According to this friend of mine who IS well-versed with insurance laws in Malaysia, section 166 applies when you make a nomination when buying an insurance policy after marriage. Only your spouse and/or children can be nominated. Your parent can be nominated under this section 166 if, at the time of purchase, you are not married.

Nobody else qualifies as a nominee under section 166. When you die, the insurance money goes into a Trust under this policy and then gets paid to the nominee who is now the beneficiary of this Trust. The beauty of this Trust is that no creditor can claim against it. So you can’t have the creditor coming up to the beneficiary and trying to make a legal claim on the insurance money.

On the other hand, when you buy an insurance policy before marriage, the person you nominated in the policy – who can be your sibling or a relative or even a friend but other than your parent – can only receive the insurance money on behalf of your estate. This means that the nominee cannot claim the money as belonging to him (or her). Instead, the nominee is duty bound by law to pass the money along to the rightful Executor or Administrator of your estate.

What can be done if the insurance money is not handed over by the nominee? No need to make a hue and cry, said my friend. Get a lawyer to send him a “friendly” note. He’ll get the message.

So what happens next to the money once it goes into your estate? Only two things: first, if you die without a Will, the money is distributed according to the Malaysian Distribution (Amendment) Act 1997 and everyone with the legal right to be your beneficiaries are entitled to their portion of the policy money.

Second, if you die with a Will, the money is distributed according to the instructions in your Will. Unfortunately for most people, there is no provision in their Will to deal with such insurance money. In this case, the money goes into the residuary portion of the estate and from there, it is distributed to the named beneficiaries of the residuary amount.

This may not be entirely to your liking because you may have intended that the money goes to the person you nominated originally. To get around that, you should seriously consider adding a clause in your Will to say that the policy moneys are meant to be given the persons nominated in the insurance policies. Remember, this is only for insurance policies under section 167 of the Malaysia Insurance Act 1996.

I guess these points should keep everybody happy, including the deceased.

Need to know more about writing your Will or creating a Trust? Click here to contact me. Thank you!

If you have ever been sold a financial product labelled ‘capital protected’ or ‘principal protected’ and did not know what the terms really meant, there is good news.

Singapore’s financial regulator has decided to ban their use because too many investors do not understand them.

What is more easily understood is ‘capital guaranteed’ — meaning the investor’s principal sum is fully protected – and this will be one of only two types of products allowed to be sold.

The other category? Everything else that is not capital guaranteed.

The Monetary Authority of Singapore (MAS) announced its decision yesterday as part of its response to feedback that it had received on a slew of changes proposed in the wake of the collapse of Lehman-linked structured products.

These proposals, first released in March, were mooted in response to controversy over the way complex investment instruments were sold to people, including elderly and lowly educated folk.

Some of the key changes include requiring financial institutions to provide customers with simple, user-friendly ‘product highlights sheets’ and providing ‘health warnings’ on complex investments in appropriately large font.

MAS had also proposed that bank tellers should not sell investments and there should be a seven-day ‘cooling off’ period during which an investor could change his mind and pull out of his investment.

In a 19-page document yesterday, the financial regulator outlined public responses it had received, and said that it would adopt most of the proposals.

The ban on the use of the term ‘capital protected’ will apply to mass-market products familiar to retail investors, including structured notes, unit trusts and investment-linked life insurance policies.

Some investors had previously raised concerns that they had difficulty understanding what those terms meant, MAS said.

A ‘capital protected’ product is where the principal sum is ploughed into investments like bonds which, on maturity, are expected to provide the 100 per cent capital protection.

But this is not a certainty. ‘The bonds could turn sour and affect the value of the investment, and people may not get back 100 per cent,’ said First Principal Financial’s chief executive Mohamed Salim.

This is to be distinguished from ‘capital guaranteed’ products where an investor is guaranteed to get back at maturity the money that he invested on day one.

Financial advisers told The Straits Times that many retail investors, even more experienced ones, cannot differentiate between the two terms.

MAS said yesterday that one way around the problem was for the industry to develop a standard definition for capital protected products.

But it had found that all the suggested definitions tended to be too lengthy or not easily understandable by investors.

Capital protected products were popular in the years just preceding the recent financial crisis. One banker told The Straits Times that ’30 to 40 per cent’ of retail investment products here carried this label.

This is why consumer advocates are lauding the move.

