100 years maturity date for an Insurance Policy is a shocker

27/11/2017 11:38

The Consumer Council of Fiji is expressing its disappointment in the manner life insurance policies are being sold to consumers by insurance agents.

Recently a group of municipal workers between the ages of 30 to 55 years signed up for the Bula Life policy with BSP Life Insurance not knowing that the policy will mature when they reach 100 years. Manipulated by the insurance agent, the workers hastily signed and was informed of several benefits such as receiving lump sum payout after 5 years of consecutive premium payments and the use of policy as a collateral for loans in their various banks.

After numerous premium payments and receipt of their original policy document, the workers learnt that maturity dates for their respective policy were set to expire when they turn a 100 years old.  And they also found that the policy could not be used to obtain loan. This vital piece of information was not disclosed upfront when the insurance agent made the presentation. However, they were informed, in a presentation, of the benefits they will get from the policies.

According to the latest World Health Organization data published in 2015, Fiji’s life expectancy is 69.9 years. Considering the life expectancy of Fijians, how can BSP Life sell such policies when the current retirement age is 55 in Fiji? How will the insured persons continue to pay premiums after they retire? Is it a ploy to benefit through lapsed policies due to defaulting payments?

The Council learned that insured persons will have to nominate one of the next of kin to continue with the payment until the insured person turns 100 years old. So now the question is why sell policies where one has to either burden the next of kin to continue payment or simply surrender the policy?

But then policy termination or surrender are also matters of significant concern. Policies surrendered before 3 full years would not fetch any surrender value and any surrender of the policy after 3 years means the insurance companies will determine the surrender value. Consumers therefore, neither have any knowledge of what the surrender value of a policy would be before they purchase the policy, nor can they be assured that they would be paid a just and fair surrender value.

According to the Insurance Industry Report 2008, each year, insurance companies keep at least $2m in premium through surrenders and $11m through forfeitures. 100 years maturity date for a policy is a concern considering surrenders and forfeitures comprise a very large share of all life insurance policies terminated.

Our experience with handling complaints against agents, has shown that some agents are not transparent in their dealings with consumers. Misinformation and lack of knowledge of the various products are some of the issues dealt with against agents who tend to mislead consumers in a bid to sell the product so that they get a commission. 

 This practice denies consumers the right to full disclosure and many blindly enter into signing up for policies they may not purchase if they were fully informed in the first place.

 The Council would like to see pre-disclosure statement outlining key information on the insurance product is made mandatory, so that consumers can make informed decision before entering into a contractual agreement.