fML Case Study: Shield Plan Riders At Old Age – Yay Or Nay?

fundMyLife Case Study - Is it worth it to get shield plan riders at old age?

While we’re a question-and-answer platform that connects questions to the right advisers, once in a while the fundMyLife team receives questions directly. We get them via email, our contact page, or even Facebook itself. One day, fundMyLife had the opportunity to correspond with Karen*, who dropped one of the team members a message about personal finance.

Here’s a little bit about her – she is 50 years old, currently unemployed, and has three children who are still in school. They are aged between 17-21. She presented a total of four different questions for us, which we thought were worth discussing. In this article, fundMyLife explores her questions and shares our thoughts in this case study, on whether it’s worth it to get Shield Plan and Shield Plan riders at old age.

Karen’s questions

Karen started the conversation by sharing that she and her children had a Shield Plan A from NTUC Income without any riders. She was wondering if it was worth it for her to firstly switch to Enhanced Shield Plan (presumably from NTUC Income as well) (Question #1).

She also expressed concern whether it was worth attaching a rider since there will be a co-payment of 5% in a few years’ time (Question#2).

The next question she had was if it was a good idea to upgrade her children’s plans to the enhanced private hospital shield plan without riders first (Question #3). Her children can obtain riders when they start working.

Finally, she asked if it was easier to downgrade plans later in her children’s lives when they purchase the private hospital plan now while they are still young and healthy (Question #4).

fundMyLife’s opinion**

#1 To upgrade or not to upgrade

An easy answer to that is “it depends”, but that would be a cop-out.

The Integrated Shield Plan from NTUC Income comes in two variations: IncomeShield and Enhanced IncomeShield. The main difference between these two plans are that the Enhanced version has less limits when it comes to compensation. For example, the equivalent of IncomeShield Plan A is Enhanced IncomeShield Advantage where the limit of compensation is $1,200/day for the former as opposed to as charged for the latter, i.e. as much as the hospital charges.

Let’s see how much she has to pay to switch to an enhanced plan equivalent for her age. IncomeShield Plan A vs Enhanced IncomeShield Advantage, at 50 years old: from annual premium of $178 to $224. That is pretty affordable! How about after 50 years old?

We plotted a table for her perusal, from 50 until 85 years old.

A table showing the premiums for age ranges
Before we ask whether it’s worth it to get shield plan riders at old age, we must see how much it costs to maintain ISPs into old age. Information found here and here.

We discuss this from a premium point of view. At first, between 51 to 60 years old, the premiums remain manageable for both kinds of ISP, with around $100 difference between the two. Two observations on what happens after 60 years old:

  1. Within the same plan, the premium almost doubles from the previous age bracket, i.e. $257 vs $413 for IncomeShield
  2. The difference in premiums for the same age bracket between IncomeShield and Enhanced IncomeShield increases drastically

The increase in amount reflects the higher risk of hospitalization when a person gets older, which is normal. However, for Enhanced IncomeShield, the cash outlay, i.e. amount required to pay in cash, increases a lot as well. In addition, the cash outlay for Enhanced IncomeShield is twice that of IncomeShield in each age bracket. Hospitalization plans are important, and Karen will have to consider whether she’s okay with the expenditure and whether she will be able to maintain the cash outlay for the years to come.

#2 Is it worth getting a rider?

Her concern comes from the fact that there will be at least a 5% co-payment for the hospital bills in the near future, in 2021. To address the first concern, hospital bill sizes range between $970 – $13,1490, depending on the ward class and location of the hospital. In addition, NTUC declared there are maximum co-payment of $2,500 for both Plan A and Advantage with the Assist Rider.

A secondary concern that she should address is the fact that she has to cough up additional cash to pay for the riders. How much does need to pay? We plotted a table for her convenience.

Table that helps Karen decide whether to get shield plan riders at old age
Rider premiums for Plan A and Advantage riders. Plus Rider is no longer offered for Plan A policyholders.

Judging from the the table, the premium for the riders jump at she’s 60. It’s relatively affordable, and if she has the cash for it, why not?

