Insurance industry in 2016

2016 was a challenging year for the insurance industry. Other than the economical changes that affected the financial sector, FinTech became more common to consumers and they have more choices when it comes to buying an insurance policy. There were several regulatory changes too. So, how did the insurance industry ended in 2016?

According to reports from Life Insurance Association(LIA), the total new business underwritten rose 10% to SGD3.29bn  in the year 2016 from 2015. Out of this amount, SGD 2.26bn were from annual premium products .

Therewas a minor shift in distribution channel of insurance policies as well.

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Common Reporting Standard

January was a busy month for some financial institutions(FIs) as the Common Reporting Standard (CRS) was implemented on the 1st Jan 2017.   The FIs may be banks, specified insurance companies, investment entities and custodial institutions.

For accounts that were opened before 1st Jan 2017, the FIs may contact the account holders to declare their tax residency. This declaration of tax residency will be a standard question in the application forms for any accounts open after 1st Jan 2017. In short, there is nothing you need to do if the FIs did not send you any forms to update your tax residency.

  • What is Common Reporting Standard?

The CRS is an internationally agreed standard for the automatic exchange of information on financial accounts between jurisdictions for tax purposes. It is to enhance tax transparency to detect and deter tax evasion through the use of offshore bank accounts.

  • How is a person’s tax residency determined?

It is oftenly mistaken that a person’s citizenship is the same as the tax residency.

For the purpose of tax, a person’s citizenship is secondary. In general, the tax residency of an individual is determined by the person’s physical presence or duration of stay in a jurisdiction in a year. You are a tax resident if your stay in that jurisdiction exceed 183 days in a year.

  • How CRS works?

(Source:www.newgensoft.com)

 

Please speak to your tax professional if you need more clarification and for more information on CRS, please visit IRAS.

IBF Standards

The IBF Standards are a set of competency standards for financial skills. It is a comprehensive quality assurance framework with both an accreditation and a certification system.

There are 3 levels of IBF Certifications as shown below.

certification_process(source:www.ibf.org.sg)

 

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More information on can be shared from this YouTube clip

Funny incidents at work

Sharing some funny incidents that happen in the course of work.

1) I was explaining a medical plan to a prospect…
Me: This plan will cover you globally, 24 hours per day.
Prospect: You mean I cannot claim anything if I’m injured on the 25th hour?

2) There’s a medical plan that have am accumulative limit of USD850. You can use it for Mammogram, PAP smear test, Colon cancer screen, Prostrate cancer screen & other prevention test. After explaining, Prospect cited an example.
Prospect: Does that mean if I claim $200 for PAP Smear, the max I can claim for Prostate cancer screen is $650?
Me: Technically you are right but that is very unlikely to happen….

3) There is a particular critical illness plan provide benefits for Death, Total & Permanent Disability(TPD) and multiple critical illness claims as compare to most that will terminate once you make a claim. For e.g. in most policy where a insured claims say Major cancer, the policy will terminates once the payout is successful. This policy allows the claims for Major Cancer to be paid and if the insured suffered stroke, he can claim for stroke again.

The prospect understood the plan well and then asked,” How about death & TPD? Can do multiple claims?”

 

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Happy Lunar New Year

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快马扬鞭迎羊年,羊年转眼身边到。

事业走上羊关道,志得意满人欢笑。

夫妻恩爱人羡慕,幸福生活总围绕。

健健康康无烦恼,羊年大吉乐淘淘!

May you have a year filled with good health & plenty of wealth.
Wish you success in your career and happiness of your family!
Have a Happy Lunar New Year & a Happy Holiday!

Lunar New Year cards

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Lunar New Year cards for my Chinese Clients. All ready to be mailed!

Are you paying more than what you should for your mortgage loan?

If you are among those who had took up a mortgage loan in the last few years, you might or already seen an increase in your loan interest rate. The bad news is expect a higher interest rate in the near future as Fed will increase the interest rates again and again.

images (9)Mortgage loans interest are usually peg to SIBOR. In the first week of Jan 2015, we saw SIBOR increased from 0.577 % to 0.620%. That little jump in figures translate into a jump of 7.45%! The experts had forecast mortgage loan interest could even tripled by end of next year. Brace yourself for that’s what is going to be translated into your repayment amount. While you will not see your installment increase by 3 folds, do expect a significant increase in your repayment.

