[Insurance Clinic: Premium Financing] 65-year-old retired woman falls into a “life insurance trap”, saddled with HK$5 million in debt!

She had only wanted to earn steady interest income, so why did she end up, through no fault of her own, as a victim saddled with more than HK$5.03 million in debt? Recently, Headline Daily reported a case of suspected malpractice by a bank, which precisely played out this “wealth management turned into debt” nightmare. The 10Life team was previously invited to speak to Headline Daily to help the public unpack this premium financing trap.

As she entered retirement age, Madam Chan, a 65-year-old long-standing customer of a medium-sized bank for 40 years, had always preferred safe short- to medium-term savings products. However, in mid-2025, she was enticed by the branch manager with a purported 8.5% return and, without her full understanding, took out over HK$5.43 million through “premium financing” to purchase a savings insurance plan. Her 40 years of trust in the bank ultimately turned into a huge debt on paper, leaving Madam Chan anxious and self-reproachful every day. 

In June 2025, an old policy held by Ms Chan expired, with a maturity cash value of approximately HK$1.3 million. Just before the policy matured, the bank proactively called her to promote an insurance plan offering a “6% discount” and “an annual return of 8.5%”, stressing that the offer was only available to those who took out a policy before the end of June.

After being persuaded by the branch manager, she visited a branch in the district in late June 2025 to meet the branch manager in person. During the meeting, the branch manager showed her on a computer screen a plan that could deliver an annual return of 8.5% over eight years. For a retired elderly person, the returns were highly attractive.

However, behind this lay a key factor that was not clearly explained — premium financing. The assumption was that interest rates would remain at an extremely low level throughout the eight-year period, and that the dividend realisation rate would reach 100%; under these conditions, a return of 8.5% could be achieved upon surrender. However, the interest on this premium financing loan would fluctuate with market interest rates. When Ms Chan took out the policy, rates were at a low in 2025, but interest rates then continued to rise, causing her monthly interest expenses to increase sharply. 

Recounting the day the policy was signed in June 2025, Mrs Chan arrived at the branch at around 10 a.m. That same day at noon, she had to go to Kowloon for a medical appointment. The branch manager urged her to return to the bank in the afternoon to complete the insurance application on the same day. Did the branch manager have sufficient time to comply with the regulatory requirements, explain the policy returns and the interest rate risks of premium financing, and understand the customer’s financial needs? Mrs Chan recalled that the entire signing process was rushed under severe time pressure, with all documents signed quickly on a tablet only.

As a bank customer for 40 years, Mrs Chan trusted the bank and, without gaining a thorough understanding of the product, took out a whole life insurance policy with a premium of as much as US$1 million (approximately HK$7.8 million) within a single day, involving a premium financing loan of up to HK$5.43 million.

Two days later, the bank asked Mrs Chan to return to the branch to sign an “Application Amendment Form” handwritten by a bank staff member: because she had built a relationship of trust with the relationship manager for more than a year, she was willing to disclose more assets, and the declared amount of her net liquid assets was suddenly “substantially increased” to HK$19.99 million.

Mrs Chan vehemently disputed this, saying she had never had assets of HK$19.99 million. The manager had only been transferred to that branch in early 2025, so where did a relationship of trust lasting more than a year come from? In fact, a year earlier, Mrs Chan had also been persuaded to take out another savings insurance policy, and the assets declared at that time were about HK$5 million.

Nearly two months after taking out the policy, in August 2025, Mrs Chan discovered that HK$9,207 had been debited from her bank account, an amount exceeding the monthly fixed premium contribution of HK$7,800 she had expected. It was only then that she realised the policy was in fact tied to a substantial premium financing loan, and that she had already missed the 21-day cooling-off period, losing the opportunity to cancel the policy unconditionally.

This loan carried a floating interest rate, meaning the rate would rise and fall in line with market movements. According to records provided by Mrs Chan, she had once been required to pay as much as HK$19,808 in interest in a single month. As Mrs Chan is retired and has limited income, the pressure of servicing the interest was considerable.

