NTUC Income Already GG 20 Years Ago- So Not Sure Why So Many Old Men Coming Out to Bash The Allianz Offer.

I hope I don't get roasted too badly writing this post. I get the nostalgia that many old old men such as Tommy Koh, Tan Kin Lian and Tan Suee Chieh have about NTUC Income and its goal to help the lower income secure insurance coverage. This was indeed the grand vision of one of the founding fathers of Singapore, Dr Goh Keng Swee. Nevertheless, my personal thoughts and experiences are that NTUC Income Insurance has already lost track of this goal 20 years back when it was run by Mr Tan Kin Lian. 

The sucky parts about NTUC Income Insurance:

At that time (20 yrs ago), NTUC Income kept selling those traditional whole-life policy that one has to pay premium until one's death bed or for 99 years. I wrote to Mr Tan Kin Lian before telling him that other insurers already started offering limited premium paying plans for only 10-20 years (and then become fully paid up) but NTUC Income was still selling its policy holders pay till 99 years old type of stupid traditional insurance plan. His immediate response was a disappointing whether I am another insurance agent from another competitor insurance company. NTUC Income products were already losing innovativeness and relevance to the real market. On a social level, it is actually harming consumers with an inferior product relative to other insurance companies.

NTUC Income was also selling to heartlander customers its investment linked polices- the NTUC Ideal Plan. One would have lost almost 15% of one's invested capital as sales charges before the remaining capital gets invested into unit-trusts. I will leave the link to a post here from 2 March 2012 on my experience with a NTUC Income Insurance agent. 

I also encountered a lot of extreme questioning by NTUC Income assessor trying to get Hospitalisation and Surgical coverage for my aged parents about 15 years ago. They are the pioneer generation that worked hard for Singapore during the early days. I only succeed in getting coverage for my father (with various exclusions) but none for my mother. So what social goal is Tommy Koh, Tan Kin Lian and Tan Suee Chieh talking about that NTUC Income is helping the lower income get insurance coverage? This is Bull-SH*T by these old men. It is clear that NTUC Income is trying to reduce coverage for low income workers while aiming to preserve as much profits as possible.  

Bear in mind that it is Mr Lee Hsien Loong and his government that came up with the Pioneer Generation and Merdeka Generation medical packages to help aged Singaporeans like my Father and Mum generation who most needed the medical coverages but NTUC Income is not keen to cover at all...period. Without the Pioneer generation and Merdeka generation subsidies, my sibling and I would have been saddled with hefty hospitalisation & surgical bills for my aged parents. 

Is NTUC Income Insurance still relevant?

Personally, I thought that it was definitely relevant during the days of Dr Goh Keng Swee when many workers are struggling to get adequate insurance coverage. However, it has since lost its social goal decades later and at current time where for decades, they are very profit driven. Worst still is that Income Insurance is struggling with relevancy for its products and pricing relative to other insurance competitors. I have moved away from NTUC Income many years back due to its inferior products. So I do not understand why so many old men are coming out to stop the Allianz deal which actually has more pros than cons for the future of Income Insurance Ltd. 

Loyal Shareholders of Income Insurance Ltd See Jaw Dropping 400% Returns From Potential Bidder’s Market Valuation.

Congrats to all Income Insurance Ltd shareholders! The former NTUC Income Co-operative- which has just recently completed its corporatisation in September 2022- announced that German financial services giant Allianz plans to acquire 51% of its share at S$40.58 per share. Considering the fact that many shareholders got their share at S$10 par value (plus the 5%+ dividends over 20 yrs) and considering recent transaction on an exchange setup by Phillips Securities is at around S$20 per share, the S$40.58 offer is a whopping +400% and +100% to cost price and recent transacted price respectively. 

What happens next?

