Twisting a policy

Dear Mr Tan,
I was deeply troubled by a 20 year limited premium policy that bought from NTUC Income 2 years ago. I bought the policy for my daughter to provide her with lifetime coverage by paying the policy premium for 20 years.

Recently, NTUC Income no longer accept new policy for the product and was replaced it with a similar limited premium product called Revo Life. My agent said that my existing policy is inferior to the new Revo Life:

1. My existing policy is more costly for the same amount of coverage
2. Revo Life took a much shorter period to breakeven
3. Revo Life provides extra benefit of 3X payments on accident coverage.

Why is the original product more costly with less coverage, where the contract already specified the % of premium that represented the distribution cost in maintaining the policy.

Could this be due to some miscalculation that caused the higher cost in initial policy?

As the consumer has not been notify of this difference, people who purchase the original 20 years limited will continue to pay more for less for the remaining year!

Do you think the consumer have the right to ask for some kind of bridging arrangement to the newer policy with minimum loss? I was suggested by the underwriter (through my agent) that I should cancel my policy (with a huge loss of course) and buy the new policy. Do you think this is a fair suggestion?

REPLY
You should ask the agent to present a detailed comparison of the cash value of the old policy and the new policy after 5, 10, 15, 20 years and the premium. You can read the FAQ in my website, www.tankinlian.com/faq

You should also consider this point. By stopping the old policy and taking a new policy, you are suffering the high front end charge again (which can take up more than one year of your savings).

Normally, it is unethical for an agent to advise a client to stop an old policy and take up a new policy, as it is against the interest of the client. This is called "twisting a policy". You can lodge a complaint to NTUC Income against this unethical practice.

It is not correct for an insurance company to introduce a new product that offer a better return compared to an old product. This is unfair to existing customers. It is their duty to ensure that existing customers are given a fair return, through higher bonus, compared to new customers. You can ask NTUC Income's management to give their comment on this point.

You can also raise this matter with the Monetary Authority of Singapore. They will ask NTUC Income to give you an explanation. If you are not satisfied with the reply, you can discuss with MAS.