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Article (14) – Protecting the Rights of Policyholders

Effective from 9/10/2019
  1. In case Companies are selling Savings Products with different charges and different names that are deducted from the policyholder’s account, it is the responsibility of the Actuary to ensure that the profitability of each Savings Product is achieved throughout the policy term and that the policyholder is not overburdened for the Company's profit in the initial year(s). The Actuary is required to equitably allocate Surrender Charges for Savings Products between the Company and the policyholder.
     
  2. The Company may consider a Surrender Charge for the purpose of mitigating risk in relation to expenses incurred.
     
  3. The Surrender Value of a policy must be set on an equitable basis to both the policyholder and the Company. The Surrender Value, at any time of the policy, should be set in a way that the profit of the Company should not be greater than or equal to what would have been earned if the policyholder did not surrender the policy.
     
  4. The application of charges while determining the Surrender Value must be consistent with the rating structure of the policy and should be disclosed in the policy documentation, promotional material, and Illustrations.
     
  5. For policies that have any bonus, such as reversionary or guaranteed, at maturity, the Surrender Value should be defined in a way that it maintains the incentive of the Company to serve the policy near the end of the policy term. It is important that the Surrender Charge is appropriately shared between the policyholder and the Company and should not be treated solely as income for the Company.
     
  6. Should the adopted methodology result in a negative or zero Surrender Value, the Surrender Value may be set to zero. In this case, clear rationale should be provided to the Authority with justified consideration made with regards to treating the client fairly.
     
  7. The interest of the policyholder shall be considered when deriving the Surrender Value from the Cash Value. Should a policyholder choose to stop paying premiums and maintain the same term coverage, such as to purchase a single premium term / endowment / whole Life policy for the Surrender Value amount for the remaining policy term, then the Surrender Charges related to the conversion should be minimal as it should exclude all amounts that the client has already paid such as Commissions or policy set-up charges.