First and foremost, the above offer must be approved by our local regulator. Next, the offer needs to be approved by shareholders of Income Insurance and an EGM thus needs to be convened. The major shareholder of Income Insurance, NTUC Enterprise Co-operative has undertaken to sell part of its shares should the sales of shares by minority retail shareholders falls below the 51% required by Allianz. So, we can tell that the management of Income Insurance has given priority to minority shareholders who would want to exit. More details should be announced soon.

Do note that since the announcement of this deal, ex-CEOs of NTUC Income Co-operative have came out expressing their opposition to the sales of shares by controlling shareholder NTUC Enterprise. Even the influential Prof Tommy Koh (ambassador-at-large at the Ministry of Foreign Affairs, a position he has held since 1990, and a professor of law at the National University of Singapore) is now challenging NTUC Enterprise Chairman Lim Boon Heng’s justification for selling away their majority stake in Income.

Parting thoughts

During late May’24 portfolio review and update, I have stated that I will be keeping my small holding of 106 shares of Income Insurance as a souvenir as the amount is extremely small and then live with its 5%-6% yearly dividend yield. However, with a S$40.58 offer, this paltry investment has suddenly grown from a mere S$1,060 to S$4,300. I guess I will definitely sell if off and then reinvest the proceeds into the Endowus bond funds.

Using Hospitalisation & Surgical Insurance To Get Free Medical Checkup and Medical Treatment at Private Specialist Clinics- Beware of the Consequences.

Yup, you folks read the topic and subject header correctly- it is not a typo. What the heck am I talking about? Apparently, there are a number of people out there who has found a hidden "hack" to make use of their Hospitalisation & Surgical ("H&S") insurance plan to get free health check-up or medical treatment by specialist clinics. According to my friend (let's call him Kenny for the purpose of today's sharing session), as long as you know the right doctors at the private hospitals, they will know how to write in their medical report for one to file a H&S claim against their insurance companies to cover their medical examination costs and also 5 star hotel stay equivalent at A Class ward in private hospitals.

1.  "It is stupid to spend your own money on medical checkup. Make use of your H&S plan"- per Kenny.

My "friend" Kenny is a very street smart guy. A few months back, when I mentioned that I had recently spent S$1.5K in medical consultation and treatment for my chronic illness (asthma) at a respiratory specialist clinic, Kenny immediately commented that I should have consulted him earlier for alternative route. He and his spouse never waste their money for health-checkup or specialist treatment. As aforesaid mentioned, Kenny asserted that he knows of ways to be able to make a claim on H&S. He also remarked that "It is stupid to spend your own money on medical checkup. Make good use of your H&S plan". 

Coincidentally, Kenny has some chest pain issues then. So, he checked himself into a private hospital for 1 day to do a battery of tests which came up to S$13K in total bill. The results of the tests did not reveal any medical issues. True enough, the insurer approved the entire H&S claim of S$13K and made a full payment on behalf to the private hospital (The H&S plan of Kenny was purchased many years back hence it is the only one that I knew of that still covers "all charges" if one has bought the Extra Rider under the old scheme while rest of insurers such as NTUC Income Insurance Limited had already forced a co-payment in cash by policy holders under the old H&S scheme). 

2. Insurance Companies are not stupid- they have safeguards in place to mitigate such occurrences and deal with folks with these mindset for claims. 

To continue with the above story, Kenny got a shock when his H&S insurer wrote to him that due to this claim, they will be increasing his premiums by  three-fold for 1 year which amounted to increase of S$2k-$3K per annum. Kenny was very upset and told his insurance agent that he will be terminating his H&S with the insurance company. Currently, he has asked for quotes from a few other H&S insurers in the market for H&S replacement coverage.

It turns out that there is no free lunch after all. The consequences just came in a bit later.    

Prudential Dividend Funds- Weird Sales Cold Call By Personal Assistant of Unknown Agent.