‘The term principal protected has never been understood by retail investors. Now they’ll understand the terms of sales better,’ said David Gerald, president of the Securities Investors Association of Singapore.

The change will make it tougher for bankers to market these investments. One banker said some product manufacturers will find it harder to sell structured products in Singapore in future because they cannot distinguish the safer products from more risky ones.

But Singapore will not lose its competitiveness as a wealth management centre, he acknowledged, since the measures as a whole will provide more transparency and confidence.

Seah Seng Choon, executive director of the Consumers Association of Singapore, lauded the full list of changes, saying that they go a long way in promoting a higher level of disclosure and safeguard investors’ interest.

MAS said that it will issue further responses to more proposals in the fourth quarter. That is because some of them need further study. — The Straits Times

Here is an interesting story that appeared in today’s issue of The Business Times in Singapore. It’s saying that owing to the global financial crisis Malaysians appear to be the most averse among Asians to higher risk investment products. They have become more conservative in their choice of financial instruments.

According to the Life Outlook Index released by AXA, 67 percent of Malaysians indicated a preference for insurance products that offer protection as well as savings. It’s a ‘dramatic shift’ from aggressive to conservative strategies, and this is reflected in a big jump from 26 percent in 2007 to 45 percent of those planning to purchase life insurance.

The response rate for dual protection-savings products ranged between 40 and 60 percent for the other seven markets AXA had surveyed, namely, China, Hongkong, India, Indonesia, the Philippines, Singapore and Thailand.

AXA Affin Life Insurance chief marketing officer Nicholas Kua said the switch from high-risk, high-return investment products to options combining life protection and long-term savings was quite consistent with the firm’s observations. “The financial crisis has made Malaysians and Asians more conservative,” he said, which was surprising because unlike Hongkong and Singapore, Malaysian investors were spared much of the pain associated with structured products and investments tied to the now defunct Lehman Brothers.

Here’s the rest of the Business Time story:

Even so, Kua said it was evident Malaysians are shaken up by the global economic gloom and more willing now to plan for their retirement. Instead of starting at an average age of 37 as was the indication in 2007, they now plan to begin at 34 — earlier than the regional average of 36.

Nearly a quarter or 23 per cent plan to increase savings for retirement while 43 per cent would maintain the current pace.

But most are still far from ready for retirement with only 38 per cent having a plan (36 per cent previously). More than a quarter or 27 per cent are “thinking seriously” but unsure how to go about saving while 7 per cent are non-planners — admittedly an improvement from 12 per cent in 2007.

According to the Employees Provident Fund — the country’s biggest pension fund and main source of savings for most workers — the average savings for a 54 year old member last year amounted to RM132,500.

Given that 70 per cent of retirees who take out their EPF savings in a lump sum exhaust it within 3-10 years, the concerns and fear are very real.

Indeed the AXA survey showed only 29 per cent of Malaysians think they can maintain their health post-retirement, most believing their funds would be insufficient.

The respondents also desired to retire at an average age of 54 — one year before the retirement age — but believe 57 to be more likely given the current economic conditions.

Kua said unlike the Indians who are “very realistic” and willing to either work longer or compromise their present living standards to save for their retirement age, the survey revealed Malaysians want to enjoy their golden years but not at the expense of their luxuries.

One area they were willing to trade-off current living standards is to provide their children a better education (57 per cent).

Although only 57 per cent still see opportunities in the future compared to 64 per cent previously, 60 per cent still plan to have kids, with half of them planning to have at least three.

The survey covered 2,400 respondents regionally, those in Malaysia having an income of RM4,000 to RM5,000.

Complicated? It needn’t be. The mortality rate provides an historical measure for each age group and gender which, when considered as a whole, becomes the mortality table. Insurance companies live by it. It’s part of their business to know about the mortality rate because it is a factor that an insurance firm takes into account when setting the premiums of an insurance product.

Generally, the lower the mortality rate, the lower will be the premium. Medical advances and better nutrition have generally enabled us to live longer. Since fewer deaths are now expected per age group, which means lower death payouts from insurance companies, we should be enjoying lower premiums. For example, I’ve been hearing that new policyholders of term life insurance are enjoying lower premiums partly because the mortality rate has dropped through the years.

Statistically, men have a higher mortality rate than women because the latter have longer lives. However, women have a higher morbidity rate as they fall ill more often. (The morbidity rate is an historical measure of the number of people falling ill for a particular group in a given time period.)

