Its Rewarding To Be A Dictator

Ninety-three-year-old Robert Mugabe may not be the Zimbabwean president anymore‚ but he will be living like one. Mugabe was forced to resign in November‚ but the current president has - in an official gazette - revealed that Mugabe and his wife Grace are entitled to more than 25 staff‚ a fully furnished office‚ two properties‚ a fleet of cars for employees‚ private international travel and an entertainment allowance.

Grace Mugabe will be looked after when Mugabe dies and be entitled to stay in an official residence.

President Emerson Mnangagwa had released a special gazette detailing the benefits applicable to a retired president‚ their spouse and dependent children.

The gazette specifically details benefits for any retired president who ruled Zimbabwe since 1987. That was the year Mugabe switched from being prime minister to becoming president‚ suggesting the law was specifically designed with Mugabe and his wife in mind.

The gazette‚ according to the Herald‚ is called a Statutory Instrument of an Extraordinary Government Gazette in terms of Presidential Pension and Retirement Benefits (Services and Facilities for Former Presidents) Notice‚ 2017.

Here are the perks allocated to Mugabe:

--- A fully furnished official residence in Harare

--- Housing allowance or a private residence anywhere in Zimbabwe with five bedrooms and three guestrooms or lump sum of money equivalent to the cost of building a private residence

--- At least six security staff‚ which can be increased at the current head of government's request

--- Two drivers

--- Two private secretaries‚ two office assistants and two personal assistants

--- At the residence Mugabe is able to employ: two gardeners‚ two cooks‚ two waiters‚ two laundry staff and three domestic workers

--- An office with computers‚ cellphone‚ landline

--- Vehicles and petrol costs for all staff serving the president. The cars must be replaced every five years.

The current president has the discretion to increase the number of security personal and decide on Mugabe's entertainment allowance.

The private residence‚ described in the gazette as "a reasonably sized house"‚ is allowed to have five bedrooms‚ a guest wing with three guest rooms‚ a study‚ swimming pool‚ two guardrooms and two garages.

The benefits also include medical aid contributions for the president‚ his spouse and children under age of 21.

Mugabe and his wife will have diplomatic passports‚ first class air and train transport four times a year inside the country. The pair are also entitled to four international private air trips and the use of a Mercedes Benz 500 series or equivalent vehicle in a foreign country.

Mugabe's electricity and water bills will also be paid.

Reasons For Not Buying Life Insurance

A recent study from LifeHappens found that only 41% of people purchase individual life insurance, and an additional 19% of adults get life insurance through their work. On their own, these numbers do not provide  the entire picture. Do the 40% of people without life insurance need coverage for their families? Do the 60% of people who are paying for life insurance actually have a use for it?

ValuePenguin explored the top reasons people are, or are not, purchasing life insurance to understand whether this financial planning decision is being made rationally or mostly emotionally. 

Burial & final expenses - For people that already have life insurance, the most commonly cited reason for purchasing it was in order to cover final expenses. In fact, this was a “major” determining factor for 53% of policyholders. This is a fairly concerning statistic, since the average cost for a funeral is about $10,000, which is alsothe amount of money that many financial experts recommend you have in an emergency fund for these sorts of situations. You’d also expect that, given that most people have decades to save, putting aside $10,000 before your deathwould be preferable to paying the high costs of final-expense insurance.

Final-expense insurance policies are fairly low in cost, but this is because the amount of coverage available is often limited to less than $25,000.A moderately healthy adult can typically save several hundred to several thousand dollars by instead purchasing term coverage and putting together a final-expense savings account.

Cost perception - Among consumers who don’t purchase coverage, cost is cited as the top reason for passing on a policy; 64% of those surveyed said they were not purchasing life insurance at least in part due to the rates being too high. While the cost of a financial product is certainly a worthy consideration, the cases are very few in which the price for life insurance alone should determine whether or not you buy coverage.

For the majority of people, term life insurance is the more appropriate choice than permanent life insurance, asa term policy can offer significant coverage for a period of decades. In addition,  a term policy will often be offered at around a tenth of the price of a permanent life insurance policy with comparable coverage. You can purchase up to several hundred thousand dollars worth of term insurance from dozens of insurers so long as you’re reasonably healthy and below 70. Even if you have pre-existing medical conditions, unless they’re quite severe, a good number of insurers will be able to offer a reasonable price and a face value up to $500,000.

Cost only becomes a significant limitation when you’ve over 70, are bedridden or unable to handle normal activities without assistance, or are particularly ill. However, costs can seem high if you are quite specific about the type of coverage you want. For example, if you don’t want to be asked any medical questions in the underwriting process, or would only purchase permanent life insurance, costs for coverage can seem quite steep. The choice between your particular preferences for life insurance and the risks of not being covered is, therefore, a personal one. This is why cost should be a factor, but typically not on its own.

Spending prioritization - After the cost of life insurance, the most cited reason for not purchasing coverage was other financial priorities. It’s unlikely that any financial advisor would argue with the decision to put off purchasing life insurance in order to pay basic cost-of-living expenses (a reason cited by 62%), not all the reasons to delay coverage acquisition are as stable.

