Seth’s Blog on Finance

SM Goh Chok Tong’s Take on Insurance

A few excerpts from SM Goh Chok Tong speech at NTUC Income’s 40th anniversary:

Affordability of Term vs Whole Life

“What can we do to keep insurance protection affordable? I urge the insurance industry to make a more concerted effort to address this. Part of the problem lies in the conventional practice of insurers in bundling the savings and protection elements into what is known as Whole Life Plans. Since the savings element in such Whole Life Plans can be very significant, the insurance premiums could be 3-5 times that of pure protection Term Assurance plans, for the same level of protection. I faced the same problem when I first started work. I could not afford a Whole Life Plan but had the good sense to choose a Term Assurance policy.”

A hint at product-pushing, perhaps?

“The insurance industry should not always push for a Whole Life Plan as it may result in under insurance. It needs to place more emphasis on a pure protection plan like a simple Term Assurance which is a more cost-effective way of addressing the protection needs of Singaporeans.”

Go Beyond Tied

“The insurance industry should also find ways to reach out to more Singaporeans who are either uninsured or underinsured, and be prepared to go beyond the tied agency distribution model.”

Regulators to push for transparency

“MAS will also play its part in helping consumers make informed decisions when purchasing insurance. It will be working with the industry to enhance transparency in the disclosure of bundled insurance products such as the Whole Life plan. Currently it is unclear how much of the premium paid for a bundled insurance product goes towards providing protection, how much to savings and what the return on the investment is.”

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