Full review of insurers' products, practices needed

The report on Oct 5 ("Insurance premium higher than her pay") highlights the urgent need for a thorough and industrywide investigation and review by the authorities of the products and practices of insurance companies, and not just the conduct of their representatives, although the latter is a big concern as well.

A check on the CompareFirst website shows that Prudential offers a 10-year term insurance plan for a 57-year-old female, which would have cost Madam Corinne Han a mere $695 for the same death coverage as the endowment plan.

How does Prudential explain the rationale of the low guaranteed value at a loss of $19,000 ($181,000 versus $200,000 premium), when the only benefit to the policy owner during the 10 years is the insurance coverage, which would have cost only $695 in total?

Should such a product even be released in the retail market at all?

IPOs and retail bonds require stringent requirements to be met before they are approved for retail distribution. What about insurance products proposed as savings and/or investment plans which are widely circulated to retail consumers and in which Singaporeans invest so heavily for their retirement?

The effective rate of return at the projected $217,768 at maturity - if Prudential makes an investment return of 3.25 per cent a year - is only 1.07 per cent a year. At the projected $236,000 at maturity - if Prudential makes 4.75 per cent a year - the return is a mere 2.08 per cent a year, with capital guaranteed at only 90.5 per cent.

These are very low returns for 10 years, whether this is compared with the Singapore Savings Bonds, which offer a much better yield with the capital fully guaranteed, or even bank fixed deposits.

It also shows that Prudential is levying an extremely heavy charge on the returns.

A very important issue is the lack of accountability from the insurance companies for the representation of their projections versus their actual payout at maturity.

How bonuses or dividends are actually determined is shrouded in secrecy. There is no transparency or accountability in ensuring that the actual payouts are determined as they were represented at the point of sale. Could the authorities look into this?

Evelyn Tan-Leong (Ms)

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