Dividend paying funds seems to be the rage these days. Out of the blue, I suddenly got a cold call earlier this week from a personal assistant ("PA") of an unknown agent who asked me whether I want to find out more about their Prudential dividend fund. She is trying to fix me up on an appointment with her financial advisory agent to find out more about dividend paying funds. It was a bizarre and hard conversation with this curt PA:

Prudential PA: "Sir, have you heard of Prudential dividend investment fund?"

BK (me): "Sorry, may I know who's on the line and what is this call about?" 

Prudential PA: "Sir, what's your name, is it a good time to talk to you?" 

(Hmm, why she keep asking my name when she herself has not introduced herself or shed light on what this is all about?)

BK (me): "May I know who's on the line and what is this about?" 

Prudential PA: "Have you heard of Prudential dividend investment fund? Can you spare me 5 minutes?"

BK (me): "Nope, never heard before.  I got a meeting. But I can spare you a minute." 

Prudential PA: "WHAT's your name? HAVE YOU HEARD OF Prudential dividend investment fund? I will get my agent Sam to contact you. "

BK (me):" I already got a Prudential Agent lah".

Prudential PA: "But has your agent brief you on anything about our Prudential dividend investment fund? It also offer you insurance protection at the same time."

BK (me): "Nope, my current Prudential agent never brief me on this product."

Prudential PA: "Great. Then I will get my agent, Sam, to call you. WHAT's your name?!" 
(I can sense the lady getting impatient and irritated with me as her voice was raised".)

BK (me): "Ok, your agent can call me."

Prudential PA: " I will get my agent to call you". (Next moment, she just put down and cut off her phone abruptly without even saying goodbye).

Well, strange that the personal assistant is getting so desperate to want to get an appointment for her boss via cold calling but her brusque attitude over the entire tele-conversion is really out of the world. Also, is making a living so cut-throat now that they can just target a customer who already has an existing Prudential agent that has remain close in contact with me over the years? What makes this weird PA thinks that she can just wrest the business relationship away from the existing agent that easily? 

Alamak! Tan Kin Lian Running For Singapore President Again---Can Someone Please Stop Him?

This is really OMG!. The former chief executive of NTUC Income Insurance Cooperative is coming out to run for the Singapore Presidency again. In 2011, Mr Tan Kin Lian came in last out of four candidates with only 4.91% of the total votes and immediately lost $48,000 of his election deposit for failing to garner more than one-eight of the total votes. 

1. The savior of Singapore-Mr Tan Kin Lian

Again, with guns blazing, Mr Tan Kin Lian started blabbering weird stuff about influencing government policies if elected and he proudly proclaim that he will use the President's veto powers to ensure that government policies align with his vision and goals. 

"Mr Tan’s aim is unrealistic and misleading", said political analyst at Nanyang Technological University (NTU) Felix Tan. “That is not the role of the President. They do not guide policies, to begin with. That’s the role of the government of today.” Please refer to Channel NewsAsia.  

2. Sparring with Mr Tan while he was in NTUC Income Insurance

I had some personal interaction with Mr Tan while he was the boss of NTUC Income Insurance. Many years back, whole-life limited payment plan just came out. I was a NTUC Income policy holder. I wrote in to feedback to him that NTUC Income should learn from other insurance companies like Aviva which are offering premiums payment of 10 years to 20 years limited payment for whole-life plan instead of NTUC Income traditional policy of paying till one is age 85 years old (pay whole-life indeed even after your retirement). Mr Tan jumped the gun and replied in a hostile manner to demand to know whether I am an agent from other rival insurance company. This left a lasting bad impression on me about his personality.

3. Have you heard him speak publicly?

In 2011, there were various interviews held with the different presidential election candidates. I almost fainted when I hear him speak. Personally, I think I will die from embarrassment if he was ever elected as our Head of State representing Singaporeans.

Parting thoughts

I am not sure why the Presidential Elections Committee allowed Mr Tan Kin Lian to run in 2011 Presidential Election. I hope they don't make the same mistake again and disqualify him immediately for 2023. This will also help Mr Tan save his deposit and hard-earned money from being forfeited. 

