Hello --
It is an excellent point, Mr. Tan.
Obviously, terminal bonuses are higher than annual bonuses. Doing that -- pushing most of the bonuses to the end the policy -- puts the policyholders' fund at risk IF the courts would decide the company cannot simply walk away from its obligation to pay its terminal bonus, as promised.
That is what happened in the case of Equitable Life in UK. Equitable couldn't pay and it went broke.
Are Singapore insurers also at risk?
Well, it depends. In the case of NTUC Income, it gave its assurance at its recent AGM (May 30) that it would not walk away from its terminal bonus. It would pay it.
In a way, that is good for policyholders.
On the other hand, such a statement sounds very much like "an obligation".
Requiring NTUC Income to keep its promises (to meet its obligations) could be expensive for the company.
As mentioned, it was prohibitively expensive for Equitable Life in UK.
Sincerely,
Larry Haverkamp
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