Time for standard format from big boys in life insurance

Life insurance players need industry standard to present investment performances

The life insurance industry really ought to get its act together and come up with a clear industry standard to present its investment performances for participating funds.

In this, the Monetary Authority of Singapore (MAS) can help by nudging the industry players along to hash out a standard format.

This suggestion for standardisation follows a BT report on Dec 12 that tabled life insurers' average annualised net investment returns on par funds by duration.

The data compiled showed that the bigger boys fared better than the smaller players from 2006 to 2015 (AIA Singapore, Great Eastern Life and Prudential Singapore had the most number of top quartiles - top 25 per cent - of the 10 major life players in the market).

Some insurers had pointed out that the returns based on what they filed in line with MAS requirements do not provide a complete picture of their investment strategy.

They alluded to the fact that other considerations, including the level of guarantees of the different products and allocation by asset classes, are missing.

They also said that the findings do not show the returns done by daily flow.

They are right on all counts.

But here's the thing: journalists and consumers are not privy to the granular data and insurers are not obliged to provide the information they would most likely describe as "commercially sensitive".

In the absence of more detailed data - insurers willing to share those are most welcomed - if the returns filed are good enough for the MAS, then the picture painted based on those figures are sufficiently reliable.


The calculation used in the BT report to paint that picture is based on an approach that removes the differences in formulae used by insurers for their published returns, as well as the anomalous use of the investment returns on selected sub-funds, instead of total par funds, by some insurers.

So while the data does not show some of the variables, the formula in compiling the data reflects the final outcome of insurers' judgments on how much they allocate to each asset class - which is what matters to BT readers.

But if, as some insurers say, that's not enough, then the onus is on life insurers to devise a standardised approach so that no one quibbles about methodology.

Here's the other thing about the findings: The most glaring point about it is that almost all industry averages over the 10 years save for the seven-year average, failed to meet the 4.75 per cent per annum investment rate of return projection spelt out in the benefit illustration (BI).

If you compare the industry averages to the other projection listed in the BI - 3.25 per cent per annum - six exceeded the projected rate.

Now, these two illustrations are used to sell par policies.

No matter which way you look at this, all roads lead to the same question - isn't it time to review the illustrated rates of returns in the BI if many are not meeting these projections?

Just by sheer logic, consumers need to know that the more insurers' investment returns fail to meet the two projected rates of returns, the more likely they are subject to impending cuts in non-guaranteed bonuses.

This commentary appeared in The Business Times yesterday.

investmentMonetary Authority of SingaporeSingapore