Creaming off the customer

Dear Mr. Tan,
Is an insurance product that offers a return of less than 2% over 20 years considered as "creaming off" the policyholder?

REPLY
Over a 20 year period, the expected return should be 5% per annum, considering the current rate of inflation and other factors.

If the product offers less than 2%, then the difference of 3% is taken away for the following:
a) cost of insurance protection
b) commission to the sales agents
c) advertising expenses
d) high salaries and other expenses.

The cost of insurance protection should taken away only 0.5%. The remaining 2.5% is large wasted on the marketing and other expenses.

The product is usually marketed with "gimmicks" that hide the real cost. This can be considered as "creaming of" the customer.