Tan Kin Lian's Blog: Big cut in maturity payment

Tuesday, January 19, 2010

Big cut in maturity payment

A policyholder bought a 21 year anticipated endowment policy. At that time, the policy showed a projected return of 5.5% per annum. The company used 7% to project the accumulation of the triennial payments and also included reversionary and maturity bonus that were not explained in a transparent manner. However, the company did explain that the projected amounts were not guaranteed.

On maturity, the policyholder was given a payout that is about 35% lower than the initial projection. The final yield was reduced to 1.6% per annum. The insurance company explained that the low payout was due to the difficult investment climate. In my view, this is only partly true. Another major contributor was the highly optimistic assumptions used in the initial projection, to entice the consumer to buy the insurance policy.

I hope that the authority will ask the insurance company to be accountable for its initial projection. While it is acceptable for the final payout to be lower to reflect the actual investment climate, the difference should not be as much as 35%. I believe that this type of unfair treatment applies to large numbers of policyholders.

I have advised consumers not to trust the optimistic projections that are used to sell life insurance policies, unless there is a higher standard of business integrity and protection of consumer rights.

Tan Kin Lian

16 comments:

Anonymous said...: ntuc Revosave maturity return is also about 1.6% and to hide this miserable return it has other reinvestment options to con polciyholders.This product is like trying to touch your mouth by going around behind your neck to reach it.
Policyholder is much better off by investing directly and it is better than any of options.
If clients want to save for short term for liquidity put it in a money money market.
If it is for investment in a fund just do a RSP.
If it is for protection buy a term
for critical illness or death and TPD.
In the any of the options policyholders don't have to waste big amount of money in commission on the stupid and unethical insurance agents who know nothing but conning from product pushing.
This product is a condemned product in US and other jurisdictions as scam.; January 19, 2010 1:10 PM
Anonymous said...: Kin Lian,

The best solution to this problem is to totally AVOID participating and investment-linked policies even if they came from heaven.

These policies are meant to ultimately cheat you.

The main role of life insurance companies is to provide finanmcial protection against the contingencies of death,longevity, diability and sickness.

So just buy protection only.; January 19, 2010 2:33 PM
Anonymous said...: Hi TKL

1) Can FISCA do something to highlight this miserable situation to authorities or establish an online petition with policyholders with this experience?

2) If this is done to policyholders using CPF funds, perhaps CPF can take action since the lowest interest is 2.5%?; January 19, 2010 3:12 PM
Anonymous said...: Use CPF or even cash to buy blue chip stocks and ETFs, not insurance.

