I REFER to yesterday's article entitled 'Ex-Income chief calls truce in dispute over bonus payments'.
I discussed with NTUC Income's management to seek an amicable solution that will be in the best interest of policyholders and the reputation of NTUC Income.
I have communicated two concerns on behalf of the policyholders:
First, the restructuring of the bonus has resulted in a lower annual bonus distributed yearly to policyholders. This is to be compensated by a higher rate of special bonus (which is not guaranteed).
I asked that there should be satisfactory assurance on the payment of the special bonus on surrenders and claims, so that the policyholders will not lose out due to this change.
Second, in some past years, policyholders suffered a bonus cut (compared to what was illustrated at the point of sale) when the investment yield was low.
As NTUC Income had earned a good yield of 7.8 per cent for the past 10 years, I suggested that the shortfall in the bonus for the poor years be restored as early as possible, subject to financial solvency.
The Straits Times reported a statement from NTUC Income that the old bonus declared was unsustainable. I disagree with this statement.
The actual yield earned by the life insurance fund was higher than the yield used to project the bonuses at the point of sale. In any case, NTUC Income has the option to adjust the bonus rates from time to time, to reflect changes in the long-term yield.
To allow more time to find a settlement, I indicated that I will set aside the Collective Protest for the time being and will not lodge it at the annual general meeting.
I hope that an amicable solution can be found subsequently, so that the protest will not be necessary.
Some policyholders have asked me to insist that they be given the right to choose between the new and old bonus structures. I hope that this is possible and believe it is the best option.
If NTUC Income's management is convinced that the new bonus structure is likely to give a better return to the policyholders, it should be able to convince most policyholders to move to the new structure.
This article was first published in The Straits Times on May 29, 2008