For instance, 26% of those delaying the purchase of life insurance were doing so as they were saving for a new car or boat, or to purchase a second home. And 15% cited vacation as a financial priority that was taking precedent. Prioritization of finances must certainly be reviewed on an individual basis but, considering how inexpensive it often is to get coverage that can help to protect your family in the face of a tragedy, it may be worth the tradeoff to delay your next trip slightly.

This content originated on ValuePenguin.

Mis-selling Life Insurance

A recent story reports on mis-selling and fraud by a bank in rural Rajasthan where they allegedly made bank deposit customers put their signatures on life insurance products of a group firm. While the story of people of small means being cheated out of their money is worrying enough, what is of greater concern is that this problem is not limited to one insurance company or bank, or location. 

Life insurance mis-selling and fraud by bank branches is systemic in the country. The evidence to this statement comes from three sources. The first is anecdotal: almost everybody who has a bank account has a mis-selling or fraud story to tell about life insurance. For those who superciliously turn away from anecdotes, there are three academic papers that nail the problem. 

In 2014, two economists and I, wrote a paper estimating that policyholders lost over Rs 1.5 trillion from mis-sold life insurance plans between 2007 and 2012. In 2017, I published another paper that mystery shopped bank branches to catch mis-selling. I found that bank officials lied most of the time on features around costs and costs of early redemptions to potential customers. 

A 2015 paper find that agents overwhelmingly recommend life insurance products that are unsuitable to the customer but get the agent high commissions. Three, two government committees, have found life insurance to have very high front incentives that cause sharp sales and fraud. (Disclosure, I have served on both the committees). 

Why is there a bad smell about life insurance in India? We need to follow the money to get answers. Life insurance agents earn Rs 42,000 on every Rs 1 lakh of premium in the first year of sale of traditional plans that make up 87% of the market. This is what is legitimately allowed. Illegal payments, say ex CEOs from the industry, reach 80% of the first premium. Commissions come down in subsequent years, giving agents the incentive to just push that first-year sale. 

Now the game begins; insurance rules in India allow firms to appropriate all the money if the policy holder of a traditional plan does not renew the policy in the first two years. Firms are allowed to book ‘lapsation’ profits after two years. The game is set up to mis-sell and defraud the customer. That first sale is made anyhow, the agent makes his commission and the insurance company swallows the entire premium if the second or third premium does not come. The product is a trap; once they get you, either you keep paying for 20 years or you lose your money. Indian life insurance shows a dismal 44% 5th year persistency. 

Why does the regulator not do anything? There are two regulators in this picture. Irdai is the product regulator and RBI is the sales through banks regulator. Both have consumer production at the bottom of their agendas. 

The insurance regulator is in a time warp, unwilling to give up on the way business was done in the 1970s and its regulatory philosophy is deeply influenced by India’s erstwhile monopoly, Life Insurance Corporation of India that grew the business in a particular way. It has moved in the opposite direction to global lessons on retail finance regulation and has actually hiked first year commissions and, worse, legalised what were hitherto illegal payments in April 2017. 

The very high front incentives are triggering massive mis-selling and fraud in life insurance. I worry that as the unbanked now get into the formal financial system, we are setting them up for financial disaster. The insurance regulator needs to rationalise front commissions, put in place persistency targets and reduce the loss policy holders take if they stop the policy after one premium. Life insurance in India must stop being a trap. 

Monika Halan works in the area of consumer protection in finance. She is consulting editor Mint and on the board of FPSB India. 

Dengue Terror Malaysia

A total of 82,840 dengue fever cases were recorded until Dec 23 this year, a drop of 17.2 per cent from the 100,028 cases recorded in 2016.

171 people died from the disease – a 26 per cent drop from the 231 deaths reported for the same period last year.

As of Dec 23, 303 dengue outbreak areas are still considered “active”, including 20 hotspots nationwide. They comprise 10 locations in Selangor, four in Johor, three in Kuala Lumpur and Putrajaya, two in Perak, and one in Penang. Public must help authorities search and destroy breeding sites of the aedes mosquito in their respective homes.

Jail 13,275 Years For Scam

A court in Thailand has handed down a total of 13,275 years of imprisonment on a man for cheating more than 2,500 people, involving 570 million Baht (about RM73 million), through a bogus investment scheme.However, under the law, the 34 year-old man will only serve a maximum of 20 years in actual prison time.

According to a report in a local media today, the man, Phudit Kittitradilok, was found guilty of public fraud and money laundering in connection with an investment scheme which he masterminded from August 2015 until September 2016.

Despite the long prison term imposed by Thailand’s Criminal Court on the man, it was still a long way from nearing the 1989 record when another court sentenced a former Petroleum Authority of Thailand’s employee, Chamoy Thipyaso, to a total of 141,078 years in prison.

Thipyaso was convicted of corporate fraud. Kittitradilok was detained by the police in August this year, following an arrest warrant issued by the court.

