CareShield Life: Make ‘actuarial report’ public?

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How much is the projected spending by the Government on CareShield Life in the future?

I refer to the article “Government refutes text message claims that it is profiting from ElderShield, CareShield Life” (Straits Times, Jul 2).
It states that “The Government has refuted claims made in a text message being circulated on messaging platforms that the ElderShield and CareShield Life health insurance schemes were introduced to reap profits off Singaporeans.

The text message also suggested that because the risk of severe disability is very low, it is unlikely that policyholders will make a claim.”

As to “The Government said on its website that it will not profit from CareShield Life.

The premiums collected and returns from investments will stay within the fund so that policyholders can benefit through higher payouts or premium rebates.

“Today, premiums collected under ElderShield are more than the claims paid out, as most policyholders are relatively young,” the website said.

However, these premiums collected do not become Government surpluses. Rather, they are meant for future claims – when policyholders become older and more of them make claims for severe disabilities” – why not make the actuarial reports for CareShield Life, Eldershield and MediShield Life public information, so that Singaporeans can have a better understanding of how they work?

With regard to “It also said that as the population ages, half of Singaporeans who are healthy at the age of 65 could go on to become severely disabled” – this estimate for the percentage of those who could be severely disabled do not seem to gel with the estimates that were given in Parliament? 

In this connection, according to a Parliamentary reply on 6 February 2017 – “The prevalence rate of Persons with Disabilities in Singapore is as follows:

Population Group
Approximate Prevalence Rate
Student population
2.1% of student population
18-49 years
3.4% of resident population
50 years and above
13.3% of resident population”

Persons with sensory (blind and deaf) and physical disabilities would constitute half of the disability group. The remainder comprises those with Intellectual Disabilities and Autistic Spectrum Disorder.”

Since “Persons with sensory (blind and deaf) and physical disabilities would constitute half of the disability group” – does it mean that those with disability such that it may not meet the claim requirements of not being able to perform at least 3 out of the 6 daily activities of living under CareShield Life (such as being blind and deaf), may be about 6.65% (13.3% divided by 2)?

So, does it mean that those who can claim under CareShield Life may be much less than 6.65%?

In this connection, “Nearly half of Americans who turn 65 — a common retirement age — will eventually enter a care facility because they are unable to perform specific ADLs. While the majority of care facility admissions will be for the short term (less than a year), about a quarter will stay longer than one year. Typically, long-term care insurance coverage for nursing costs requires an individual who is unable to perform two or more of the six ADLs” (investopedia).

So, how likely is it that those who can claim under CareShield Life will do so for their lifetime or for 10 years as the media has been illustrating as an example, given that the above statistics for the United States are based on 2 ADLs, instead of the required 3 ADLs in Singapore?

In respect of “From 2013 to last year, the annual claims paid out rose by 12 per cent more than the annual premiums collected, which went up by 3 per cent – if we assume that the accumulated surplus is now $3.6 billion and the claims last year was $30 million – using the calculator at http://financeformulas.net/Present_Value_of_Growing_Annuity.html – the projected number of years into the future for the accumulated surplus (assuming 4% interest and 12% increase in claims per annum) to run out is about 32 years.

However, the above does not account for the current 3% rate of increase in the premiums collected. So, how much longer may it be if this is included – about 40 years?

Also, given that the Government does not spend any money on ElderShield – why are we collecting such arguably, high premiums now and in the past?

So, to what extent will CareShield Life be like ElderShield in respect of premiums, claims, surpluses, etc?

$2.6b in premiums, $100m in claims

As to “While the expected median duration for severely disabled individuals to remain in disability is around four years, three in 10 severely disabled individuals are expected to remain in disability for 10 years or more”” – why are there also no statistics on the claims to premiums ratio of the ElderShield scheme, from its inception?

In this regard, according to the article “Gan Kim Yong: $2.6 billion collected in premiums for ElderShield insurance and around $100 million paid out in claims since 2002” (theonlinecitizen, Feb 18, 2017)

– “from 2002 to end-2015, about $2.6 billion have been collected in premiums for ElderShield insurance and around $100 million have been paid out in claims, adding that about $130 million in premium rebates have been given to policyholders so far, the first tranche in 2007 and another in 2012.”

What is the accumulated interest (investment returns) on the excess premiums over the last 15 years? Will it increase the total excess premiums accumulated to over $3 billion?

When will annual claims exceed premiums?

Also, when do we project that the current trend of premiums exceeding claims every year to end?

Claims ratio for last year?

For example, what was the claims to premiums ratio for say the last year?

Not spending a single cent?

When will the Government start to allocate some of the Budget into ElderShield or CareShield Life, as it does not cost the Government any money now, or possibly in the future too, as long as from a cashflow perspective – the cash inflows exceed the outflows annually?

Leong Sze Hian

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About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.