#3 A family that upgrades together, stays together

…in the same ward, that is. However, as mentioned it’s important to consider the costs involved. More so if she and her children are not working yet so that presents additional  risks and may use too much of her MediSave funds.

That said, because her children are not working, this reduces the household expenditure per person. This is advantageous to Karen because this will qualify her and her children for substantial subsidies for MediShield Life.

Table of MediShield Life subsidies based on income per person
Subsidies for MediShield based on household monthly income per person. Source: https://www.moh.gov.sg/content/moh_web/medishield-life/premiums—subsidies/types-of-premium-subsidies.html

With lowered MediShield Life premiums, she can channel her funds to paying for her and her children’s Shield Plans.

#4 It’s always easier to downgrade

Have you ever thought of why you need medical checkups/underwriting when purchasing life or health insurance? The insurance company is taking on a risk to insure you, and as such requires as much information as possible.

When her children downgrade from Integrated Shield Plans to MediShield, there’s no need for any health assessment or medical underwriting. However, if any of her children decides to upgrade again after downgrading, they’ll have to undergo medical underwriting again.

fundMyLife opinion

We don’t have the entire picture which includes household income. This is important because households below a certain level qualify for premium subsidies for MediShield Life (more details here). Whether we assume that there is a breadwinner in the family or otherwise, the household monthly income per person should be at a sufficient level to qualify for subsidies.

One thing to note is that, when she is older, her MediSave will not cover everything for either the IncomeShield or Enhanced IncomeShield. In her later years, cash is required to cover the rest. Without a job, the burden falls on her children. The amount of cash required for the plan is not trivial from 66 years onwards.

It’s important that she engages a financial adviser, preferably one who can advise not just herself but also her children. We recommended her to approach on of the awesome financial advisers of fundMyLife.

Ask fundMyLife financial questions today!

That’s all folks! We hope the case study useful to understand whether it’s worth it to get shield plan riders at old age. If you see anyone who’s like Karen, just show them this article and let them know it’s good to reconsider.

If you’re still unsure about what you need, why not head on over to fundMyLife and ask our curated pool of financial advisers? Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.

*name was changed for anonymity

**the following article is a opinion, and does not constitute financial advice whatsoever. Please do your own due diligence and speak to a professional financial adviser

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

fML Case Study: The Need For Needs Analysis

fundMyLife ILP case study

Financial planning can be a scary thing – it’s meant to chart your financial adventure for current and future life stages. This also means you’re more or less committed to this plan for years ahead, barring any changes in your life. Most of the time, the financial plan that a financial adviser provides works out well. However, when it doesn’t, it causes regret and feelings of being lost.

Fortunately, it doesn’t have to be this way. That’s where fundMyLife comes in, to connect consumers with questions to the right financial advisers to answer them. In this case study, fundMyLife follows user Elsie* as she asked financial adviser of fundMyLife Roshan Belani of AIA for advice. In the previous fundMyLife case study, Roshan encountered a user who was in a similar quandary and helped resolve his troubles as well.

With their permission, fundMyLife presents to you a case study that highlights the importance of needs analysis.

To hold or not to hold?

Elsie is a young working woman who bought an ILP four years ago. However, a year after she bought the ILP, she had to go overseas to work. Despite that, she maintained the policy for the next three years. At that point, she felt that she can longer continue with the plan and came onboard fundMyLife to seek advice. Since she bought an AIA ILP, fundMyLife’s algorithm once again connected her to Roshan, where they corresponded for a while. She mentioned that she wanted someone unbiased, and thus came to fundMyLife’s portal.(Editor note: looks like we’re doing good on that front).

Roshan first started with a bit of fact-finding. More specifically, he asked about the kind of ILP she purchased. He explained to us that there are several kinds of ILPs in the market, and ILPs can either have both protection and investment, or purely investment. Elsie did not want to confront her original adviser to discuss her plan, which led her to use fundMyLife. Fortunately, he also found out that she had access to the AIA eCare portal, where she was able to examine her policies (and cancel them if need be).

Learning point

If there was a single learning point, Roshan summarized the case study into this: understand your needs for the near and long term. In the case that you are not sure of what your life will be in the future, it is crucial not to commit to long-term plans that take time to mature.

