Five Problems With CareShield Life

When CareShield Life burst onto the news on what was supposed to be a quiet Sunday, it created quite a bit of a stir.

Did you think “WLE another sudden announcement by gahmen, spoil my Sunday night, super no mood liao”?

Having had a few days to sit and think about CareShield Life, before deciding if it’s a good or bad thing, or possibly both, here’s an attempt to look at CareShield Life from the perspective of a working adult in Singapore.

There are quite a few upfront problems people have with CareShield Life.

While this is not a comprehensive list, let’s just keep it to 5 because confirm we can find a never-ending list of problems with anything government-related in Singapore.

1. Why is CareShield Life mandatory?
2. Why do I have to pay so much?
3. Why do females have to pay more? (Noting that females earn less than men on average)
4. Why didn’t I have a say in the formulation of CareShield Life? Government didn’t consult the people ah?
5. What if I don’t get my money back? 

These are 5 problems that probably rank higher on the anger-meter.

So while the verdict is out whether CareShield Life really works or not (because we won’t know till another 30-40 years later anyway right?), let’s look at these 5 problems of CareShield Life.

 

1. Why is CareShield Life mandatory?

Besides the fact that having a larger pool would theoretically reduce premiums and increase sustainability of the scheme, let’s look at the problems ElderShield faced that CareShield Life is trying to solve.

People could opt out of ElderShield (actually 38% opted out in 2002).

If they had bought their own disability insurance, that’s great!

But if they didn’t (because they couldn’t afford, didn’t want to spend money, or are already ineligible due to existing disability), they would be super undercovered for disabilities which would also impact their livelihoods.

So how much coverage does one actually need for disability?

I found a 2014 Moneysmart article that discusses the impact of permanent disability and how much a person conservatively needs.

Besides big expenses such as existing loans and treatments, we have to factor in monthly expenses (over $2k in the Moneysmart article).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Let’s say 37 years into the future, we are already retired at 67 with a comfortable nest egg to pay for our $2k+ monthly expenses. We’ll get $1,200 a month to offset until we die.

But what if touch wood, we kena disability at the tender young age of 30+? Haven’t even hit peak career income yet and saved up enough money in our bank account? And we may live until 80+?

That’s like 50+ freaking years of $2k+ monthly expenses, not to mention inflation and all.

The good thing with CareShield Life is that at within 1 year (for a 30-year-old policyholder), we can claim $600 a month until we die.

The bad thing is that if we need help with 3 out of 6 ADLs, is $600 a month enough? If not we have to top up with our own private disability insurance.

What disability insurance options do we already have?

There are disability income plans (like ElderShield), and Total and Permanent Disability (TPD) benefit plans.

According to SingSaver:

The focus of disability income is to support your efforts in regaining the same standard of living you enjoyed before your injury. Note that disability income pays out as long as you have been certified to be medically unfit for your current profession. Payouts are dispensed even if your disability is deemed temporary, and full recovery is expected.

A TPD benefit is a lump-sum payout that is meant to help replace lost earning power and maintain a standard of living comparable to before the injury. However, the conditions for redemption are strict. A TPD benefit requires extreme injuries (such as loss of sight or limb, for example) to trigger the full payout. In the case of lesser injuries (such as loss of fingers), only a partial payout will be given.

Also, the disability has to be long-lasting and irreversible, and severe enough to hinder 3 out of 6 activities of daily living (eating, toileting, dressing, washing, mobility and transferring) – that’s what ‘Total and Permanent’ means.

After realising how expensive having a disability is, not just because of living expenses but also opportunity costs in career, it’s quite shocking when I look at my own disability coverage.

I don’t have a disability income plan, and my Total and Permanent Disability insurance lump sum payout would not cover my living expenses for long.

So keeping in mind that some of us below 40:

• have no money for private disability insurance
• are ineligible for private disability insurance (as we already have pre-existing disability)
• are undercovered even with private insurance (like me)

Which option should the government choose as an effective way to ensure we have planned for future disabilities?