Now, I did mention that the mortality rate is a factor used by insurance companies to work out the premiums of an insurance product. I’d just like to add that there are other factors such as the rates of returns on investments, interest rates and inflation.

An insurance company will need to ensure that the premiums it charges are sufficient to cover the claims and the business costs, but not so high that the products are unattractively priced beyond a potential customer’s pocket.

You need to protect you and your family in case of unexpected emergencies during your travel. However, you may not be satisfied with the offer made by your insurance company. How do you deal with this?

First, you have to submit the claim form with supporting documents such as medical reports and police reports together with the details or a copy of your original policy. Check the time frame stipulated in your policy for filing claims.

Claims for losses or damage should be paid as soon as you provide proof of the damage and the insurer has had the opportunity to investigate and verify that the claims are in order.

Claims for lost baggage are usually compensated after a lapse of 30 days from the day of loss in case the airlines are able to recover the lost baggage within that time-frame.

Where can you go to lodge a complaint against the insurance provider?

If you are not satisfied with the offer of settlement or rejection of a claim, first try to resolve the matter with the Complaints Unit of the insurance company.

If the matter remains unresolved, you may consider lodging a complaint with the Complaints Action Bureau of Persatuan Insurans Am Malaysia (PIAM) or choose to file a complaint to the Financial Mediation Bureau for mediation of your complaint.

PIAM is the national trade association of all licensed direct and reinsurance companies for general insurance in Malaysia. Currently, PIAM has 41 members.

Travel insurance policies are generally assessed by age, destination, length of stay and any pre-existing condition. Age may affect the eligibility of the elderly but it also depends on the other factors mentioned above.

Where you are going affects the amount of premium you have to pay. You will be required to pay more if you’re going to a country with a relatively higher cost of living (especially medically-related costs) or are known as high risks areas.

In comparison, countries that are not known for political strife or security risks usually attract lower premiums.

Travel insurance is also charged based on the duration of your stay. The longer your visit, the more premium you pay.

What should you do in the event of an emergency?

When you purchase a travel insurance policy, check and see if the insurance company provides an emergency hotline service.

In an emergency, you can contact the medical and emergency assistance hotline for access to medical advice, referrals, medical evacuations and assistance in other matters such as loss of passport or baggage.

It is important that you notify the authorities such as the local police, hotel, airline or transportation terminal authorities of lost or damaged items. Remember also to inform your insurer and then submit the necessary evidence or documents as soon as you can.

War risks: These include loss or damage that may be attributed to civil war, revolution, riot or civil commotion.

Suicide, mental disorder, self-inflicted injury: The resultant injury, illness or death arising out of these conditions are not sudden, accidental or caused by external factors. These acts may be considered against public policy and there is also the element of moral hazard.

Pre-existing medical conditions: These are conditions for which you have received medical advice or are receiving treatment prior to you applying for the travel insurance.

Influence of alcohol or drugs (except under medical advice): This covers the temporary or permanent misuse of these substances which are considered hazardous to health.

Travelling against medical advice: In this case the person is advised to travel only when he is well.

Pregnancy, childbirth or miscarriage: This category of incidences does not constitute a “loss” as defined as they are not normally sudden or accidental in nature.

AIDS, AIDS-related complex and sexually transmitted diseases: Provision of insurance for this category is generally considered to be beyond the scope of insurance.

Hazardous and professional sports: This category includes activities like racing, motor sports, mountaineering, bungee jumping, flying as a pilot or crew member, underwater activities, hunting, professional sports including winter sports, martial arts, wrestling and boxing. These are considered activities not normally undertaken by the average traveller and would require additional premium if the insurer does agree to provide such coverage.

You are advised to always read your insurance policy to fully appreciate and understand its scope of cover.

The coverage and limitations under the policy vary depending on the insurance company. Here are some of the benefits offered in most travel insurance policies:

Medical Expenses: Falling sick while travelling can be a very scary and expensive experience. In case of accident or illness, hospitalisation, medical and surgical expenses and outpatient medical expenses are payable under this benefit.

Some policies provide a daily allowance up to a certain number of days if you are hospitalised for more than 24 hours.

Personal Accident: Compensation is paid in the event of death and permanent total disablement due to an accident. The compensation is paid based on a scale of benefits.

