Investment-linked policies — improving disclosure and transparency for customers

The concept of sustainability is simply to understand and manage the amount of regular premium/contribution required to maintain the protection you need for the length of time you desire.

Beginning January next year, insurers/takaful operators will be required to update policyholders/certificate holders at least once a year with regards to how long their ILP can be sustained at the current level of premium/contribution and to provide options to improve their policy’s sustainability so that their protection can keep pace with their needs.

*Illustrated projections after 20 years reduce to 6 per cent for equities, 5.5 per cent for managed and 5 per cent for bond fundsFrom Jan 1, insurers/takaful operators will introduce a new standardised product illustration for prospective new buyers. Changes can be categorised into two main areas: From July 1, 2019 insurers/takaful operators were required to set minimum premium/contribution levels that are expected to be sufficient to sustain the ILP for the full term of coverage. The level of required premium/contribution is determined using rates of returns not higher than the best estimates of the insurer/takaful operators.

The new prescribed illustrated rates of return will not affect the minimum level of premium/contribution required for the proposed ILP plan. However, since the best estimates determined by the insurer/takaful operator for investment returns may be higher than the prescribed rates of 2 per cent and 5 per cent, the product illustration may show the level of premium proposed to be insufficient to sustain the policy/certificate for the entire term of coverage.

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