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Article (10) – General Provisions Concerning the Illustrations

Effective from 9/10/2019
  1. The Illustration shall provide details of basic plans and supplementary riders, including the following, as a minimum:
     
    1. Mode of Premium Payment: Yearly / Half Yearly / Quarterly / Monthly / Single.
       
    2. Annualized Premium and Modal Premium.
       
    3. Name of plan, Protection Benefit, policy term, and Premium Payment Term.
       
    4. The Protection Benefit, Cash Value, Net Asset Value, Maturity Benefit, and Surrender Value should all be clearly defined and not combined. Similar values for riders should be clearly distinguished.
       
    5. The premiums should be gross of all charges and fees, and the Protection Benefit, Cash Value, Net Asset Value, Maturity Benefit, and Surrender Value should be net of all charges and fees.
       
    6. The headings in the Illustration table should be “Illustrative Values” or “Guaranteed Values” as applicable.
       
    7. Cumulative main plan premium should be provided.
       
    8. All other charges need to be disclosed, meaning no hidden charges are allowed.
       
    9. Any details related to Ad-hoc premiums should be provided separately.
       
  2. For the policies sold after the effective date of these Instructions, a revised Illustration should be provided to the client upon request, or in the event of:
     
    1. Any significant Ad-hoc premium, such as more than 20% of Net Asset Value;
       
    2. Any significant partial withdrawal, such as more than 20% of Net Asset Value;
       
    3. Any change in Protection Benefits, including the increase / decrease in the rider benefits.
       
    4. Any change in future premium;
       
    5. Any change in Mode of Premium Payment; or
       
    6. Any change in policy term or Premium Payment Term.
       
  3. All Companies are required to send a policyholder account statement to the policyholder, at least semi-annually. For clients that request an account statement more frequently than semi-annually, the Company may charge a fee, provided this fee is predefined in the policy.
     
  4. All Companies are required to produce the Illustration values at the gross rate of return and then deduct all charges in determining the policyholder benefits. The gross rate of return is calculated before both Explicit and Implicit Fund Management Charges. All charges could include Explicit and Implicit Fund Management Charges, bid-offer spread, mortality premium, supplementary rider premium, premium charges, commission charges, and any other charges included in the calculation of the Protection Benefits, Cash Values, Net Asset Values, Maturity Benefits, Surrender Values and any other values shown in the Illustrations. The following shall be observed:
     
    1. The Company should deduct underlying Implicit Fund Management Charges in addition to its own charges and fees as applicable.
       
    2. In case of a Mirror Fund, the Explicit Fund Management Charges and the Implicit Fund Management Charges both need to be deducted as applicable.
       
    3. If the underlying funds of a Unit Linked Product have differing charges, a representative charge can be used provided that it is equal to or greater than the weighted average for the underlying funds.
       
  5. At least two scenarios, based on different sets of clearly defined assumptions such as investment rates of return, distribution charges, Surrender Charges, and similar charges, should be provided to illustrate variability in investment returns. The maximum gross investment rate used for the purpose of the calculation should not be greater than the three-month EIBOR + 4%, rounded up to the next 0.5%.
     
    1. The Company can update the maximum gross investment rate either annually starting January 1 or quarterly. If the update is annually, the Company should use the first EIBOR rate published after December 1 of the prior year. If quarterly, the Company should use the following EIBOR rates:
       

      For Illustrations produced during:

      Use first EIBOR published on or after

      January 1 to March 31

      December 1

      April 1 to June 30

      March 1

      July 1 to September 30

      June 1

      October 1 to December 31

      September 1

    2. If the Company updates the maximum gross rate annually, they should still monitor the EIBOR rates on a quarterly basis and issue an interim update for any quarter in which the change from the current maximum gross rate is +/-1.5%, or 150 basis points, or more.
       
  6. The Company can charge both Explicit and Implicit Fund Management Charges, but it must explicitly disclose all fund management charges to the client. Further, if the Company and/or Distribution Channels are getting any form of rebate or refund from a third party or fund manager, then this will belong to the client and not to the Company or the Distribution Channels. This must be clarified in the Illustrations.
     
  7. For with profit policies, bonus sustainability analysis must be carried out, and certified by the Actuary. This should be provided in any Illustrations. The analysis should be consistent with mortality, morbidity, investments, cancellation, withdrawal, and etc., which shall be the same as in the last valuation report. The Actuary may also need to justify the reason(s) for variances, if any, between the valuation report and Illustrations.
     
  8. The Company must also provide an Illustration, in the appendix, to give a clear picture of all the charges deducted and to show the guaranteed and non-guaranteed portions separately. This Illustration can be in the form of a “reduction in yield” or “effect of charges” breakdown which must be approved by the Authority and included with the product submission by the Actuary. If the Authority deems that these Illustrations are not clear or ambiguous, then using a 0% gross investment rate of return scenario can be required.
     
  9. All charges to the clients that can be changed in the future at the discretion of the Company must be disclosed. This includes, but is not limited to charges for contingencies that may relate to any future event that may be beyond the control of the Company, such as a change in mortality rates. Any such charge needs to be filed with the Authority, including the reason(s) for the change, along with an actuarial certificate before implementation.
     
  10. At the point of sale, the Surrender Charges and Surrender Value of the policy at the end of each year must be provided as a separate document and must not be stapled together with the entire policy. The fonts of this page should have ‘Red’ color and the client must sign this page separately.