Roshan also stressed the importance of doing a proper needs analysis, as it can help people avoid encountering what Elsie did. If her financial adviser figured out that there was a possibility that she would go overseas for work, she might not have received the recommendation to purchase an ILP. (Editor note: we hope).

He shared that if you’re unable to foresee what your life path is in the near future, he suggests to get a term plan instead. There are 5-year term plans in the market, better suited for those people in transition between locations or life stages.

He also shared that ILPs are more flexible other plans, with stop-gap measures like premium holidays. However, this sort of measure is at best temporary, and should not be used beyond 6 months as it will eat into the value of the policy. Before engaging such plans, it is important to build up enough money to avoid cash-flow problems when paying premiums.

Conclusion

Needs analysis is important, and it goes beyond just calculating the sum assured for the consumer. Call us biased, but online needs analysis tools do not provide the human insights required anticipate possible future events. In needs analysis, uncertainty is as important a factor as certainty.

If you find yourself in the same situation as Elsie, or you’ve questions on financial planning, head on to our main site and ask our curated pool of financial advisers! Alternatively, you can also browse our individual advisers’ pages – just click on their profiles and you can ask them questions directly from their profile pages.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

*name was altered for privacy

When Shit Happens: A Collection of Personal Accident Stories Part II

Personal accident stories part II

The world can be a scary place, as illustrated by our article on personal accidents stories. After sharing that article, members of the Facebook group Insurance Discussion SG chimed in to share both their own and/or their clients’ experiences with personal accident. We thought it’d be a good opportunity to compile another set to inform and educate readers out there. As such, in this article fundMyLife presents the second set of personal accident stories shared  in the Facebook group (without any personal details of course), with an additional educational twist.

Personal accident stories, part II

 #1 Motorcycling accident

One commenter recounted how he encouraged his client to purchase a personal accident plan since he commuted daily using a motorcycle. Soon after, the client experienced an accident. While the client was okay, he subsequently went for TCM treatment. Fortunately, his personal accident plan covered the TCM treatment.

While this story seems very common, it highlights two important things. Firstly, it’s important to get personal accident coverage when commuting using vehicles with relatively higher risks of injury. Secondly, timing is important, especially if the activity is done frequently, i.e. daily riding.

#2 Fowl play

One of the commenters shared was about she cracked her teeth biting into boneless chicken rice, or what was she thought. While dental claims are usually limited to incidences like car accident, she successfully claimed the full amount for the dental treatment…since it’s an accident.

What to do when eating boneless foods

We don’t think there’s much to caution when consuming boneless food, except to do an exploratory nibble before going for a chomp. Fun fact: if you’re feeling paranoid, there is such a thing as dental accident insurance. Not only does it cover accidents, it also covers routine preventive work such as scaling and polishing to encourage dental care. General insurance companies like Chubb and MSIG offer them.

#3 Canine trouble

In two separate but similar accounts, two members of the group recounted how their clients experienced injuries due to dog bites. One incident involved a client experience a bite from a dog which just recently given birth. Another incident involved a house visit to someone with a dog – the owners assured the person that the dog was harmless, which did not turn out to be the case when the person was bitten soon after.

What to do when encountering dogs that might bite

Angry dog
This is the look of a dog that might bite you – drooped ears and bared teeth.

While dogs are friendly, it is nonetheless important to be careful and recognize the warning signs. Firstly, avoid prolonged eye contact. You’re scared, but you cannot make eye contact because the dog will lunge at you. After removing eye contact, slowly move away and pretend to ignore the dog. After you’re a safe distance away from the dog, walk away real fast. Good luck.

#4 Raw meal to real deal

From the book of the same name, the author shared what happened after her husband of 20 years lost his hearing after consuming raw fish contaminated with Group B Streptococcus (GBS) bacteria. She successfully claimed against his company’s group personal accident plan and the family’s own personal accident plan, after much difficulty. On a related note, another individual affected by the GBS incident lost all of his four limbs.

What to do if you love raw fish

After the GBS incident, the Ministry of Health placed a ban on all raw fish sales from open stalls. You can still eat them from restaurants as restaurants generally follow strict hygiene rules for food preparation and kitchen cleanliness.

