12 different scenarios: Comparing the fee erosion of 7 investment-linked insurance plans

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After the SFC issued new guidance on investment-linked assurance schemes (ILAS), a major overhaul will arrive within 18 months. However, these products are still on the shelf today, and their complex charges continue to be a consumer nightmare. 10Life takes seven single-premium ILAS on the market as examples, clearly listing the Total Fees and Charges Disclosure (TFCD) percentages and showing policy values by policy term and assumed return rates to demonstrate how strongly fees erode returns under the same assumptions.

Some people in the insurance industry have recently made constructive suggestions, saying that comparing only three ILAS is insufficient, that there are too few assumed scenarios, and that the impact of mirror funds on ILAS charges was not considered.

10Life has conducted a deeper study this time, expanding to seven products on the market. Six of these offer a death benefit of 105% of the account value, while one offers at least 105% of premiums paid. We provide more scenarios, comparing comprehensively across three policy terms (10 years, 20 years, 30 years) and four assumed return rates (0%, 3%, 6%, 9%), to see which ILAS has the strongest fee erosion overall, which has relatively lower charges, and whether mirror funds have a decisive effect on charges.

ILAS Fees "Heat Map"

The chart below lists the rankings of seven ILAS under different scenarios. Simply put, the following uses the same assumptions — a 40-year-old male paying a single premium of HK$1,000,000 — and shows each company’s expected total policy value relative to peers under different TFCD percentages, policy terms and assumed return rates, which indirectly reflects how much each product’s charges erode returns.

For TFCD percentages, red means higher and green means lower; for policy values, green means higher and red means lower. Appendix 1 lists the actual data for reference.

It is worth noting that the TFCD percentage only includes all applicable non-discretionary bonuses. This product comparison does not include other special promotional factors outside the "Key Facts Statement" (KFS) on the SFC website.

Figure 1: Comparison of Expected Policy Value Rankings for 7 ILAS

ILAS		安盛盛名 II 整付投資保險計劃	永明迎雋投資壽險計劃	保誠雋賦投資計劃	宏利投資計劃	萬通環球投資整付計劃	富通盈晉之選	友邦卓達智悅
TFCD percentage		1	2	3	7	6	5	4
Mirror fund provided?		✗	✓	✗	✓	✗	✗	✗
Minimum death benefit		105% of premium	105% of policy value	105% of policy value	105% of policy value	105% of policy value	105% of policy value	105% of policy value
Policy year	Assumed return rate	Expected policy value ranking
Year 10	0%	1	2	4	3	6	5	7
	3%	1	2	4	2	6	5	7
	6%	1	3	4	2	5	6	7
	9%	1	3	5	2	4	7	6
Year 20	0%	1	3	2	6	7	4	5
	3%	1	2	3	4	7	6	5
	6%	1	2	3	4	5	7	6
	9%	1	2	4	3	5	7	6
Year 30	0%	3	2	1	7	6	4	5
	3%	2	1	3	4	7	6	5
	6%	2	1	3	4	5	7	6
	9%	2	1	4	3	5	7	6
Notes: 1. Assumes the insured is a 40-year-old male paying a single premium of HK$1,000,000. 2. For "TFCD percentage", 1 represents the lowest and 7 represents the highest; for "expected policy value", 1 represents the highest and 7 represents the lowest. 3. Green indicates lower charges and weaker erosion of returns; red indicates higher charges and stronger erosion of returns; product ordering from left to right is based on overall ILAS ranking. 4. This product comparison does not include special promotional factors outside the "Key Facts Statement" (KFS) on the SFC website. 5. See Appendix 1 for detailed data.

ILAS expected returns vary by policy term

To compare complex ILAS charges, you must understand how different policy terms and assumed return-rate scenarios affect expected policy values. Some products have relatively low expected principal-plus-returns in the early years (e.g., Year 10), reflecting high fee erosion; but as time goes by, fee impact may improve compared with peers in later years (e.g., Year 30). Consumers must understand these differences.

At Year 10, AIA 卓達智悅 ranks lowest among the seven ILAS. Under four assumed return rates, it ranks last in three cases, indicating higher charges; next worst are 富通盈晉 and 萬通 plans. 安盛盛名 ranks highest among the seven, followed by 宏利投資 and 永明迎雋, reflecting lower charges for those products.

At Year 20, 富通盈晉, 萬通 plans and AIA 卓達智悅 continue to perform poorly under different assumed return scenarios, reflecting stronger fee erosion; 安盛盛名 and 永明迎雋 continue to maintain high rankings; 保誠雋賦's ranking improves slightly.

At Year 30, 永明迎雋 rises to the top — under assumed return rates of 3%, 6% and 9% it ranks first among the seven products, reflecting that this product has relatively lower fees for longer terms and positive return scenarios; 安盛盛名 continues to show low fee erosion; 富通盈晉, 萬通 plans and AIA 卓達智悅 continue to rank lower.