When she asked the branch manager about it, he tried to reassure her by saying that “interest rates in the US will be cut”. However, rates did not come down. The branch manager then seized the opportunity to promote another fund, saying that the income from the fund could be used to repay the loan, leaving Mrs Chan feeling helpless.

In October 2025, Mrs Chan told the branch manager that she wanted to cancel the policy and stop the heavy monthly interest burden as soon as possible. However, the manager informed her that even if the policy were cancelled, she would still need to continue paying the remaining loan interest. Of course, the premiums she had originally paid out of pocket would not be recoverable either, because this was an early surrender, and the surrender value would be used to repay the principal of the loan.

In January 2026, Mrs Chan herself lodged a complaint with the bank, but the bank’s written reply at the end of March stated that there was “no objective evidence” to support the complaint. She subsequently sought help from Scoop, and the incident drew attention after being reported on the programme. 10Life also stepped in to assist after understanding the case, and, with Mrs Chan’s authorisation, formally lodged a complaint with the bank on her behalf.

However, after reviewing the relevant documents, 10Life found several contradictions in the bank’s reply at the end of March: 

1. Assets exaggerated to nearly HK$20 million, with the bank’s own rationale disproved: the revised statement increased Grandma Chan’s net liquid assets from about HK$5 million (2024) to HK$19.99 million (2025). The bank argued that this was because the two parties had established a “relationship of more than one year”; in fact, they had only known each other for about six months, rendering the claim untenable.
2. Ignored genuine needs, saddling a retired elderly customer with huge debt: the application documents show that the nearly 65-year-old Grandma Chan took out the policy for “estate and funeral” purposes. However, Hong Kong does not have estate duty, and even a grand funeral would not require US$1 million. Yet this arrangement left the retiree burdened with a HK$5.43 million premium financing loan.
3. The claim of “no WhatsApp records” was exposed by screenshots: the bank insisted that the two parties’ WhatsApp messages were limited to greetings and did not discuss insurance. However, screenshots provided by the complainant clearly show that, more than a month before the policy was signed, the staff member had proactively contacted Grandma Chan to recommend the policy and related offers, directly contradicting the bank’s account. 

As the repayment deadline is 30 June 2026, the situation is urgent. After reviewing the case, 10Life, with Ms Chan’s authorisation, issued a formal complaint letter to the bank’s senior management, pointing out a number of potential compliance concerns involved in the incident: including inaccurate asset declarations, failure to properly assess the customer’s repayment capacity, suspected excessive borrowing, and never explaining the customer’s right to the 21-day cooling-off period. We will continue to follow Ms Chan’s case and provide further coverage.

The case of the policyholder is by no means an isolated incident, and 10Life has previously received assistance requests of this kind on multiple occasions. We remind readers to pay close attention to the following warning signs:  

1. “Offers” created a sense of urgency: the offer may appear attractive, but elderly customers still need to fully understand the product to avoid making hasty decisions.  
2. Electronic signatures completed in a rush: signing documents quickly on a tablet can easily cause important terms to be overlooked and leave matters insufficiently explained.
3. Highly sensitive to interest-rate movements: as the interest rate for premium financing is variable, if borrowing rates remain high, the interest burden may become too heavy, with a risk of a “call loan” at any time.  

Once again, please note that if premium financing is used, the policyholder must gain a thorough understanding of the product being taken out. If anything is unclear, professional assistance should be sought. General savings insurance products have a 21-day cooling-off period. If the policyholder cancels the policy within this period, all premiums paid can be fully refunded.

Premium financing involves leverage risk and is not suitable for all investors, especially retirees seeking stable passive income. Before taking out a policy, you must proactively request a written explanation to confirm whether the product involves any borrowing arrangement. 

In the market, apart from being mindful when purchasing premium financing products, there may also be many pitfalls in other insurance products. If you have encountered poor insurance sales practices, or are facing significant difficulties when making a claim, please feel free to contact 10Life via WhatsApp at 37051599.

Further reading: 
[Premium Financing] In a high-interest-rate environment, using premium financing may result in a loss upon exit
[Insurance Clinic] Turning term insurance into borrowing to buy savings insurance — a bank’s sudden loan call reveals a sales trap 

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.