with the letters S,I,N,G,A,P,O,R,E instead of the usual numbers 1 to 9.
Go to this website. Click PLAY. Select the symbols - CHARACTERS. Choose the level (from very easy to complex). Enjoy.
How about trying to solve a Sudoku puzzle (Logic9) with the letters S,I,N,G,A,P,O,R,E instead of the usual numbers 1 to 9.
Go to this website. Click PLAY. Select the symbols - CHARACTERS. Choose the level (from very easy to complex). Enjoy.
Insurance company should set a good example
I had an interesting conversation with an adviser from a large life insurance company. Here are his comments about his company's business practice:
* their top management is measured by head office, mainly on new business
* a significant part of the new business comes from getting their customers to terminate their existing policy, and buy a new policy
* this is bad for the customer, as they lose on the heavy charges
* but it is good for the company's profits and the agent's commission.
The adviser felt bad about this practice and was not willing to take advantage of his customers. He is not active in sales now.
I commend this adviser for his ethical approach. It is important for the insurance company to set a good example, so that the advisers can emulate it.
* their top management is measured by head office, mainly on new business
* a significant part of the new business comes from getting their customers to terminate their existing policy, and buy a new policy
* this is bad for the customer, as they lose on the heavy charges
* but it is good for the company's profits and the agent's commission.
The adviser felt bad about this practice and was not willing to take advantage of his customers. He is not active in sales now.
I commend this adviser for his ethical approach. It is important for the insurance company to set a good example, so that the advisers can emulate it.
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