#5 Nailing it

Inspired by video games of the same genre, escape room games are games where you solve puzzles and riddles present in a room in order to escape it under a time limit. It takes wit, teamwork, and creativity to escape the rooms, but it’s a lot of fun when you solve them.

One commenter recounted how he lost his pinky toe nail in one of those Escape Room games, where he had to climb into a coffin for clues. Unfortunately, in his climb his nail was left behind inside. Fortunately, after clarifying with the insurance company, his insurance covered all treatment expenses. Escape Rooms can be surprisingly physically demanding since the challenges require you to run around to solve puzzles. A cursory search on Google reveals that there are plenty of injuries that result from these games. Be careful when you go for one with your friends!

Conclusion

That’s all folks! Some stories were part horror (mostly horror), part humorous but they were all educational. fundMyLife would like to thank the folks from the Insurance Discussion Group for their personal accident stories. As always, we here at fundMyLife believe in educating consumers on the possible dangers out there, and what better to alleviate risks in daily life than personal accident plans. If you have any more questions on personal accident, why not ask our curated pool of trusted financial advisers?

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

When Shit Happens: A Collection of Personal Accident Stories

fundMyLife presents personal accident stories

[3 min read]

Personal accident plans are plans that help you and your loved ones when you experience disabilities or death, be it from your occupation or everyday life. While the probability of going through an accident is slim, it is nonetheless a very real possibility. How else to illustrate this possibility, but through stories? To do this, we scoured the internet for interesting personal accident stories. Besides anecdotes from blogs and financial websites such as MoneySmart and Clearly Surely, we also found several real life case by Straits Times Invest Editor Lorna Tan, and paraphrased these stories for brevity. In this article, fundMyLife takes a look at these stories and glean insights from these incidents.

Personal accident stories

#1 Road accident

A 55-year old man was involved in a road accident and sustained injuries to his shoulder, neck and back. He went through X-ray and outpatient treatment at a TCM clinic, which was fully reimbursed by his insurer Sompo.

#2 Child falling

A 5-year old child fell from the third storey of a staircase. He experienced wounds, and a brain trauma caused by fatal injury, succumbing to his wounds 10 days later.  The child was covered under a family plan, so the parents were paid $12,500 and $1,500 for death and medical expenses respectively by insurer Sompo.

#3 Motorcycle accident

A 36-year old man met a motorcycle accident, and fractured his right foot. His insurer Sompo paid out for his expenses, miscellaneous benefits, and a weekly income benefit for missing work for 7 weeks.

#4 Workplace mishap

A 53-year old man died at work, pinned by a heavy object and suffered multiple injuries. The AXA group personal accident policy by his workplace paid out a death benefit to his family members, burial expenses, and family security. In addition, because of no prior claims, his family also had increased benefit payout.

#5 Getting hurt during staycation

A 50-year old woman slipped and fell on a flight of stairs during a staycation in Sentosa. She cut herself and sprained her ankle. Her insurer Tokio Marine fully reimbursed her medical bills for out-patient treatment.

 

#6 Injuring self while changing light bulb

A 52-year old man lost his balance and fell while changing his kitchen’s lights. During his fall, his neck hit one of the kitchen’s chairs. The injury subsequently paralyzed him. The company’s personal accident plan for workers paid off a lump sum of $100,000 as he was permanently disabled.

#7 Slip and fall from cleaning

A 45-year old man was wiping his windows, when he slipped and fell. His head hit the floor, leading to a head injury which he succumbed to. As the man bought a personal accident policy which was featured with his home insurance, his family received a death benefit payout of $20,000.

#8 Accidental overdose of drugs

A 50-year old man was found unconscious, after consuming a large variety of drugs in high doses. The coroner ruled that the incident a suicide, which prevented the $1.2M insurance claim from AIA as there was a suicide exclusion. The High Court also ruled similarly in 2016. The family then escalated it to the Court of Appeal, and in 2017 the Court of Appeal found that the incident was indeed an accident and not suicide.

