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May 18, 2010
Review insurer's bonus cuts
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LAST year, insurance company Aviva continued making cuts to the bonuses on its participating Enhanced Living Assurance 15 policy by 50 per cent from what it was in 2007.
It was disappointing enough that in 2008, Aviva was the only insurer in my portfolio of policies to cut bonuses, compared to insurers like NTUC Income, TM Asialife and Great Eastern.
That Aviva continued to cut bonuses last year despite a substantially improved economic situation and after a year of strong investment performance, which Aviva itself acknowledged, is unfathomable and unjustifiable to long-time policyholders like me.
This brings to mind the following questions:
- How is the Monetary Authority of Singapore (MAS) regulating insurance companies on investment returns of their participating funds and ensuring a fair distribution of profits back to policyholders?
- What is there to prevent insurance companies from creating different pools of funds and shifting profits between these at their own discretion without any consideration for policyholders' stakes?
- Are policyholders left with no recourse but to be at the mercy of insurance companies?
Aviva noted that last year was a strong performing year for investment returns, so it is a reasonable expectation by policyholders that bonuses should be restored to normal levels.
Shouldn't the bonus declared for each year reflect the performance of that financial year? Why is it that the company can cut bonuses during a recession, yet not increase them when the investment performance is strong?
In the bonus declaration letter, the insurer said: "Whilst the overall fund returns have been strong in 2009, long-term interest rates are expected to remain at lower levels than in the past. For this reason, it is necessary to reduce the level of reversionary bonus which we pay to your Junior Savers and/or Enhanced Living Assurance 15 policy."
Aviva did not elaborate which "long-term interest rates" it was referring to nor why these interest rates affected only the Junior Savers and the Enhanced Living Assurance 15 policies.
I hope that Aviva and MAS will review the situation and address the issues raised.
Goh Eng Eng (Miss)
Review insurer's bonus cuts
<!-- by line --><!-- end by line -->
<!-- end left side bar --><!-- story content : start -->
LAST year, insurance company Aviva continued making cuts to the bonuses on its participating Enhanced Living Assurance 15 policy by 50 per cent from what it was in 2007.
It was disappointing enough that in 2008, Aviva was the only insurer in my portfolio of policies to cut bonuses, compared to insurers like NTUC Income, TM Asialife and Great Eastern.
That Aviva continued to cut bonuses last year despite a substantially improved economic situation and after a year of strong investment performance, which Aviva itself acknowledged, is unfathomable and unjustifiable to long-time policyholders like me.
This brings to mind the following questions:
- How is the Monetary Authority of Singapore (MAS) regulating insurance companies on investment returns of their participating funds and ensuring a fair distribution of profits back to policyholders?
- What is there to prevent insurance companies from creating different pools of funds and shifting profits between these at their own discretion without any consideration for policyholders' stakes?
- Are policyholders left with no recourse but to be at the mercy of insurance companies?
Aviva noted that last year was a strong performing year for investment returns, so it is a reasonable expectation by policyholders that bonuses should be restored to normal levels.
Shouldn't the bonus declared for each year reflect the performance of that financial year? Why is it that the company can cut bonuses during a recession, yet not increase them when the investment performance is strong?
In the bonus declaration letter, the insurer said: "Whilst the overall fund returns have been strong in 2009, long-term interest rates are expected to remain at lower levels than in the past. For this reason, it is necessary to reduce the level of reversionary bonus which we pay to your Junior Savers and/or Enhanced Living Assurance 15 policy."
Aviva did not elaborate which "long-term interest rates" it was referring to nor why these interest rates affected only the Junior Savers and the Enhanced Living Assurance 15 policies.
I hope that Aviva and MAS will review the situation and address the issues raised.
Goh Eng Eng (Miss)
