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The life insurance landscape has changed considerably
22 Jun 2016 (751 views)

During the 30 years that I was CEO of NTUC Income, I followed a simple but very important principle - the insurance products that are sold by NTUC Income should give good value to the policyholders, i.e. that they should get insurance coverage at a lower cost and an investment return that is higher than what they can get from other types of investments.

I was not only giving them a better return compared to other insurance companies, but I aimed to give a better return compared to other types of investments.

I was focusing on the investments that are available to ordinary people, e.g. unit trusts, fixed deposits and bonds. At that time, the low cost index fund (such as the STI ETF) was not available. If someone is an expert in investing in shares, he or she is not "an ordinary people" and can do better than buy a life insurance policy from NTUC Income. I was not focusing on these investment experts.

I was not focusing on how much profit could be made by NTUC Income. It has to make a profit but the maximizing of the profit was not the objective. The objective was to provide insurance products that the buyers can get good value, i.e. low cost insurance coverage and a good investment return.

I was able to achieve this goal by operating efficiently and at low cost. At that time, NTUC Income was operating what can be described today as a "low cost index fund".

Due to competition, the other life insurance companies had also to provide returns that are not that far short of what was available from NTUC Income.

The environment today is different in many significant ways.

First, most life insurance companies how have the goal to generate as much profit as they can. They do not care much about the return earned or the losses suffered by their policyholders.

Second, the regulator, namely the Monetary Authority of Singapore, does not pay attention to the fair treatment of policyholders. They expect the policyholders to be educated to look after their own interest. This is a mistaken concept, but it has been operating for the past two decades.

Third, NTUC Income, under its new management, does not seem to be keeping its expenses at the low level in the past. It is also offering new insurance products that do not provide better value to the policyholders compared to other types of investments.

Fourth, ordinary people can now invest in a low cost index fund, such as the STI ETF, to enjoy the benefit of diversification and get an attractive return over the long term.

Under the new environment, I advise consumers to avoid investing in all types of life insurance products. To get the insurance coverage, they should buy term insurance or personal accident insurance.


The life insurance landscape has changed considerably
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During the 30 years that I was CEO of NTUC Income, I followed a simple but very important principle - the insurance products that are sold by NTUC Income should give good value to the policyholders, i.e. that they should get insurance coverage at a lower cost and an investment return that is higher than what they can get from other types of investments.

I was not only giving them a better return compared to other insurance companies, but I aimed to give a better return compared to other types of investments.

I was focusing on the investments that are available to ordinary people, e.g. unit trusts, fixed deposits and bonds. At that time, the low cost index fund (such as the STI ETF) was not available. If someone is an expert in investing in shares, he or she is not "an ordinary people" and can do better than buy a life insurance policy from NTUC Income. I was not focusing on these investment experts.

I was not focusing on how much profit could be made by NTUC Income. It has to make a profit but the maximizing of the profit was not the objective. The objective was to provide insurance products that the buyers can get good value, i.e. low cost insurance coverage and a good investment return.

I was able to achieve this goal by operating efficiently and at low cost. At that time, NTUC Income was operating what can be described today as a "low cost index fund".

Due to competition, the other life insurance companies had also to provide returns that are not that far short of what was available from NTUC Income.

The environment today is different in many significant ways.

First, most life insurance companies how have the goal to generate as much profit as they can. They do not care much about the return earned or the losses suffered by their policyholders.

Second, the regulator, namely the Monetary Authority of Singapore, does not pay attention to the fair treatment of policyholders. They expect the policyholders to be educated to look after their own interest. This is a mistaken concept, but it has been operating for the past two decades.

Third, NTUC Income, under its new management, does not seem to be keeping its expenses at the low level in the past. It is also offering new insurance products that do not provide better value to the policyholders compared to other types of investments.

Fourth, ordinary people can now invest in a low cost index fund, such as the STI ETF, to enjoy the benefit of diversification and get an attractive return over the long term.

Under the new environment, I advise consumers to avoid investing in all types of life insurance products. To get the insurance coverage, they should buy term insurance or personal accident insurance.