Long Term Savings Insurance Scoring Methodology

10Life Score is designed to compare products based on different insurance needs and objectives. The 10Life Score weightings vary according to the insurance objectives and target horizon as follows.

• Male non-smoker age 35;
• Total premium payment amount USD100,000;
• No policy loan taken and no withdrawals of cash value and/or dividend/bonus throughout the policy term.

Guaranteed return is one of the key differentiators between buying a mutual fund and a savings insurance product. 10Life compares the guaranteed return and the projected return of each product against the market benchmark to derive the guaranteed return score and projected return score, reflecting different risk levels at the end of the specified policy period. The detailed methodology is as follows.

4.1. The Levels of Risk Reflected

Three factors are used for assessing the savings returns after the policy is in force for a certain period of time.  

• Is the return guaranteed?
• Does the return include all guaranteed benefits?
• Does the return include non-guaranteed benefits?

The details are summarised in the following table:

4.2. Comparing the Cash Values

The three return scores measure the 10/20/30/60-year cash values, assuming the policyholder withdraws the total cash value (including guaranteed & non-guaranteed values) as a lump sum at the end of the 10/20/30/60th policy year.

4.3. Benchmark Return against the Market

For each of the three return scores, 10Life will determine the market benchmark by using the 99th percentile cash value in the 10/20/30/60th policy year. The return score is then calculated by comparing the cash value at these policy years against the corresponding benchmark. The benchmarks may be updated from time to time to reflect changes in the market.

Since the implementation of GL16 in early 2017, insurers are required to disclose fulfilment ratios of non-guaranteed dividends/bonuses. Currently the published data available in the market mainly cover the fulfilment ratios in the early policy years, making it insufficient to determine the ability of insurers fulfilling the long-term nature of these non-guaranteed returns. Moreover, products and market assumptions are constantly changing, making it difficult to predict future returns based on past returns. In spite of the difficulty, starting 2024, 10Life includes the published fulfillment ratios in the 10Life Score calculation to better compare long term savings products.

Insurer Fulfillment Score (IFS) depends on the following factors:

• Average fulfilment ratio
• Proportion of fulfilment ratios reaching 70%
• Experience factor

5.1. IFS Scoring Methodology

As suggested by its name, long-term (participating) savings insurance is intended to be held for a longer term as an investment tool. The dividend/bonus payouts in early policy years tend to be relatively small, and thus the fulfillment ratios of early policy years is not indicative or representative of the insurer’s long-term performance. Therefore, 10Life focusses on fulfillment ratios for Policy Year 6 onwards. For insurers with an adequate number of observations of fulfillment ratios for Policy Year 6 onwards, i.e. 50 data points, 10Life employs the following formula for the IFS calculation:

5.2. Experience Factor

Special treatment is provided for insurers who have a limited number of fulfillment ratio data points (at Policy Year 6 or above). A discount factor is applied to the Score based on the tier the insurer falls into, ensuring that insurers with a limited number of data points are still considered in the scoring, with the scores adjusted to reflect the lower confidence due to limited data availability. The discount factor gradually decreases as the number of data points increases, allowing for a more accurate representation of the insurer’s fulfillment performance. For Tier 3 and 4, a discount factor is applied to the IFS computed under section 5.2. However, for Tier 1 and 2 with less than 10 fulfillment ratio data points (Policy 6 onwards), the data scope is expanded to consider fulfillment ratio of all years.

10Life Long Term Savings Insurance 5-Star Rating is awarded to the top products under four common financial goals of whole life savings insurance for the policyholder:

• Golden 10 Years
• Education funding 
• Retirement planning 
• Legacy planning 

Each financial goal has its own specified target period, premium payment term and risk preference. The 5-Star Rating criteria for each category are summarised below.

Updated on Jun 26, 2024