• Option 1: Spend millions of dollars on a tray-return or Sharity-elephant-lookalike campaign to encourage people to buy enough private disability insurance,
• Option 2: Remove PDPA so everyone can get a call from any insurance agent to buy more disability insurance (because some won’t purchase insurance except through an agent)
• Option 3: Say ‘fuck it’ (ok perhaps not literally), let’s create a national scheme where everyone from 30 to 40 can ownself togetherly insure ownself, even if too poor (government give subsidies), or already disabled (universal healthcare mah).

TL;DR: Without CareShield Life, how many of us have private disability insurance that covers us with payouts until we die?

 

2. Why do I have to pay so much?

For comparison sake, let’s look at how much we have to pay at 40 years old in 2020, and how much more we can claim (assuming 10 years of disability).

Looking at the 40-year-old male, he has to pay $ (25-15) / 15 = 67% more premiums (assuming this remains relatively constant vs ElderShield).

If he becomes disabled at 67 years old, he can claim:

• under ElderShield = $400 x 12 months x 6 years = $28,800
• under CareShield Life = $11,812 x 10 years = $118,120

This means he can claim $ (118,120-28,800) / 28,800 = 310% more payouts with a 67% increase in premium.

What about CareShield Life surpluses collected by the government? Will they return to us?

In the case of ElderShield (collected by private insurers), Minister of Health Gan Kim Yong said:

From 2002 to end-2015, about $2.6 billion have been collected in premiums and around $100 million have been paid out in claims.

So what happened to the ElderShield surplus collected by the private insurers?

Mr Daniel Lum from Aviva said in an ST article that MOH made a specific provision in the ElderShield contract for insurers to return part of the accumulated surplus to existing policyholders, if claims turn out to be lower than projected. ST also mentioned that Aviva and Income gave rebates to eligible ElderShield customers.

In the ElderShield Review Committee Report, it states 50% of the accumulated surplus will be returned to existing policyholders via premium rebates.

Gan Kim Yong also said:

About $130 million in premium rebates have been given to policyholders so far, the first tranche in 2007 and another in 2012.

So while part of ElderShield surpluses were returned in the form of rebates, will this be the same case for CareShield Life?

The ElderShield Review Committee recommended that surpluses be returned to policyholders as a premium rebate if claims experience is better than expected (i.e. lesser claims than expected).

MOH also released a Straits Times forum letter stating:

Any surpluses generated will stay within the fund and go towards benefiting policyholders through higher payouts or premium rebates.

TL;DR: So while we have to pay more for premiums, the upside is we can claim more for longer to cover potentially large disability costs.

Government will also return CareShield Life surpluses to policyholders via higher payouts or premium rebates.

 

3. Why do females pay more?

Well the reply given is simply, females live longer, so while we still pay premiums for the same number of years as the males, we potentially have longer payouts.

So let’s assume that females live 4 years longer (till 85) than males (till 81).

A quick excel calculation (please correct me if I’m wrong) estimates that a 40-year-old female will pay $2,631 more than her male counterpart, and can potentially claim $4,800 more based on life expectancy.

This doesn’t take into the account how much she could have earned if she put the extra money in investments though.

TL;DR: Females pay more, for potentially longer payouts.

 

4. Why didn’t I have a say in the formulation of CareShield Life?

Did the government really come up with something on their own without consulting someone? They should know better right?

I went to check this 90 page document and this is what it said:

Ok perhaps 800 out of 3,439,200 Singaporeans (or 0.02%) may look miniscule. Does anyone have an alternative minimum number of Singaporeans to engage?

TL;DR: From the above channels, we also learn where we can plant ourselves in to give constructive feedback, because complaining on WhatsApp cannot be detected by the government right?

 

5. What if I don’t get my money back?

This a classic dilemma.

Do I want to be so disabled I can claim more than what I paid in premiums, or do I want to be so healthy I never get back anything from CareShield Life?

Of course the best scenario is to be healthy and then die a painless natural death, leaving behind lots of assets and minimal liabilities to my future generation.

But what if the worst case scenario happens, i.e. I’m disabled earlier than I expected and my spouse and kids have to deal with my living expenses because my disability hampers my career?

TL;DR: Disability insurance is one safety net many of us (including myself) overlooked, until last Sunday.

 

What other insurance coverage should working adults have?

Here are some insurance links that may come in useful:

Key Insurance Policies for Working Adults

Beginners Guide to Buying Insurance

What Insurance Do I Need?

 

Featured photo: TODAY