There was no evidence to suggest that the man was suicidal, and consumed the drugs with no expectation of injury. As such, this incident was classified as an accident – unforeseen and involuntary event that causes an injury.

Conclusion

In general, the stories do not seem to follow any pattern at all. However, the slip and fall accidents seem to affect those in their later years, i.e. 40s onwards. Besides practising good safety measure while doing household chores, it pays to consider getting a personal accident plan indeed.

You might be wondering what the point of this article is. “Scare tactics”, you might mumble under your breath. However, from these personal accident stories, the usefulness of personal accident plans cannot be denied. We thought by sharing some of these real life cases, you’d be more aware of how fragile we as humans can be. With low annual premiums, it might not be a bad idea to get personal accident insurance. In addition, it is also be a good idea to check your company’s policy to see if you’re adequately protect.

We here at fundMyLife believe in educating consumers on the possible dangers out there, and what better to alleviate risks in daily life than personal accident plans. If you have any more questions on personal accident, why not ask our curated pool of trusted financial advisers?

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

fML Case Study: Aligning Expectations With The Right Financial Advice

fundmylifestories

[3 min read]

Sometimes, getting professional financial advice can be tough – it requires the right expertise, the right experience, and most importantly the right adviser him/herself. Without any of the three, things may go awry when financial goals are not achieved, which does happen.

In this article, fundMyLife follows fML user James* who asked a burning question on our site on an AIA plan. Our AI engine connected his question with one of our fML advisers, Roshan Belani of AIA. After connecting with Roshan on fundMyLife, James and Roshan met up for an appointment. Roshan first spent some time acquainted with James on their first meeting, and they bonded over investing – something that Roshan is an expert of.

Unmet expectations in plan bought

Upon conversing, Roshan discovered that James’ initial goal was to accrue a set amount of savings for a particular financial goal. However, the plan which he was sold by another adviser turned out to be an ILP, and was unsuitable for two reasons:

  1. The plan protected him more than he needed
  2. The premiums he paid in the first two years went to protection first, instead of investments

The plan was not going to deliver what he wanted – savings – in the long term as a large chunk of the premium went to insurance component. As such, his goal was unmet. The initial premium was $500/month, which he reduced to $300/month in the past already.

Weighing the options

James was faced with a dilemma:

  1. Keep the plan going and not reduce the premium
  2. Reduce the premium to $100/month and free up more money for investments

Roshan noted that each of the options had their pros and cons. While the plan wasn’t what James originally wanted, the protection offered by the plan under $300/month was adequate and sustainable. Furthermore, the plan served a purpose by locking down on his health from two years ago – future insurance plans may be slightly more expensive. On top of that, reducing it to $100/month would also result in less insurance coverage. However, the second option provides James with more freedom to do with what he wants to do with the money.

In addition, Roshan also looked at other areas of James’ risk management and gave his perspective on those as well. For example, critical illness coverage, personal accident plans, etc. Impressed by Roshan’s professionalism and expertise, James immediately requested for Roshan to take over his AIA portfolio. Currently, it is an ongoing conversation where Roshan will further assess James’ future needs and identify gaps in finances be it investments or insurance.

Conclusion

It is important to engage the advisers who can give the right financial advice. James found himself in a quandary when the plan he bought did not align with his goals due to unsuitable advice. fundMyLife was pleased to have been able to connect the question James had to Roshan and we are committed to making sure more users like James have access to the right financial advice, by the right financial adviser.

If you find yourself in the same situation as James, or you’ve questions on financial planning, head on to our main site and ask our curated pool of financial advisers! Alternatively, you can also browse our individual advisers’ pages – just click on their profiles and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

*name was altered for privacy

The Startling Similarity between Medical Cost in Singapore and Laptop Repair in Austria

Healthcare and Laptop: How Similar Are They?

Written by Jackie Tan. Jackie is part of fundMyLife, the platform that connects financial planning questions to the right advisers.

A few years ago, a team of researchers from the University of Innsbruck ventured across Austria to fix their computers, which they purposely broke. They were conducting an experiment to ask a very simple question: does insurance make merchants and vendors dishonest?