My Insurance Agent Introduced Innovative AIA Investment Product That Gives Back Huge Return of 53% Bonus Within First 3 Years Of Yearly Invested Amount!

Recently, my insurance agent (her name is "Aura") arranged an appointment with me to introduce a highly innovative investment product from AIA. Ms Aura further mentioned that AIA is now working with Blackrock to manage their assets. She told me that for a yearly sum of S$12,000 (payable for 10 years), the AIA Pro Achiever product gives very high return of 15% bonus for the 1st year, 18% bonus for the 2nd year and 20% bonus for the 3rd year which is a whopping cumulative 53% bonus! 

Well, it certainly gives me the false impression that one is given a stellar S$3,960 of investment return (+16.5% return) out of S$24K of capital being invested into this innovative product within 24 months of investing S$24K in pre-paid premiums. At the same time, 100% of the premiums paid are being converted into Investment Link Product ("ILP") units according to my agent. So it appears that AIA is doing charity work?

There is no free lunch and "out of the world" investment return from insurance companies

Taking into account the many mouths to feed in AIA, its fund manager as well as the commission for the insurance agent herself, everyone will know that this product does not make sense if it is giving out freebie and cannot be behaving like a normal unit-trust. Investment Linked Products from insurance companies are still murkier than mud with a total lack of transparency and worst still, as hard to comprehend as ever on the strange technical terms that their agents use to muddle their prospective victims customers.

The marketing gimmicks embedded here is that the impressive returns are actually "bonus" as well as the myriad of well-concealed charges to claw back the "bonus". For those who en-cashed their whole-life insurance bonus before will know that it is not a S$1 to S$1 basis when insurance bonus gets converted to cash equivalent. So I seriously do not understand why insurance agent like Aura keeps hammering on this super-size bonus award as their key selling point for an investment product. I thought the key selling point should be the type of investible funds but alas for me, a whole half an hour was spent by Ms Aura talking about the 53% out-sized bonus instead. 

For those still interested, I list down the key points of this "innovative" product and you can contact your own AIA insurance agent over this irresistible product:

1. What is this AIA Pro Achiever that brings in such stellar return for investor?

2. High "Bonus Return" from this product

3. 100% of your premiums used to buy into units immediately? So free sales charges-so awesome wor!

Parting thoughts:

There are sales charges and other yearly fund management charges that one needs to clarify in detail over this "innovative" ILP product. 100% premiums invested upfront into units does not mean that the insurance company cannot sell the units subsequently to pay for the above mentioned charges plus the "special bonus". Last but not least, do your own due diligence. Don't get smoked by your own insurance agent and then ended up buying something that you will regret later on. Have a great week ahead folks! 

Private Medical Shield plan Insurers Flip Flop and Making Customers On Full Coverage Rider Co-pay Medical Fees Now

NTUC Income has begun informing policyholders on private integrated enhanced shield policies ("IP") that they will soon have to co-pay part of their bills when their policies are renewed starting from April 2021. As a matter of fact, four other insurers (Aviva, Prudential etc) having IPs with such riders say  that they are moving policyholders to co-payment riders, or considering doing so.

From 2018 to 2020, cost of IP has increased by almost 40% as policy holders on such full coverage riders plans have been overconsuming medical services and doctors have been over-charging according to the Ministry of Health ("MOH"). I reckon that the mindset of many such policy holders and private doctors are that it is ok to do so as "rich insurance companies" are picking up the tab. Such ugly behaviors lead to free riding on other policy holders who have to pay exorbitant yearly increase in hospitalization and medical premiums.

With the revert back to co-payment for policy holders on previously full paying riders, the insurers in return will reduce the premiums. NTUC Income will reduce its insurance premiums by up to 50%. 

