Insurance Plans. Worth the trouble?

Recently I've had some skin problems and went to the National Skin Centre to consult a dermatologist about the matter. He was a really savvy doctor and we were discussing about insurance. He pointed out that skin cancer was not covered by local insurance. ie, it isn't one of the 30 dread diseases or what is commonly known as critical illness. The mortality rate isn't significant at all especially for Asians. He was complaining that due to the fact that skin cancer was becoming a more prevail ant problem in Singapore (85% of skin cancer is caused by excessive exposure to the suns UV rays), that insurance companies should consider covering this disease. I felt it made sense but then I thought of the reason why it isn't included in policies.

Due to the low mortality rate of the disease, it perhaps is not too worth it for the underwriter or the acuter of the insurance company to include this risk in a general life or medical policy. It will only serve to increase the premium. The incidence rate for skin cancer is relatively low in Singapore. Thus it isn't worth it. Imagine the extreme. Let's say you buy an insurance coverage for your car. If you would like it to be covered against any act of terrorism the premium would definitely shoot up. Thus car insurance does not cover acts of terrorism or even acts of God for that matter.

However, I would still like to see insurance policies in Singapore make leeway for clients who want to underwrite risks like skin cancer. It is important that the insurance industry really wakes up its idea and come up with more innovative products for the consumer rather than just focusing on sales figures alone. That is my personal feeling anyway.

Let's strip down a traditional life policy. The policy holder will have to service the policy ie. pay the premiums for the rest of his life. I know he can use things like taking a premium loan / holiday and stuff but let's assume a disciplined person with 100% job security. There is actually a portion deemed as non guaranteed. This actually means that the policy will only yield that sort of return if the economy continues to move at the current rate of return on investment. In actual fact, you are giving the insurer money to participate in the bonus of whatever he is investing in. I do not believe in this. Coverage and investments should be left separated. Whatever that may look good now may not be that way 20-30 years down the road. You can never guarantee anything that long. Your financial adviser may not even make it pass the current year, what more 20-30 years in the business. The turnover rate is very high!

I have since come up with the best way to strategise for the general Singaporean. Just buy term and invest the rest. It just isn't worth the trouble to buy a policy which you do not know whether will suit yourself 20-30 years down the road.

Recommendation: For SAF personnel, buy the group term insurance from Aviva. It even covers your spouse. Invest the rest of your money in unit trusts, shares or real estate. It gives much better returns that a participating policy. Just pick the right advisers to do it for you.