But not now. Wait for another big correction, like in end 2008 to early 2009. It may even happen this Tiger year, like what happened in 1998, the last Tiger year where there were great economic and political upheavals.; January 19, 2010 3:48 PM
Anonymous said...: One sentence: look only at the guaranteed portion when surrender or mature.; January 19, 2010 4:39 PM
Anonymous said...: Insurance companies depend on this type of products to pay themselves big salaries and they get the agents to do their bidding by bribing them with high commission. They work hand in gloves.
MAS needs these companies for its existence and to ensure its own existence it has to close 2 eyes and pretends nothing has happened.
Avoid them completely so that you won't be frustrated by MAS.; January 19, 2010 5:42 PM
Robert Tan said...: If the insurance companies are making so much profit from selling such policies, maybe can buy their shares and invest in insurance companies??!! Tsk ! Tsk!; January 19, 2010 8:15 PM
Anonymous said...: The problem is the company is not making the money. It is agents and the ceo and senieor managers and the consumers are paying them and in return getting paltry return.The operating cost is very high and the cost is passed to the buyers.The complaint is the products are not value for money and yet the consumers are conned into buying them. We are warning the csutomers that these products are not good.There are other better ways and products that can do better but the commission is low. I am sure these products have been dissected and the content is exposed as scam.
Get FISCA to review and show you what you have bought, then you will be convinced that you have been conned.; January 19, 2010 9:16 PM
Anonymous said...: It took me 21 years to find out that the projections are over optimistic. By then, the insurance agent who sold me the product is long gone. There will always be 21 year old new customers for them to bluff another 21 years.; January 19, 2010 11:03 PM
Anonymous said...: FISCA is a good place to get a review.Don't trust the insurance agents becuase it is well known that they are salesmen out to push a product for commission and have no interest to put your needs first. Get a second opinion before it is too late.
For those who have existing policies should seek review to check if your so called trusted agents have cheated you. It is better to find out now and not wait for 21 years.If there is mis-selling it is your option to sue , to report to MAS and seek redress at FIDREC for recovery of losses due to early termination from the company.
Fret not .Check the fact find form for mis-selling and I assure you that your agent had mis-sold you.
These products definitely are not suitable for you. To recover your premium take this case up to the company for refund and copy to MAS.
The fact find form will reveal the conflict of interest and that your agents had never your interest at heart. Demand the return of paid premium at least or else threaten to take up to MAS against the agent and the company.
All par products have lost their usefullness and they are very bad products and therefore any agents pushing these products definitely will breach ethics or section 27 of the FAA.
Don't waste your hard earned money. You have every right to responsible and ethical financial planning.Demand your right and don't let salesmen con you.They don't care for your financial well being. They care for their own pockets.; January 20, 2010 12:22 AM
Anonymous said...: Soon the results of 2009 will be out. Companies will come out to boast the number of mdrt or COT agents it has produced hopefully to entice wannabees.Unknowingly these companies are telling the world they have so many thieves in the companies that have robbed many poor souls of their financial future.The 't' at the end of MDRT, COT TOT, stands for thief and aptly these agents were .These agents stole the life of their customers by dumping useless products that they can't find out only after 21 years.After 21 years these people's money could have turned a few folds instead the amount lost to inflation. So, isn't this robbing their clients' money?
The cheek is one company calls their agents sales champions super dupers.They are dupers alright and isn't a wonder their results are good.They robbed their trusting cleints to be where they are.
Well, for these agents they will meet their retributions soon.; January 20, 2010 9:32 AM
Anonymous said...: Dear Singapore Citizens,

YOU HAVE BEEN A SUCKER OF THE LIFE INSURANCE COMPANIES FOR BUYING PARTICIPATING OR INVEST-LINKED POLICIES FROM THEM.

THE ONLY WAY WE CAN GRADUALLY STOP THIS EVIL PRACTICE IS TO SEND WORD AROUND TO YOUR FAMILY< RELATIVES< FRIENDS, COLLEAGUES ETC NOT TO BUY ANY PARTICIPATING OR INVESTMENT-LINKED POLICIES FROM ANY INSURERS.; January 20, 2010 1:25 PM
Anonymous said...: Yes, pass the words around. Not only that those who have been conned into buying these par products must also demand the return of the premium or else sue them, the agents and the company or report them for mi-selling or conflict of interest.
It is to your advantage as one voice to demand compensation for the mis-selling.Take this concerted action.
Someone should speak on this at Hong Lim Park.; January 20, 2010 6:26 PM
31-yr old said...: For your info, I was absolutely disgusted with 1 high-earning financial manager. I was looking for an admin job in a X insurance company and she boosted to me how rich is she and invited me to be an agent instead. She has a house in Australia and a big balcony in Singapore.

I left the place disillused about insurance. That is people's hard-earned money!! I began to see why my parents had detested insurance; it's totally called-for.

For lay-person like me, I struggle with trusting an agent and the need for a good insurance that will help me when I am really in need.; January 22, 2010 5:30 PM
Anonymous said...: I have only one anticipating policy from NTUC Income bought some 21 years ago. Like some of the commentors here, it took me 21 years to confirm that the projected final payout for my policy is grossly over-optimistic! Sigh...I have a few other life & critical illness policies and an investment linked fund with the same firm. Should I terminate these policies? Any advice? LHH; January 22, 2010 8:37 PM
Term Life Insurance Quotes said...: They have to be really accountable for this matter. It's important to have a good reputation in this type of business.; February 12, 2010 12:37 PM