Current ElderShield insurers should return surplus premiums to MOH

A recent report said that private insurers collected $3.3 billion in premiums for ElderShield and only about $133 million has been paid out in claims (Those on ElderShield will be able to upgrade from 2021; May 28).

This raises the question of how exactly the surplus is used.

In 2020, the state will take over the underwriting and, assuming that existing, though not all, ElderShield policyholders decide to upgrade to CareShield Life, what are the insurers going to do with the surplus and how?

By 2021, the insurers would have accumulated more surplus.

Therefore, it is necessary for them to transfer the surplus to the Ministry of Health, minus rebates given to their policyholders, to help lower the premiums of CareShield Life.

While we understand the need to keep the surplus as reserves to pay for future claims for disability as well as to provide lifetime coverage for policyholders even after they turn 65 and stop paying premiums, such reserves become obsolete when ElderShield policyholders migrate to CareShield Life.

That removes the risk from ElderShield providers.

Because our Government takes over the coverage, there is no risk for the insurers to be able to provide adequate coverage for policyholders as our population ages nor is there a need to set aside amounts for future claims.

Presently, nobody knows the claims-to-premiums ratio since the insurers started collecting premiums in 2002, nor the accumulated interest and investment returns on the excess premiums over the past 16 years.

Rightfully, whatever the surplus, including interest earned and returns on investment, it should be transferred to MOH.

There are many people, including myself, who have been paying ElderShield premiums for many years without claiming.

These are the people who help to contribute to the pooling system of ElderShield.

They should be given rebates on the CareShield Life premiums, on top of the subsidies.

MOH must mandate that the three private insurers return all the surplus premiums, including interest and investment income, to the ministry.

The extra revenue will certainly help to offset the higher CareShield premiums.

Cheng Choon Fei

A version of this article appeared in the print edition of The Straits Times on May 31, 2018, with the headline 'Current ElderShield insurers should return surplus premiums to MOH'. Print Edition | Subscribe