TFCD percentage and actual fee erosion are not necessarily closely correlated

As mentioned above, some in the insurance industry said the TFCD percentage does not tell the whole story. 10Life partly agrees. Among the seven ILAS, take 宏利投資 (with the highest TFCD percentage) as an example: in the 10th policy year under different assumed return rates, its fees are relatively low compared with peers and rank only behind 安盛盛名; in the 20th and 30th policy years, except under the zero-return assumption when its ranking is lower, its performance is generally mid-range.

As for AIA 卓達智悅, its TFCD percentage is not particularly high — ranking only 4th among the seven — which is mid-range compared with other products. However, its overall expected policy values are generally ranked lower across all assumed terms and return rates. The TFCD percentages of the other ILAS generally show a reasonable correlation with the total expected principal-plus-returns.

Does a mirror fund mean higher charges? We could not reach that conclusion

Some ILAS offer so-called mirror fund options, where the insurer buys fund units to replicate a fund house’s portfolio. The Investor and Financial Education Council (IFEC) states that if an ILAS investment option is linked to a portfolio internally managed at the insurer’s discretion, fees charged by the insurer should be included in the total fees and charges paid to the insurer based on TFCD assumptions, and reflected in the TFCD percentage (see figure below).

Figure 2: IFEC explanation

In addition, the Insurance Authority’s Guidance on Illustration of Benefits for Long Term Insurance Policies (Guideline 28) states that if a "mirror fund" charges fund management fees, those fees must be disclosed numerically in the illustration document.

Figure 3: Excerpt from IA Guideline 28

Regarding the claim that ILAS with mirror fund options are charged higher than ILAS offering only direct funds, our study could not reach that conclusion. Among the seven ILAS above, only two offer mirror fund options — 宏利投資 and 永明迎雋 — yet these two products outperform peers in many assumed-return and term scenarios.

Conversely, products without mirror fund options that only offer direct funds — AIA 卓達智悅, 富通盈晉 and 萬通 plans — have overall expected principal-plus-returns that underperform peers.

Consumers should not buy products they do not understand

Finally, this study did not include possible loss scenarios for expected policy values; after accounting for fees, such losses could be even more severe. Currently the Insurance Authority does not require illustrations to provide loss scenarios (see article "The missing 'loss scenarios' of ILAS").

10Life believes that before buying ILAS, consumers must do extensive research and not rely solely on a single broker, agent, or so‑called "star" agent’s opinion. Consumers need to read the ILAS "Key Facts Statement" and the benefit illustration document carefully, consult related articles on the IFEC website, and the Insurance Decoder is also a useful reference. If you still do not understand the details of an ILAS, you should not purchase it, and especially avoid falling into sales traps where certain brokers and agents claim these products are "high return, low risk."

Appendix 1: Policy values assuming a 40-year-old male pays HK$1,000,000 single premium

ILAS		安盛盛名 II 整付投資保險計劃	永明迎雋投資壽險計劃	保誠雋賦投資計劃	宏利投資計劃	萬通環球投資整付計劃	富通盈晉之選	友邦卓達智悅
TFCD percentage		15.2%	16.1%	17.2%	27.5%	25.6%	24.6%	24.0%
Mirror fund provided?		✗	✓	✗	✓	✗	✗	✗
Minimum death benefit		105% of premium	105% of policy value	105% of policy value	105% of policy value	105% of policy value	105% of policy value	105% of policy value
Policy year	Assumed return rate	Expected policy value (HK$10,000s)
Year 10	0%	90.7	88.5	88	88.1	85.5	86.3	85.1
	3%	122	119.5	118	119.5	115.6	116	115.1
	6%	162.5	159.9	157	160.4	154.9	154.5	154.1
	9%	214.7	212.1	207.2	213.3	207.3	204.1	204.5
Year 20	0%	87.1	84.9	86.2	79.6	79.1	80.3	79.7
	3%	158.2	155.7	154.2	148.1	143.7	144.9	145.1
	6%	280.6	278.7	271.5	268.6	262.6	257	259.1
	9%	489.6	489	471.1	476.8	465.4	448.7	454.5
Year 30	0%	80.7	81.4	84	71.7	72.8	74.8	74.6
	3%	203.7	204	200.7	184.7	179.9	181.1	183.5
	6%	480.8	489	468	453.4	443.5	427.7	437
	9%	1107.9	1134.5	1067.4	1073	1039	986.2	1012.4
Notes: 1. Assumes the insured is a 40-year-old male paying a single premium of HK$1,000,000. 2. This product comparison does not include special promotional factors outside the "Key Facts Statement" (KFS) on the SFC website.

Notes:
1. This article was prepared by 10Life using market information collected from various sources for general reference only. It does not consider any individual needs or suitability and should not be regarded as sales advice. Before purchasing, consult a licensed insurance adviser to discuss an insurance plan suitable for you, and rely on the information provided by the insurer.
2. The premium information above is updated to 15 November 2021 and does not include the levy collected by the Insurance Authority.
3. Last updated: 15 November 2021.

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This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.

10Life 編輯團隊

團隊成員由一群資料搜集員組成，主力保險相關資訊研究。

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10Life 編輯團隊

團隊成員由一群資料搜集員組成，主力保險相關資訊研究。

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