Posted on June 2, 2009 - by Tan Kin Lian

Uncertain distribution of bonuses

Tan Kin Lian

In recent months, I have received many e-mails from policyholders of various insurance companies asking about the reduction in the bonuses on their participating policies. The companies explained that the bonus cuts were necessary in the light of the financial situation and indicated that the terminal bonus will be increased to give a high payout on the policies.

However, the terminal bonuses are not guaranteed and many years later, these policyholders are told that the terminal bonuses have to be cut due to some other reasons at that time.

The insurance company claimed that the bonus rates have been approved by the appointed actuary and fairly distributed to policyholders. What is fair is subjective and may not be fair from the prespective of the policyholders – as they have no say.

Many policyholders have found that the bonuses have been reduced compared to what they were told at the point of sale, and that the insurance company continued to make bigger profits for shareholders and pay higher management expenses and commissions. They are not convinced that they have been fairly treated over the years, but they have no way to exercise their contractual or legal rights.

This practice has been prevailing in some insurance companies in past years and has now spread to many other companies. It is now becoming quite common for insurance companies to treat their policyholders in this arbitrary manner. Read more…

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