To do this, the experimenters bought several laptops and damaged the RAM. Fixing it is a small matter, and it would take a short afternoon to fix it at little cost. The team then went to 61 randomly chosen stores in various states in Austria and asked repair shops to fix their laptop.

Their hypothesis was that informing the repairmen that they have insurance results in more repair than needed, and overcharging of their services.

Hence, for each repairman, they would say either of these phrases after sending their laptop for repairs:

  1. “I will need a bill for the repair” (CONTROL group)
  2. “I will need a bill for the repair because I have insurance that covers the repair costs” (INSURANCE group)

At the end of the experiment, the experimenters found that the repairmen charged twice as much and worked twice as long for the INSURANCE group compared the CONTROL group. The results were published in a research article damningly titled “Insurance coverage of customers induces dishonesty of sellers in markets for credence goods”.

This experiment, while simple in nature, sheds light on why the recent proposed benchmarking by the Ministry of Health in Singapore is a great idea.

Wait a minute.

What does fixing laptops have to do with healthcare? Ever paid $100+ for a simple flu visit to the GP? However, before we go there, let’s take a quick look at a bit of Singapore’s history.

History of Fee Guidelines in Singapore

In 1987, the Singapore Medical Association released a fee guideline for medical procedures. In theory, the transparency is a good thing since both doctors and patients would know the price of the procedures offered. However, in 2007, the association withdrew the guideline as it was construed as anti-competitive, i.e. it presented a possibility of price fixing by doctors since doctors released the guideline themselves.

A decade later, the Ministry of Health recently introduced a fee benchmark which performs a similar function as its predecessor without the complication of being anti-competitive. Doctors, patients, and insurance companies are welcoming this change in 2018.

Why the Need for Benchmarking?

Presumably, this was rolled out in response to the rising trend of insurance claims by patients with riders in their integrated shield plans. Insurance companies are facing losses as medical claims increase in costs every year. The Life Insurance Association points to three trends that exacerbates this: 1) higher usage of IP and IP riders, 2) increasing number of claims for private medical treatment, and 3) higher doctor fees.

Why would the benchmark and the implied transparency make life a little easier for both patients and insurance companies? We already have the answer implied by the experiment – having fee transparency gives consumers insight into how much a procedure is usually charged.

Credence Goods and the Asymmetry of Information

Both repair services and medical treatment belong to type of good called credence goods. Credence goods are a type of object or service with qualities that cannot be observed by the consumer after purchase. It is hard for the consumer to judge the impact of the object/service, be it good or bad.

However, only the seller knows the impact which creates an imbalance of knowledge between the seller and consumer. In a fancier term used by economists, this imbalance of knowledge is called “asymmetric information”. Examples of credence goods include education, repairs, vitamins, and medical treatment.

Hopefully, with the benchmark going forward, patients can assess whether they’re being charged reasonably. Having a baseline will allow the market to operate more effectively, resulting in a win-win with all involved.

That’s All Folks!

We here at fundMyLife hope you found the story as fascinating as we did, since it was a simple case study that sheds light on a larger phenomenon.

fundMyLife is a platform that aims to empower the average Singaporean to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions. Follow us on our Facebook page to get exciting updates and your dose of finance knowledge! Let us know what you want to know about finances or something that you wish your friends knew! 

Post-script: The Experiment Results

In case you’re interested to know more about the results – two astonishing figures sum up the entire study:

A graph showing the summary of the results
Figure adapted from the research paper by Kerschbamer et al.

Ooh, the graph looks pretty but what does it truly mean?

The top graph shows the distribution of repair prices in Euros between the two groups. An intuitive read of the graph is that the repair prices for the CONTROL group (blue line) range from 0 to 150 Euros. On the other hand, the repair prices range from 0 to 275 Euros when the experimenter indicated that there is INSURANCE involved (pink line).

The bottom graph shows the distribution of working time charged by the repairmen. In the CONTROL group the working time charged is at most 1 day, whereas for the INSURANCE group the range of working time charged is larger, all the way to 2.5 days.

Granted, this experiment was conducted in Austria, and there was a small sample size of 61 observations across 17 states. Nonetheless, it provides compelling perspective that there is a risk of overcharging in situations where there is an asymmetry of information.