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Large drop in surrender value over the years
27 May 2022 (488 views)  

Mr Y bought a life insurance policy 30 years ago and paid an annual premuim of $2,794. 

He obtained a post sale benefit illustration (PSBI) in Sept 2021. It showed a cash surrender value on the 30th anniversary of $106,830. The policy will reach this anniversary in July 2022.

He checked the website of the insurance company in May 2022 and found that the surrender value was only $88,564. this was $18,266 short of the illustration given to him less than a year ago. 

He had complained earlier to the insurance company about the difference in the surrender value compared to the benefit illustration given to him at the time of purchase. 

The insurance company had replied to him that "nothing is guaranteed even to the extent that yearly returns may even be zero".

Mr Y was angry that the insurance company had absolved themselves of any accountability, responsibility, or reliability for the figures presented in their PSBI.

Mr Y managed to retrieve a PSBI given to him in 2014, i.e. 6 years earlier. It showed the cash surrender value on the 30th anniversary to be $129,817. During the intervening 6 years, the projected surrender value had dropped by $22,987 to $106,830.

Mr Y is very confused with the different figures for the projected surrender value on the 30th anniversary:

a) It was projected to be $129,817 in 2014.
b) It was reduced to $106,830 in September 2021
c) It is shown in the website as $88,564 in May 2022.

I told Mr. Y to wait until the 30th anniversary has been reached in July 2022. At that time, it is likely that the surrender value will be $106,830 as the terminal bonus would probably vest at that time. 

If the policy is surrendered before the anniversary date, the terminal bonus will be forfeited or a lower amount would be given..

My observations:

I find the customer service of the insurance company to be most unsatisfactory in the following aspects:

a) They did not explain the sharp drop in the projected surrender value shown in the PSBI issued in 2014 and 2021.

b) They did not explain to Mr. Y that there is a terminal bonus that will only vest on the 30th anniversary and would be forfeited (or a small amount is given) if the policy is surrendered before that date.

Most consumers find this method of bonus distribution to be confusing. If they are not properly advised, they are likely to suffer a large loss when they surrender their policy at the wrong time. 

I hope that the Monetary Authority of Singapore will look into the practice of this insurance company.

Tan Kin Lian
 

Large drop in surrender value over the years
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Mr Y bought a life insurance policy 30 years ago and paid an annual premuim of $2,794. 

He obtained a post sale benefit illustration (PSBI) in Sept 2021. It showed a cash surrender value on the 30th anniversary of $106,830. The policy will reach this anniversary in July 2022.

He checked the website of the insurance company in May 2022 and found that the surrender value was only $88,564. this was $18,266 short of the illustration given to him less than a year ago. 

He had complained earlier to the insurance company about the difference in the surrender value compared to the benefit illustration given to him at the time of purchase. 

The insurance company had replied to him that "nothing is guaranteed even to the extent that yearly returns may even be zero".

Mr Y was angry that the insurance company had absolved themselves of any accountability, responsibility, or reliability for the figures presented in their PSBI.

Mr Y managed to retrieve a PSBI given to him in 2014, i.e. 6 years earlier. It showed the cash surrender value on the 30th anniversary to be $129,817. During the intervening 6 years, the projected surrender value had dropped by $22,987 to $106,830.

Mr Y is very confused with the different figures for the projected surrender value on the 30th anniversary:

a) It was projected to be $129,817 in 2014.
b) It was reduced to $106,830 in September 2021
c) It is shown in the website as $88,564 in May 2022.

I told Mr. Y to wait until the 30th anniversary has been reached in July 2022. At that time, it is likely that the surrender value will be $106,830 as the terminal bonus would probably vest at that time. 

If the policy is surrendered before the anniversary date, the terminal bonus will be forfeited or a lower amount would be given..

My observations:

I find the customer service of the insurance company to be most unsatisfactory in the following aspects:

a) They did not explain the sharp drop in the projected surrender value shown in the PSBI issued in 2014 and 2021.

b) They did not explain to Mr. Y that there is a terminal bonus that will only vest on the 30th anniversary and would be forfeited (or a small amount is given) if the policy is surrendered before that date.

Most consumers find this method of bonus distribution to be confusing. If they are not properly advised, they are likely to suffer a large loss when they surrender their policy at the wrong time. 

I hope that the Monetary Authority of Singapore will look into the practice of this insurance company.

Tan Kin Lian
 

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