The structure of annuity products is complex, making it difficult for consumers to compare. 10Life actuaries set QDAP rating standards based on target segment, of making it easier to understand the QDAP scores for medium-term savings, retirement planning or hedging longevity risks. The 10Life scoring methodology considers different factors including guaranteed returns, projected returns, early surrender coverage and early death coverage. 10Life’s scoring methodology is transparent and open. You may find the detailed assumptions and scoring factors on the 10Life website.
QDAP will accumulate the policyholder’s savings and convert into a stable income in the future. 10Life compares the returns of annuity products using Internal Rate of Return (IRR). Simply put, IRR can be understood as the annualised rate of return on investment.
According to the Insurance Authority, all QDAP product brochures must use a 45-year-old non-smoking male policyholder as an example to disclose the product IRRs. In addition, consumers can refer to the product brochure to understand the IRRs of the product under different payment periods, annuity start age and income periods.
IRRs can be guaranteed or projected. The guaranteed IRR is the return contractually guaranteed by the insurance company to the policyholder, while the projected IRR includes guaranteed and non-guaranteed returns. Non-guaranteed returns are affected by multiple factors such as the insurance company’s investment performance, profit sharing policy and the general economic environment, hence it is difficult to predict.