Such flip flop by the insurance companies do not look good on them. MOH also should never have allow the private insurers to do away with the co-payment concept in the first place.  Economics theory (as well as basic common sense) have all along states that giving products and services free will lead to over-consumption. Churning out new products to grab market share at the expense of rationality has led to losses in offering IP and an unsustainable spiraling rise in premiums. In short, the insurance companies will be perpetually chasing after their own tails due to this ugly creature that they themselves have created hence they now need to extract themselves out of this mess.

Whole-life Critical Illness Insurance Plan Is A Heavy Boulder to Shoulder

What happened to the talented Chadwick Boseman can happen to anyone. Chadwick, the Black Panther superhero, died of colon cancer at the young age of 43 after fighting it for 4 years. I was sadden at the passing of Chadwick who is still so young and has many more to offer to the World. The growing rate of this terrible disease in young people is alarming. Critical illness policies are thus important and essential for protecting yourself and also your loved ones while one is still in the prime of one's live. During my last posting on my struggle with whole-life insurance policies in March 2012, I have briefly mentioned the 3 whole-life critical illness policies, namely, (i) NTUC Income, (ii) Aviva and (iii) Tokio Marine Life, that I have been holding. I like the NTUC Income Living Policy series as it generates good cash value over the many years that I have been holding. However, this is a traditional whole life policy that one is required to pay until age 85 years old unlike limited payment products that is the norm these days. I simply cannot envision myself paying S$1,500 per year up till 85 years old. 

Whole-life CI is necessary but very expensive and a constant struggle to maintain

I was extremely happy when my Aviva critical illness coverage policy became fully paid up in 2017. It feels as if a big stone was taken off my shoulder. However, the bad news is that the agent which sold me the Aviva policy convinced me to sign up for a new AXA plan with coverage of another S$100K for early critical illness coverage and this was another limited payment plan of 15 years at S$2,484.90 per annum.

2 months ago, I decided to terminate my NTUC Income Living Policy as I have enough of paying and paying non-stop to sustain this traditional whole-life plan that does not make sense to me since day 1. I was happy to take out the cash value that had built up and converted them into my emergency cash on hand. This also means I get to save S$1,500 every year from paying NTUC Income.

Life is full of contradiction

The strange thing is that after I cancelled the NTUC Income whole life policy, I suddenly felt a tinge of regret. I know it sounds ironic. But I then decided to sign up for another standard critical illness policy with Prudential but this time round, I opted for a 15 years term policy for S$100K of coverage for normal critical illness at a fraction of the price of whole-life for only about S$400 per annum. I guess I just want to have a peace of mind to have something extra before my kids finished their studies and are able to stand on their own feet.

Summary
For those who just started work, paying for whole life critical illness insurance is a huge burden with the low start-up salary package as one strives to work his or her way up by building expertise and on the job experiences. But guess it is an issue of having sufficient financial discipline to endure the hardship upfront and enjoying the fruits of the labour after the policy became fully paid up where  one eventually gets the protection for life. 

Investment Linked Products- High Returns of 6% to 9% per annum by Fund Managers So No Worries On Your Retirement

I had another strange encounter with an insurance agent at a roadshow held at a suburban shopping mall yesterday evening. While shopping around,  a persistent lady kept asking me whether I can help her do a survey and offered a packet of "Himalaya Salt" to me as souvenir. She also assured me that her colleagues and herself are not pushing any products and just wanted to do a quick financial survey. Knowing full well the pattern of the marketing tricks employed to make prospective preys less guarded by offering the free gift, I still decided to sit down with her to do the financial survey as I was curious to see what latest sales pitch and gimmicks they have up their sleeves these days. I also rejected the packet of "Himalaya Salt" being offered to me. 

Which financial products have you heard before? Investment Linked Products, Endowment, Insurance, Unit Trusts?

Wow, the insurance agent wasted no time to educate me. She told me I must already have insurance coverage such as critical illnesses and hospitalization plan. Then she started to ask the next question of which product do I think has the highest return and to guess the annual return rate before moving on to Investment Linked Product that she is marketing. So long for "this is not a sales talk" claim. She told me that investment linked products with her company offered 6% to 9% annual return based on historical performance of the different funds. In addition, her insurance company will give 65% return on the initial investment. 

