ElderShield Review Committee needs to relook risk factor calculation

Having pored over the ElderShield Review Committee Report, I am deeply concerned that the proposed enhancement scheme is based on decidedly unrealistic assumptions of policyholders' risk factor.

Data for last year shows that, at present, approximately 15,600 of the 1.3 million ElderShield policyholders are eligible for severe disability claims.

Tabulated against the total resident population, this represents a risk factor of less than 0.393 per cent. If we narrow our analysis to Singaporean senior citizens aged 65 and over - a population of 516,692 - the risk factor is still less than 1.22 per cent.

However, the ElderShield Review Committee Report assumes a "one-in-two" risk factor for severe disability claims, or 50 per cent. Even if we take into account Singapore's rapidly ageing population, and the commensurate increase in demand for eldercare, it remains highly unlikely that the risk factor would jump more than 40-fold in a relatively short time frame.

The "one-in-two" estimate remains disproportionate after accounting for other possible variables, such as an expanded definition of severe disability, the rising cost of medical care and the need for buffer funds to keep the programme financially solvent.

Basing a non-profit compulsory national insurance scheme on imprecise actuarial calculations has far-reaching implications for premiums, payout amounts and mean payment periods. I urge the committee to revisit the data and reconsider their conclusions.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on July 20, 2018, with the headline 'ElderShield Review Committee needs to relook risk factor calculation'. Print Edition | Subscribe