No need for an entirely new CareShield Life scheme

ElderShield remains a relatively low-risk insurance scheme operating on a sustainable claims-to-premiums ratio.

Rather than create an entirely new scheme in CareShield Life, and potentially complicate the situation with parallel programmes, it would be far more beneficial to build on the existing framework instead.

A closer examination of the available facts and figures suggests that, with modest tweaks to premium payments, a hypothetical "ElderShield Life" scheme could operate on a fairly solid financial footing well into the future.

First, let us consider the base number of policyholders.

At the end of last year, there were 1.3 million ElderShield policyholders. By 2030, extrapolating from the Government's population growth projections, this number will increase to over 1.6 million.

Therefore, the total sum of annual premiums collected in 2030, based on the current rate of $158.65 per policyholder, would be over $253 million.

Second, let us consider the expected volume of claims.

Working off the figures supplied by the Ministry of Health, the number of claimants last year was in the region of 1,750 (based on maximum claim amount and four median years).

Based on that risk ratio and population forecasts, we can expect over 3,000 claimants by 2030.

This risk figure of Singaporeans at age 65 becoming severely disabled before death is far less than projected by the ElderShield review committee.

Even if we suppose that the payout per claimant increases by more than 50 per cent to $7,200 per annum, outflows from the ElderShield Life pool would be around $21 million.

This relatively low claims-to-premiums ratio can be maintained even if we were to increase the number of claimants or provide a longer window of coverage. It could also be brought down further if we suppose a slightly higher premium per policyholder.

These figures serve to demonstrate how the underlying mechanism of collective security in group insurance pays off for all stakeholders involved.

Converting to ElderShield Life is not only a viable and productive solution, but also one that truly benefits our ageing population.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on June 26, 2018, with the headline 'No need for an entirely new CareShield Life scheme'. Print Edition | Subscribe