Scoring Methodology of Savings Insurance

Savings return for the medium and long term is the main purpose of buying whole life savings insurance. Unlike other financial products, savings insurance provides not only guaranteed and projected returns but also life protection. Different savings insurance products have different propositions, some focussing on guaranteed return, some focussing on both guaranteed and projected returns while others emphasising projected return only. Based on your risk preference, you can refer to the relevant 10Life scores designed by our actuaries, including "Conservative Savings Score", "Growth Savings Score" and "Aggressive Savings Score".

General Assumptions   
                                                                           
  • The insured is 35-year-old male, non-smoker
  • Premium term of 5-9 years, with total premium of USD100,000
  • No policy loan, partial cash value and/or dividends/bonus (if any) redemptions made during the specified policy period

1.Components of Savings Score

For whole life savings products, some of the benefits are guaranteed by the insurer while some are not guaranteed. The actual amounts payable for the non-guaranteed benefits may be higher or lower than those projected, and may even be zero under some extreme circumstances. The 10Life scores are calculated based on a number of key components for savings insurance.

1.1 Returns Component – Guaranteed Return / Projected Return (Base) / Projected Return (Pessimistic) Score
Guaranteed return is one of the key differentiators between buying a mutual fund and a savings insurance product. In assessing the attractiveness of the products, 10Life compares the guaranteed return, as well as the projected return (pessimistic) and projected return (base), to reflect different risk levels at the end of the specified policy period, benchmarked against the market. The detailed methodology is as follows:

1.1.1 The levels of risk reflected
Three levels of risk are used for assessing the savings return after the policy is in force for a certain period of time. 

Is this return
guaranteed?
Includes all
guaranteed
benefits?
Includes
non-guaranteed
benefits?
Cash Values Measured
Guaranteed
Return Score
Y Y N The minimum cash values obligated by the insurer at the end of the specified policy period.
Projected
Return (Pessimistic) Score
N Y Y Cash values assumed under the “Pessimistic Scenario” by the insurer in the policy proposal.
Projected
Return (Base) Score
N Y Y Cash values assumed under the current “Base Case Scenario” by the insurer in the policy proposal.

1.1.2 Compare the cash values
The three return scores measure the 20-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 20th policy year.

1.1.3 Benchmark return against the market
For each of the three return scores, the 99th percentile of cash values in the market is used as benchmark. To assess the attractiveness of the returns, the return score is calculated as the 20-year cash value vs the respective benchmark. The benchmarks may be updated from time to time to reflect changes in the market.

2. Conservative / Growth / Aggressive Savings Scores

10Life designed three scores to represent three risk preferences for whole life savings insurance policyholders. They are “Conservative Savings Score”, “Growth Savings Score” and “Aggressive Savings Score”. 
Risk preference is a main consideration in financial management. Guaranteed return reflects guaranteed benefits only, whereas projected return (pessimistic) and projected return (base) reflect both guaranteed and non-guaranteed benefits. The actual amounts payable for the non-guaranteed benefits may be higher or lower than those projected, and may even be zero under some extreme circumstances. As such, out of the three savings components, guaranteed return is the least risky followed by projected return (pessimistic), while the projected return (base) is the riskiest.
Similarly, different savings insurance products have different focuses also. Some are more conservative and focused more on guaranteed return while some are more aggressive and focused more on projected return, and some are in between. 

To cater for readers with different risk preferences, 10Life built the three savings scores by assigning different weightings to the Guaranteed Return Score, Projected Return (Pessimistic) Score and Projected Return (Base) Score. Below are the weightings used: 


Guaranteed Return Score Projected Return (Pessimistic) Score Projected Return (Base) Score
Conservative Savings Score 80% 80% 0%
Growth Savings Score 0% 80% 20%
Aggressive Savings Score 0% 20% 80%


Since the implementation of GL16 in early 2017, insurers are required to disclose fulfillment ratios of non-guaranteed dividends/bonuses. However at this stage, the published data available in the market mainly cover the fulfillment ratios of the first few 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. Therefore, 10Life does not take published fulfillment ratios into the calculation.

10Life scores are for reference only, and do not constitute any insurance purchase advice. You should seek independent advice from licensed insurance advisors before purchasing any insurance products. If you have any questions or suggestions about the above methodology, please email us at enquiries@10Life.com.

Updated on Sep 29, 2021 
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