Debunk Tan Kin Lian's views on medical insurance

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An honorable member of the Coffee Shop Has Just Posted the Following:

CURRENTLY, MediShield requires an annual premium that varies according to age. Younger people pay a lower premium, while older people pay a higher sum.
The Government is now planning to introduce MediShield Life, which covers people for life.
There has been some discussion about pre-funding for MediShield Life ("Problems with pre-funding" by Mr David Boey, last Tuesday; "Merits of pre-funding" by Ms Maria Loh Mun Foong; last Thursday; and "Caring for the old should be the norm" by Mr Geoffrey Kung; Forum Online, last Thursday).
The aim is for the insured person to pay a level premium to cover him for life. This is akin to a life insurance policy.
In both cases, the claim rate is lower for younger people and higher for older people. Pre-funding allows a person to pay a level premium that is deemed by an actuary to be sufficient for his lifetime.
There is, however, one key difference that makes pre-funding not feasible for MediShield Life.
In a whole-life policy, the sum assured is fixed for the duration of the contract.
For medical insurance, the cost of treatment is expected to rise over the years due to inflation. Also, the cost depends on the choice of hospital and specialists, and can vary significantly from one claim to another.
Some countries have adopted measures to make medical treatment more affordable for older people through cross-subsidies and supported by general taxation. They do not try to achieve this goal by using pre-funding under individual contracts.
Tan Kin Lian

http://www.straitstimes.com/premium/...-life-20131125


Despite his pathetic 30 years in the line, Tan Kin Lian does not even know how insurance works. The premiums paid are not just lying around collecting dust until a claim is made. It is invested in all kinds of instruments. That is why level premiums are workable in reality.

Let's say a person starting at 25 pays insurance and only makes a claim at say 65. That gives 40 years for his premiums to be invested. The job of the insurer is to ensure that the returns on investment keep pace with medical inflation.

It is far better to lock in a level premium at a possibly higher rate, rather than start off low but keep having your rate revised at the whim of the insurer. The insurer will have every incentive to eat you alive.

Whole life insurance does not have fixed sum assured as well. It grows at 1 to 2% per annum depending on how good the insurer is.

And cross funding is just a cute term to make the younger generation subsidize the needs of the older generation. As a member of the older generation, he and I would welcome it, but it is bad for the kids. That guy is pathetic.


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