Many policyholders bought a "critical year policy" in the belief that they can stop paying premium after that period. They were disappointed to learn that they had to pay premium for longer than the expected period and cannot get the insurance company to honour the "promise". What has happened?

If the policyholder read the actual policy document, he would have found that the word "critical year" is not mentioned in the policy. It was actually a marketing presentation. The insurance agent took the dividends paid in the past and assumed that the same rates would be paid in the future, and also that it was possible to accumulate the dividends to earn an interest rate of 6% per annum.

The actual rates of dividends paid were lower than projected, due to the low investment yield. The interest rate credited on the dividends were also lower than the 6% projection. With ...