In the past, the insurance companies observe a high standard of conduct in the distribution of the surplus. In recent years, this standard has been eroded. Many insurance companies are now prepared to short change their policyholders in the pursuit of more profit for their shareholders or for their sales growth. For example, they declare a lower rate of return on their old policies and introduce new products that give a better return to boost their sales. This is unfair and at the expense of the old policyholders.
If this happens to you, you have a recourse. There are regulations in Singapore to ensure that the policyholders are fairly treated. If you have bought a participating policy and have been given a poor rate of return, compared to other policyholders who have bought a new series of products, you can lodge a complaint with the regulator, which is the Monetary Authority of Singapore. They will take up the complaint on your behalf and will ask the insurance company to justify its stand.
If you are going to make a long term commitment in a life insurance policy, you should choose an insurance company that can be trusted to act fairly in the interest of its policyholders. There is a lot of uncertainty at this time on which insurance company can be trusted to observe this principle. It is best that you do not put your long term savings in a life insurance policy, as you are subject to the risk of being denied a fair rate of return.
It is better to buy accident or term insurance to cover your risk and to keep your savings in a low cost exchange traded fund. Many of these funds are offered in the market.
You can get more details by reading the FAQs in my website.
Tan Kin Lian
Source: tankinlian.com
Pardon me for my ignorance. But I suppose the major part of life insurance is the coverage? Are consumers not taking a risk if they are not properly covered?
Hi H,
I believe Mr. Tan here is not talking about not getting insured but to seek less expensive ways of coverage and to channel the extra money for other uses.
After all insurance is only but a part of ones overall financial planning/ portfolio.
Cheers!