In my blog entry on October 18, 2008 under the title: Do the right thing.

I highlighted a warning of the double whammy facing policyholders of regular premium investment-linked policies in the light of the current global financial turmoil which is reproduced here in full:

“The majority of my concerns lie with regular premium investment linked products which is a hybrid life insurance product. For these products, there may be many areas of possible mis-selling like:

a. it has been recommended to be suitable for everyone including more elderly

b. the assurance charges are not communicated to be reviewable and non-guaranteed

c. the assurance charges will remain level throughout the term of the plan

d. the projected 5% and 9% values in the benefit illustration represent
guaranteed returns

e. and worst, if (d) has been projected for lower risk portfolios consisting
of cash, money market and investment grade bond funds.

f. that admin fees, and other charges are guaranteed

g. it is an ideal alternative because there are usually no cash values in pure
term products

h. it generates far superior returns over a whole of life plan

For policyholders who have taken up a regular premium investment linked plan, and if the maximum sum assured has been incepted for both mortality and morbidity risks, a double whammy should have been felt in the form of paying more for these assurance charges and evidently so in a bearish market.

These assurance charges will be especially significant for older policyholders and worst for those whom i term as retirees in their 60s and higher ages.


Because in a bear market with falling fund prices, more investment units will have to be deducted to pay for assurance charges. for example, if the funds’ prices have fallen by up to 50% or more, there will now be at least 2 times the number of investment units that will have to be deducted to keep the policy in force.

And this effect of much higher deduction of investment units may not be sustainable for older policyholders where assurance charges for mortality and morbidity risks will have jumped exponentially with each higher age attained.

Just like in the sad and shocking saga of the Lehman-linked products, the possible mis-selling of investment linked products may be another potential ‘hot-potato’ biding it’s time very much like a ticking time bomb.”

My comments:

Today, I chanced to read wilfredling’s blog ( and came across this entry entitled:

Zero cash value for an ILP.

This can happen, meh?

If we take account of wilfredling’s analysis, this may be entirely probable: Read more…