Insurance participating fund performance is an important area that most insurance agents exclude in the recommendation of insurance policies (mostly policies with cash values). When asking about the history of the insurance honouring the projected returns, most agents will say that “Company XYZ is a reputable company and hence not to worry.” Many fail to highlight or just unaware of the insurer’s past participating fund performance. The past performance is a good indicator if the insurer can fulfil the projected value (4.75% per annum)
For example, if the insurance participating fund has been growing less than 4.75% per annum, it may be quite unlikely that the insurance company can honour the projected rate of 4.75% in the quotation. Similarly, if the insurance participating has been growing more 4.75% per annum, then it is likely that the insurance company can honour the projected rate of 4.75% in the quotation. Nevertheless, it is important to note that past performance does not guarantee future results. Contact us here for more information across nine insurers in Singapore before deciding on your next insurance policy.
Insurance participating fund performance (2005 to 2014)
AIA Singapore dollar (S$) insurance participating fund falls into seven groups. Most of the current AIA insurance plan falls under Group 1 of the participating fund that is launched in June 2007. Hence, there is no data for 2005 and 2006 for this group. The products in this include AIA Life Plus, Smart Growth, Guaranteed 10 or 15, Growth Special, Gen3, Smart Rewards 21 or 25. Do note that the 9.29% growth in 2007 is an annualised return and NOT absolute return.
AXA insurance participating fund started around 2006. Before 2005, AXA focused on term insurance, health insurance and investment link plans.
For Aviva, there are two participating funds. The first one is for regular premium policies while the other is for single premium policy.
For Great Eastern, HSBC, ManuLife, NTUC, Prudential and Tokio Marine, there are data available from 2005 to 2014.
Insurance participating fund performance is calculated in the following manner:
Most insurance participating fund is in the size of (S$) billions. For easy calculation purposes, the participating fund is assumed to start at S$1 million. Using the participating fund update (%), we can estimate the fund size in 2014. Using the AIA’s data, as an illustration, the size of the fund would grow to
$1,386,775 ($1,000,000 * 1.0929 * 0.8326 * 1.1530 * 1.0830 * 1.0090 * 1.1170 * 1.0130 * 1.0690)
Using a financial calculator or an excel spreadsheet, we can get the rate of growth of 4.17% per annum.
Limitation of above insurance participating fund performance analysis
The table above does not include data before 2005 as insurers may have accumulated a lot of surpluses and hence can honour the projected amount even if the participating fund is not doing well. This is called smoothing of benefits where insurers will keep the surplus during good years to smooth out the losses in a bad year. Smoothing aims to provide stable long-term returns.
It is also not applicable to term insurance, investment link policies and insurance policies with 100% guaranteed value upon maturity.
Besides the past participating fund performance, there are other important factors to be considered when you purchase your insurance policy. E.g. the effective yield of the policy, policy features etc.
To ensure that you are getting a suitable insurance plan.
To ensure that your insurance plan is valued for money.
To ensure that you are getting proper advice.
Disclaimer: All postings are personal views, and opinions meant solely for educational or informational purposes and not to be taken as formal advice. Please contact a qualified/accredited person or organisation who is capable of answering your questions about the respective topics you are keen to find out in further details. Certain information may change from time to time and may not be true or updated by the time you come across it here. You are advised to counter-check information for its accuracy before reaching a conclusion of you own. We hope this insurance participating fund update is useful to you.