Investment linked products are good- It actually invested 100% of your premiums directly into the funds contrary to popular belief that not 100% are invested.

I could not believe the insurance agent said that and so I asked her to repeat herself. I then asked her if 100% are invested, then how do you earn a commission and also cover for the insurance expense portion, no matter how little or immaterial that she is asserting. 

"Are you sure this is not the case of 100% conversion upfront of your investment and then selling off the units to pay for maintenance expenses of the policy?"

The agent just smile and repeat 100% are invested to side step around the point.

Actually in a way, 100% of your capital are indeed used to ïnvest" into the units in the fund but the fun fact that the insurance companies will deduct your units to pay for expenses are strangely left out at this point if one does not ask for clarification.

Annual return of 6% to 9% and additional 65% bonus return on initial capital offered by the insurance company

I went on to challenge her that 6% to 9% annual return and a 65% return on initial capital would most likely means that her insurance company is a charity organisation and making huge losses.

The annual return then suddenly went down to 3.5% to 6.5% as she has conveniently omitted the annual expenses of around 2.5% for the product. The agent went on to clarify that 6% to 9% are the "gross return".

Also the 65% bonus comes with some caveats and lock in and does not apply to the entire capital invested. 

Damn it, I was getting bored. The usual masquerading and dressing up of the returns by giving half truth is still part of the bag of tricks employed these days. Sell based on the half truths. Not wrong to tell prospective customers that the fund generated 6% to 9% per annum. The mindset is if I never tell you got expenses deduction, it does not mean that there is no expenses deduction. Just that I never tell you at this juncture. *Clap*Clap*.

Are investment of the asserted 6% to 9% guaranteed?

The agent replied that investments are never guaranteed. But not to worry, if the investment returns dropped below the 6%, she will help you switch to a better performing fund. The insurance company that she is working for has lots of good funds for your investments and offered free switching services.

After hearing the sales talk for 15 mins, I decided that I need to go back for dinner and said bye bye to the insurance agent. I was glad I did not take the "Himalaya Salt" from the agent. She can thus use the saved packet to get another prospective customer to do the survey.

Health Supplements Better or Spend Money On Insurance Coverages Better?

Since my monthly earning is limited, I sometimes ponder over the question of whether I have been spending too much money sustaining insurance premiums from all the policies that I have purchased for myself as well as for the entire family.

I like insurance which is the transfer of risk to insurer for protection. However, insurance and the protection can only bring benefit once certain conditions are triggered which means the unfortunate event already happened. The money does make life easier for the family but it does not buy you any additional happiness at that juncture.

Health supplements are also very important especially as one aged and all sorts of funny ailments started kicking in. Most folks started to get high cholesterol issue. Other metabolism disorder due to aging means the risk of hypertension or diabetics shoots up drastically. Chronic diseases lead to a deterioration in the quality of life.

Osteoporosis is also becoming more prevalent these days….I have an auntie who slipped in the bathroom while showering and the bones in her right foot ended up shattering like glass and broke into hundreds of finer pieces. The shocking thing is she really merely slipped and did not even fall down as in slipped but managed to recover her balance in time….just that the extra impact of the foot landing during recovery seems strong enough to cause the bones in the foot to shatter into pieces. She told me that since I am still not as old as her, I better take more calcium so that I don’t regret it during old age.

So with unlimited wants but limited resources, which one is more important? Health supplements or just allocate everything into insurances and investments? 

New insurance- Early Critical Illnesses

I finally completed the 15 years limited premium payment for my Aviva traditional whole-life Critical Illnesses coverage from Jan 2017. It was a wonderful feeling to have freed up additional cash of $350 per month for other use. Metup with my Phillip insurance broker recently and I was happy that she still looked the same albeit the passing of 15 years (we did not meet again after the Aviva policy was signed).

