Are bonuses declared fairly?

Dear Mr Tan,
I have come to realise my folly in buying substantial insurance for myself and family ranging from endowments, whole life, etc. All along, I am told buying insurance is also saving for the future - how wrong I have been. Now I am aware that term life is still the best in terms of value. Now I have to consider how to handle the current policies that I have, especially those where I have to pay for "life".

Last month, I received a Bonus Notice that informed me of the reversionary bonus for 2008 (Endowment policy). I was told that "Due to current market conditions, your Projected Matuity Value at this point in time is revised to $71,491 from $87,786. This revision is done to reflect the reduction in value of the fund's assets."

I bought this policy in 1997. The yearly premium of $1,400 is deducted from my CPF OA account. At that time, the projected return is much more than if I leave the money in CPF. In Feb 2008 that I was told the projected maturity value is $87,786, with a yield to maturity of 4.41%.

In one year, I am now informed of this drastic reduction in just 2 sentences. What I cannot comprehend is the way life insurance company is able to decide unilaterally whatever value they want to reduce even when it affects the insurance buyers so much. In that case, the insurance buyers always lose, insurers always win.

In good times, the insurers make money, then in bad times, the insurance company still make money by just reducing bonuses on the insurance policies. There is no equity. Will you help me to understand why this is so?

REPLY 
The question that you asked has troubled me a lot in the past two years.

When I was in charge of NTUC Income, I made sure that the policyholders are given a fair deal. In bad years, the bonus are reduced, but in good years, the bonus are increased.

I now get the impression that many insurance companies are not practicing a fair approach in treating their policyholders.

I suggest that you should raise your question with MAS or with the Consumer Association of Singapore (CASE) and see if they are willing to take up this point as a matter of public interest or consumer protection.