How Will the Lower Cap on Par Policy Illustrated Returns Impact Us?
Just a few days ago, The Life Insurance Association, Singapore (LIA Singapore) announced that the life insurance industry in Singapore will lower the caps of illustrative investment returns used in Policy Illustrations (PI) for Singapore-dollar denominated Participating (Par) policies, effective 1 July 2021. The upper illustration rate will be capped at 4.25%, down from the current level of 4.75%. The move is hardly unexpected. In fact, since the LIA standardized the policy illustrations across local life insurers in 1994, the upper cap allowed for Par policy illustrations has steadily fallen from a high 7% to the 4.75% now. Still, the recent adjustment will have a large impact on the local insurance business, as the most common whole life, endowment and annuity plans all fall within the category of Participating insurance policies. In this article, we talk about what the reduction from 4.75% to 4.25% means and discuss whether the actual Par policy returns will be affected. ...