The industry has launched various new products on early critical illness claim. Given the relative higher probability of getting such dread disease and knowing that the protection for traditional critical illness came in only upon the final stages, I have signed up with AXA for a whole life early critical Illnesses policy of $100k enhanced protection value till age 70. The premiums are payable for 15 years for the life time protection.

This early claim critical illness policy is one product that I would highly recommend to everyone despite the exorbitant annual premiums.

Honeyed words by insurance agents- Beware!

Recently, metup with an Independent Financial Advisor ("IFA") and a tied agent from Manulife to buy life insurance critical illness policy and medical insurance for my new born. For critical illness life policy, the IFA came up with 4 products from 4 different insurance companies whereas the Manulife agent came up with only the Protector 20 plan. I compared the protection value, cash value and lifetime premiums and finally decided on the Vivolife policy from NTUC Income. The policy from NTUC Income is a balanced one in terms of protection and extremely high guaranteed cash value.

The Manulife agent was pretty upset. She persistently ring up to try to change my mind. Now, she mentioned that she has another better product called the Ultimate Protector series that can beat Vivolife and that Manulife has one of the best annual investment return out of all the insurance companies. Also, she told me that IFA also sold products that give them the highest commission and begin her pitch that IFA and tied agents are the same. Also she insisted another meetup face to face and did not want to send the soft copy of the proposal over. So, in the end, gave the agent another chance. Was almost swung by her sales pitch but due to my previous bad experience with insurance agents, my internal alarm rang non stop and I  told her I will need to take time to relook the detailed proposal.

Ultimately, I discovered that the Ultimate Protector policy from Manulife has very poor cash value upfront. The guaranteed portion is just too pathetic. If one can assume that the investment returns from Manulife is spectacular every year, then it will be unbeatable. I still prefer guaranteed portion. Also disullionised with the bad mouthing by one agent against another agent...it's pretty much a dog eat dog world it seems. The moral of the story is to be extremely skeptical when dealing with any insurance agents lest one become the ultimate fool.

Honey Honey Words.....Yummy!

Danger of investment linked products

Recently, the STI shot above 3000 mark and I decided that it is time to surrender my Investment Linked Policy (ILP) with Manulife. This was a balanced fund investment using my CPF investment account during 2006. The return was around 4.5% per annum on average which is very amazing.....amazing in the sense that the Singapore government is also paying the same rate for money left in the special account. I figured that I have been screwed as I took on market risk but the end result was that it cannot beat the risk free interest rate. So time to surrender and send the funds back to the CPF board and say bye bye to Manulife.

The problem with surrendering the ILP is that it is only effected 1 working day after you submit your application. 1 day is a very long delay as history has proven that stock market can drop a few hundred points during economic crisis. 

Another unique feature of ILP is that even if the funds made losses, you still need to pay them management fees. This is tantamount to rewarding people for poor performance. 

Last but not least, ILP always come with extra insurance that one does not require. This is a scam to hide the additional charges. Investment and insurance are two vastly different subjects in financial planning. Mixed them into one product and what you get is as clear as mud. 

My struggle with insurance policies

My first insurance policy was actually an accident policy purchased during National Service with an agent (known as Mr A-see my previous post) from NTUC Income. Interesting thing about this accident policy was that it has a savings element to it which if you think hard, does not make any sense at all. Insurance is protection. Savings is just pure savings. The two does not mix together. 8 years later, I terminated this policy which requires monthly premium of S$32.50 as it just make me look extremely silly.

Another insurance policy that Mr A advocated was to buy life coverage for death and permanent disabilities. He made lots of commission from me selling me coverage for S$100K. Even more ridiculous was pushing me to sign up another S$50K a year later. For death and permanent coverage, one does not need it forever. You only need it while accumulating wealth and to cover for any unforeseen events to ensure your loved ones can survive financially. As such at most 25-30 years term policy should suffice. Beware of insurance agents or financial advisors who try to sell a life coverage. The commission from life insurance sales is a lot more than term insurance and there goes their independence. If possible, try to get insurance planning from financial advisory firms that charges fixed fees. (Note: When I realised I was being misled by Mr A, I terminated the life coverages and incurred S$1.5K of losses...just no point to continue when the money saved from buying term policy can generate a far better return to the savings components of life plans.)

