Singapore life insurers to cut 'unrealistic' projected policy yields

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Singapore life insurers to cut 'unrealistic' projected policy yields

Life insurers in Singapore will have to show a more realistic range of projected investment returns for policies from July, the City state's Life Insurance Association (LIA) said on 2 June.

The revised caps on participating policy illustrations for Singapore-dollar denominated Participating (Par) policies will go live 1 July 2021 amid what the association called the "prevailing low interest rate environment".

Life insurers will be required to illustrate at least two scenarios; an upper investment return scenario and a lower investment return scenario to provide a reasonable potential range of the level of benefits.

Our objective in doing so is to provide consumers a more realistic range of projected investment returns so individuals can make better informed financial decisions."

The upper illustration rate will be capped at 4.25%pa and the lower illustration rate will be capped at 3.00% pa respectively.

The lower illustration rate must be at least 1.25%pa. below the upper illustration rate.

This is a reduction from the previous caps of 4.75% pa and 3.25% pa set by LIA.

Life Insurers' illustration rates should not be higher than the insurer's view of the investment returns achievable over the lifetime of the par policies. The upper illustration rate should also not exceed the 4.25% pa. cap set by the association.

Mr Khor Hock Seng, president, LIA Singapore said: "The Association made a decision to make a downward revision on caps for investment returns assumed for policy illustrations primarily in consideration of the sustained low interest rate environment. Our objective in doing so is to provide consumers a more realistic range of projected investment returns so individuals can make betterinformed financial decisions."

He added "Importantly, consumers must recognise that these upper and lower illustration rates are for illustrative purposes only. These rates will not affect the actual returns of existing and future Par policies. We strongly encourage individuals to engage with their financial advisers to decide on policies aligned with their personal needs and risk profile."

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