Withdrawal of Champion Endowment Plans

TM AsiaLife has announced the withdrawal of their champion endowment plans, namely: TM Education (LP), TM Nest Egg (LP, LP05). This spells bad news for consumers as these plans offer great value to policyholders in terms of high guaranteed values and unbeatable track record. TM AsiaLife holds the record of being the only life insurer in Singapore of not cutting their bonus before. So far, there is no news of alternative replacement plans.

There have been no official word on the reason for the plan withdrawal. My personal take is that:

• The low interest rate environment has made it difficult and risky to offer high guaranteed cash values. Low bond yields is a bane to the insurer. This is 1 of the reasons quoted for the controversial restructuring of NTUC’s bonus structure in 2008.
• The uncertain investment climate is no help for policies with high guaranteed values. Investment performance going forward may be choppy. Low bond yields have compounded the problem.
• The insurer is under the ‘curse’ of being the only insurer with 100% record of meeting bonus projections. Any insurer would give an arm and leg to have this distinction. Laden with the task of meeting the bonus projections for the legacy of old policies, newer ones may have to come with lower bonus projections. We are already seeing more participating plans (from other companies) with lower bonus projections.

I certainly wish to be wrong and see TM AsiaLife come out with even better endowment plans. But I do not harbour high hopes. Lets keep our fingers crossed.

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