The only life policy that I ever purchased was for critical illness. Currently, I am holding  on to 3 critical illness policy from (i) NTUC Income; (ii) Aviva and (iii) TM Asialife. I like the NTUC Income Living Policy series as it does generate good cash value with the double bonus given out on every 5th anniversary of the Cooperative. However, this is a traditional whole life policy that one is required to pay until age 85 years old. In year 2006,I wrote in to the then CEO, Tan Kin Lian on my suggestion for a limited payment plan which other insurance companies are offering but was told "there were reasons" why they only have traditional wholelife payment plans but will look into it.

 I loved Aviva and TM Asialife as these companies offer limited payment critical illness coverage. I just can't envision myself paying for insurance when I am already retired. Since then, NTUC Income has came out with it's own version of limited wholelife plans to remain competitive. TM Asialife is the only insurance company in Singapore that has this awesome record of never ever cutting their yearly bonus.

Disability income is another crucial piece of protection that everyone should have in his or her arsenal. This type of unique insurance offers you protection against short and long-term disability caused either by accidents or illnesses by providing you with a replacement income that continues to support you and your loved ones during disability. The flexible coverage is guaranteed renewable and continues until your chosen age of retirement (55, 60, or 65 years). In the Singapore market, seems that only 2 insurance companies dare to offer this coverage, namely, Aviva (IdealIncome) and Great Eastern (Pay Secure). Manualife also offers something similar in lump sum payout in the event one is not being able to work but there is a distinct tightening in definition of the events that triggers the different tranches of payout....so be careful when shopping around for such coverage.

Last but not least, hospitalisation and surgical plans for healthcare. If possible, everyone should opt for the best graded plan that covers private hospitalization. In the event that one is sick, one should be looking for the best medical treatment available and not worry about whether such treatment covered under the current plans.

Be smart and don't get con

I recall my first investment was through a insurance agent (Let's call him Mr A) from NTUC Income (Insurance Co-operative). It was called the Ideal Policy. It is sold to me as an investment link product with a substantial amount of monthly premiums going in a balanced fund. Problem is 15% of the first 3 years of premiums goes into payment for commissions and other overheads.Thereafter 100% of premiums paid gets invested fully into a diversified fund.  At that time, Mr A marketed himself as an investment guru and he claimed that he has helped his other clients double their initial investment outlay through skillful top up of funds at the right time. Mr A seems to possess the amazing ability to enter and exit the market!

The fact that even before investing, one would have lost 15% per annum does not seemed too bad at my young age then. I have always thought that no pay no gain....and indeed, I paid hard to learn a great lesson! I never made any money from the NTUC Income investment linked products. The promised top-up by Mr A at the right opportunity never materialized throughout the many years I stayed loyal to him.... I got squeezed dry. 

Insurance is essential

To achieve financial independence, insurance will form a critical piece of one's financial armour. The keyword here is protection.

Life is like a box of chocolate....you never know what you're gonna get. Critical illness may strike and inevitably inflict a heavy toll in the painstaking built up of investments and savings. Also, if one were to pass away suddenly, it would be totally irresponsible to leave your loved ones struggling on their own.

A responsible man thus must always channel whatever resources he has into obtaining sufficient protection even before embarking on the road to accumulating wealth via investments....on a personal note....this is my number one golden rule in financial planning. It is plain stupidity to argue that one should channel all resources into investments as soon as possible to take advantage of the higher yield. Insurance is never a creature of investment....it is the armour to protect loved ones from the harsh and cruel events that fate may deal on us.