Emergency Medical Evacuation/Transportation: Medical evacuations and emergency transportation can be very costly but in some cases are unavoidable e.g. when the illness is serious and medical attention is not available in that country. Travel insurers normally tie up with international companies providing these services to provide for evacuation, with medical supervision, to the nearest facilities that is able to provide the proper care for an accident or illness.

Repatriation: In case of death, reimbursement will be made to the legal representative for the cost of transporting the remains home.

Trip Delay: This benefit provides reimbursement for the expenses incurred if flight or voyage is delayed for more than a specified number of hours due to reasons beyond your control.

Trip Cancellation/interruption: Policies generally cover non-refundable payments or deposits if your trip is cancelled or interrupted due to unforeseen and unavoidable circumstances. For example, insurers will rely on warnings issued by the government with regard to travel restrictions due to national safety concerns.

Loss of Luggage & Personal Effects: This benefit covers loss, damage or delay of your baggage, clothing, personal effects and money caused by a carrier.

There are usually limits to the claims payable for such losses and these are always specified in the policy.

Travel Documents: In the event of theft or accidental destruction of your passport and/or travel tickets, you will be reimbursed the replacement cost and the additional accommodation and travel expenses incurred while you are waiting for replacements. You must report the loss to the police within 24 hours.

Hijacking: Although hijackings are not so frequent nowadays due to enhanced security, your insurance will provide for specified daily benefits up to a certain number of days if your travel is disrupted due to a hijacking of your plane.

Travel-savvy Malaysians today go all over the country to the various resorts as well as to other countries. There is nothing like visiting new places to broaden our minds and have fun at the same time. But no matter how exciting travel may be, there are still certain precautions we should take as we will be stepping into new and unfamiliar places.

A good way to protect yourself should you encounter problems that crop up during your travels is to buy travel insurance.

Why Buy

While travel can be an exciting proposition, there could be situations where things may go wrong and travellers find themselves needing, for example, urgent medical assistance, help with replacing lost luggage or assistance with making an urgent trip home. Travel insurance is designed to protect you and your family against travel-related accidents, losses or interruptions. Always include travel insurance as part of your travel budget and enjoy peace of mind.

Insurance is essential. Not ensuring you are safely covered on your vacation is a matter of being penny wise, pound foolish. Do not think “it won’t happen to me” – especially if you are planning an adventure-filled vacation.

Choosing A Policy

First, make sure the policy you intend to buy covers those countries you plan to visit and that it is for the full period of travel. It also helps if the insurance is recognised internationally or at least in the countries you are visiting.

Make sure that your insurance company has a good network of foreign affiliates who can provide you with the assistance you may need. Many insurers provide worldwide assistance services. Check whether your insurance company provides you with a hotline number for emergency assistance in multiple languages in travel advice, emergency messages and medical referral.

If you are travelling with your family, make sure everyone is included in the policy. Most policies will specify who qualifies as a member of the family under the insurance cover.

If you have a medical history, it is important that you tell your insurer. You may invalidate your policy if you fail to disclose what is commonly known as a “pre-existing condition” to your insurer at the time of proposing for travel insurance.

Like all purchases, you usually get what you pay for, so do not compare the prices only; take into account the benefits and the exclusions of the cover.

If you intend to take part in extreme activities like winter sports, mountaineering, bungee jumping or scuba diving, check the policy as most standard policies will not provide such cover. You may want to discuss with your insurer on the possibility of extending the policy to cover such activities.

On one side was a man who claimed that he had been cheated of RM5,000 in benefit payments. And on the other side, an MP’s aide was accusing the would-be beneficiary of trying to cheat the insurance company by signing his critically-ill friend for 18 policies.

According to The New Straits Times, the unnamed beneficiary said his friend had named him to benefit from a RM5,000 policy he took in July. When the friend died in August, his insurance claim was rejected.

He lodged a police report after failing to get the MP aide’s help in his claim. In addition, he blamed the aide for encouraging people to sign up for the scheme.

Not so, according to the aide who said that the complainant had bought 18 policies for his terminally-ill friend, naming himself among other beneficiaries.

“When the forms were submitted to the insurance company, they were immediately rejected because his friend’s name was signed up for 18 policies. The forms were rejected in November. The complainant had actually tried to deceive the insurance company by signing up a terminally-ill person and naming himself as the beneficiary.”

However, the MP’s aide said he was negotiating with the insurance company to return the RM1,800 which the complainant paid for the policies.