Here’s the good news – There are a few options to minimise the damage.

1) You can do a re-financing with a bank that gives a lower interest rate. There’s quite a few who did this with my colleagues and they managed to save a few grands from their interest. However, this may cost you some administration and legal fees.

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2) Convert it to a fixed rate loan if you are on floating rate. You may pay slightly interest now but you save in the long run. Likewise, you may incur some administration and legal fees.

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3) Assuming the above two options are not feasible, it will be good to re-look into your mortgage insurance to assess if it is still sufficient to cover your loan amount after the interest rate hike. A higher interest would mean a higher debt and your coverage amount should be able to cover this amount.

Do talk to your financial advisers to look at the different options and weight what is best for you. I am contactable at kimheng@firstprincipal.com if you need any assistance with these.

What is the cause of your donation?

There was a donation drive on local television last night and callers just need to dial certain numbers depending on the amount that they wished to donate. My elder son wanted to make a call as well. Although his purpose was for charity, the intention was for fun.

Instead of simply allowing him to make the call, which I will make anyway, I asked him,” Who are you donating to and why?” He could easily tell me the beneficiary of the donations as it’s shown on the screen but he got stuck with the cause of the charity organisation.

I told him to Google on the charity organisation. A call that might ended in 10 seconds took almost 10 mins…for him to find out more about about the organisation, what they do and how will his donation be used. He finally made the call and I told him the money will be deducted from his pocket money 🙂

I could had just let him make the call for the fun of it while doing some charity work but I want him to understand that while it is important to have charitable acts but when we make a donation, we got to really ask who are they, why are they doing it and charity takes more than financial help. That’s the same as those who walk around with metal tins asking for donation…If they don’t know the cause for them to raise fund, I will usually not donate.

And more importantly, it also prevent him to fall into scams.

Saving plans for low-risk takers

With the current interest bank interest sitting at 0.08%-0.5% p.a, how much are you getting for your dollar in the bank? Every $10,000 will get you $8-$50 and that’s a wide variation across the banks. It pays to do some homework before locking your money in a Time deposit.

That’s $50 of interest earned every year at the highest rate offer at 0.5% p.a. Your total returns will be $10,201 at the end of four years if you choose to renew this time deposit every year. How does that sound to you? For someone who is able to take some risk, you can do some investment but what if these are money you are not prepare to risk?

For a limited period, you can consider an option to put your money aside with an guaranteed effective yield of 1.68% p.a. What that means to you is for every $20,000 you put in a bank at 0.5% p.a, the returns after 4 years will be $20,400.

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Given the same amount of time and money, the returns from this saving plans will be $21,380.1.68
Do drop me a email at kimheng@firstprincipal.com if you need more information 

(Unpublished) Letter to the forum page.

A recent visit to CPF Board to request for a relative’s CPF Statement was not approved. I was surprised to know that third party request is not available since 2004.
The first thing that came into my mind was the report from Straits Time dated 7th Jun 2014 with the heading “1,560 Singpass accounts possibly tampered with”.
It was possible to retrieve a statement over the CPF counter if we have an authorisation letter, the owner’s NRIC and the authorised person’s IC. What this mean is the owner will know every time you request for a statement because you need to ask him for his NRIC.

Without the third part request, the only way to retrieve a statement is to request for a password. For someone who may not be IT Savvy will need a third party’s assistance to access his CPF using his password. What this means is the third party can easily change the password and access multiple times without the knowledge of the account holder. While there are laws to bring these people to court, it may be too late for e.g. if someone logs in and make an irreversible transaction from the Ordinary to Special Account. 

May I suggest CPF to re-look into this option as there will be elderly or disabled people who may not be physically fit to visit the CPF Branches. They are people who may not have Internet access or knowledge to log in upon getting their password. A third party request may be useful for these groups of people and I believe it can reduce the number of tampered accounts.The contact number of the owner can be a requirement so the CPF Staff can always verified with them in case of doubt. We should never compromise security with convenience.