The court sentenced him to five years for each of the 2,653 counts of public fraud and another ten years for money laundering, bringing the total jail terms handed to the man to 13,275 years.

Initially, Kittitradilok denied all the allegations during police investigations, but pleaded guilty during arraignment, which the court took into consideration and reduced his jail sentence by half to 6,637 years and six months. 

Meanwhile, the chairman for anti-pyramid investment scheme association, Samart Jenchaijitwanich said about 40,000 people were cheated into investing in the scam, involving about 5.3 billion Baht (about RM670 million).

He called on the authorities to amend the law on public fraud to provide for a heavier penalty.

Malaysia Life Insurance Growth 2017

Malaysia’s life insurance industry is poised to record high single-digit growth in terms of new business premiums in 2017, said the Life Insurance Association of Malaysia (LIAM).

President Toi See Jong said the positive performance would be mainly supported by the better economic growth of the country.

“Malaysia’s gross domestic product is forecast to hit between 4.3% and 4.9% this year. So, the life insurance industry will grow in line with the country’s economic growth,” he told reporters on the sidelines of the LIAM Hari Raya open house in Kuala Lumpur on Wednesday.

Last year, new business premiums in the industry rose by 6.9% year-on-year to RM9.75mil.

Toi said the implementation of an online platform from Jan 1 this year  would help improve growth of the industry.

The Life Insurance and Family Takaful Framework (Life Framework) introduced by Bank Negara Malaysia, had specified that term products be available through direct channels from Jan 1.

This is to be followed by critical illness and medical and health insurance/takaful products by Jan 1, 2018.  However, Toi said the premiums contributed by the online platform was still  small, as it was at the initial stage of implementation.

“As insurance policies are quite complex, we believe agents still play a vital role in explaining the insurance products,” he added.

He stressed that various educational and promotional programmes are still needed to further increase the awareness level among the people and reduce the insurance protection gap. 

LIAM has targeted to reach the life insurance penetration rate of 75% in 2020, and it currently stands at around 55%

AIA Unable To Wash Hand From Scam

The High Court has ordered American International Assurance Company (AIA) and its Singapore-incorporated entity to pay nearly S$1.6 million, with interest, to a wealthy elderly Indonesian couple cheated by their agent into buying a fake insurance policy.

The two entities were vicariously liable to Mr Ong Han Ling and his wife Enny Ariandini Pramana, who were sold the bogus US$5.06 million AIA Thank You policy in 2002 by former AIA insurance agent Sally Low, High Court judge Belinda Ang ruled.

The Ongs, both 78 and Singapore permanent residents, discovered in 2008 that the policy did not exist.

There was a close connection between Low’s fraud and her relationship with AIA, Justice Ang wrote in her 141-page judgment released on Friday (Dec 29). Their relationship was capable of giving rise to vicarious liability – which is no longer confined to employment relationships, she said.

Regardless of whether Low was AIA’s employee, she was not an independent contractor and performed a “wide range of functions as AIA’s insurance agent”, Justice Ang said.

AIA’s control over Low was very similar to that of an employer training, managing, supervising and disciplining its employees, she said.

Low – who was jailed eight years in May last year for cheating and other offences – promoted AIA’s policies to prospective policyholders, advised them, and delivered the policy application documents to AIA.

“AIA would also correspondingly accept policyholders’ instructions from agents like Sally without further verification,” said the judge.

Low had “almost exclusive control over the AIA documents and information eventually received by the Ongs”. As such, the insurer increased the risk of her fraud by giving her the opportunity to forge documents from AIA and represent them as genuine.

Low’s fraud was perpetrated within a framework where AIA encouraged its agents, especially top-performing ones, to develop close relationships with high net-worth policyholders, with little intervention.

AIA relied on its agents to promote and market its policies to the general public, and its business model depended on agents to bring prospective policyholders to AIA, said Justice Ang.

The life insurance industry is also regulated in a manner that expects AIA to take responsibility for management of its agents such as Low, who are the “lifeblood” of the insurer, she added.

After the Ongs bought the bogus policy, Low instructed AIA to use the money to buy different AIA policies in their names, with some applications containing forged signatures.

In 2004, she told them their names had been mistakenly used for the policies because of computer crashes at AIA and assured them that the AIA Thank You Policy was still in force.

She then induced them to surrender three of the other AIA policies and return most of the surrender proceeds to AIA through her personally. The Ongs hence gave her sums amounting to S$6,288,058 and US$1,000,000.

Low misused the funds to purchase stocks and properties in her own name. The Ongs commenced the suit against AIA and a related firm, Motion Insurance Agency, in 2012.

Justice Ang on Friday also dismissed AIA’s counterclaim that the Ongs had conspired with Low to defraud AIA, finding Low’s account of the conspiracy to be “completely fanciful and unconvincing”.

The Ong’s claim against Motion Insurance Agency was also dismissed as the agency and Low did not have a contractual relationship, and both worked for and were remunerated by AIA.