By: Chuin Ting Weber, CFP, CFA, CAIA
CEO & Chief Investment Officer, MoneyOwl
Right now, there’s a curious intersection of FUD (fear, uncertainty, doubt) and “I want to get something back” when people approach insurance.
🌦️ FUD is a valid reason to insure.
It reflects a humility that no matter how well we live individually, we cannot control everything. So we risk-pool: everyone pays a little, and if I’m the one who draws life’s short straw, the payout keeps me and my family from becoming financially broken.
When we treat insurance this way, we accept that it is an expense.
We pay as little as we can to get as much protection as we need, focusing on mitigating the biggest financial threats.
💰 The problem starts when we also expect insurance to behave like an investment to give returns.
Let’s take a step back:
You actually don’t want a “good deal” on insurance.
A high return that comes only when you suffer is the last return you want. Insurance protects you from the worst-case scenario. Investments help you live well and thrive without needing misfortune to trigger their benefits.
🤔When we conflate the two, our mindset gets warped.
In the area of health insurance, we want our IP and riders to “pay for everything” – big and small – otherwise we “paid premiums for nothing”.
But that’s not true. You have already consumed the protection for:
1️⃣ The “in case” scenario — you didn’t know until you had hindsight that you were fortunate enough not to incur that huge hospital bill
2️⃣ Your insurability — something you cannot buy back later if your health changes
Ironically, wanting to “get something back” from insurance creates a negative systemic spiral that ends up hurting us.
Underlying healthcare costs matter, but commercial medical pricing isn’t purely cost-plus. It’s also driven by what the patient can pay – so medical prices adjust to what insurance can bear. So, claims go up, premiums go up, we pay more. Rinse and repeat.
These latest policy changes to the IP riders try to flush out the smaller claims. They don’t resolve everything – Government will need to address underlying cost and also medical pricing.
👍 But what it does is to make riders more affordable, by 30%.
Hopefully, this means that more people can keep their riders, which cover the big “in case” bills, and save the money from the premium discounts in the meantime.
🙏 This means more actual peace of mind where it most matters – the financially devastating hospitalisation scenarios that require the best treatments, which is where we really want insurance to work.
Please see this detailed article which contains a spreadsheet 🧮 that lets you visualise payments based on your estimated bill scenarios – compare that with the immediate savings on the rider to make a decision.
Hope this helps!
Disclaimer: The information contained herein does not have any regard to the specific objective(s), financial situation, or the particular needs of any person. Buying insurance is a long-term commitment and should be bought according to your needs, and products’ suitability. It is advisable to seek advice from a financial adviser to assess your needs and guide you on the features and details of the products before making any financial decisions. This post has not been reviewed by the Monetary Authority of Singapore.
