Debated in Parliament on 6 Feb 2017.
Assoc Prof Daniel Goh Pei Siong asked the Minister for Health since the inception of ElderShield in 2002; (a) what has been the total ElderShield premiums paid; (b) what is the total surplus collected by the ElderShield insurers; (c) what is the total surplus returned to members as premium rebates; and (d) what is the payout ratio and profit margin of each of the ElderShield insurers.
ElderShield is an insurance scheme that provides basic protection against the costs of long-term care arising from severe disability in old age. Premiums for policyholders are collected annually between age 40 and 65. Coverage starts at age 40 and the policyholder is covered for life. If a policyholder becomes severely disabled before age 65, he will no longer need to pay further premiums and will start to receive monthly ElderShield payouts. From 2002 to end-2015, about $2.6 billion have been collected in premiums and around $100 million have been paid out in claims.
The oldest ElderShield cohort that enrolled at age 40 in 2002 will be turning 55 this year. The current age profile of policyholders is relatively young but will get older over time. As older people are more likely to become severely disabled compared to younger people, ElderShield payouts are expected to increase when the profile of policyholders gets older. Indeed, the proportion of claims over premiums collected has been increasing since ElderShield started in 2002, and this trend will continue in the future.
People who are not familiar with how ElderShield works may ask why the current amount of premiums collected is much higher than the amount of claims paid out so far. Some may even wrongly conclude that policyholders have been paying too much in premiums or that insurers have made excessive profits. Allow me to clarify the facts to address these misperceptions.
There are insurance schemes that provide coverage for the year in which the policyholder pays his premiums and when the policyholder stops paying premiums, the coverage ends. ElderShield works differently. It collects premiums while the policyholder is aged 40 to 65, and provides lifetime coverage from age 40, even after the policyholder reaches 65 and stops paying premiums.
Hence, it is prudent for the total amount of premiums collected to exceed the amount of claims paid while our policyholders are still young, because the premiums collected are meant to provide coverage against future claims throughout the policyholder's lifetime. As explained earlier, the proportion of claims over premiums collected has been increasing since 2002 and we can expect this trend to continue as the profile of our policyholders gets older over time. If the insurers do not collect enough premiums today and set aside some amounts for future claims, there is a risk that ElderShield will not be able to provide adequate coverage for policyholders as our population ages. It is important for insurers to ensure that policyholders will not face this situation.
PAPERCUTS