Income CEO says lower payout reflects market returns after Tan Kin Lian questioned if it was ‘unjustified’

Tan Kin Lian accepts Income Insurance’s explanation on policy payout reduction after CEO’s clarification

Former Income Insurance chief executive Tan Kin Lian has accepted the company’s explanation for the reduction of a long-term policy’s maturity payout, following clarifications from CEO Andrew Yeo.

In a Facebook post on Sunday (2 Nov), Mr Tan shared Mr Yeo’s reply addressing concerns he had raised earlier about a 1991 Foundation policy whose maturity value appeared to have fallen by more than 25%.

This followed Mr Tan’s earlier post questioning whether the reduction was “unjustified”, which drew public discussion, including a comment from former NTUC Enterprise and Income CEO Tan Suee Chieh, who described the drop as “unwarranted”.

Income Insurance: Payout reflects market conditions, not bonus restructuring

In his letter to Mr Tan, Mr Yeo explained that the policy’s maturity value was consistent with prevailing market conditions and the performance of Income Insurance’s participating (par) fund.

He noted that long-term investment returns have declined over the decades since the policy’s inception in 1991, which has affected bonus payouts across the industry.

The Life Insurance Association’s cap on illustrated returns for participating policies has also been progressively lowered over the years, from 7% in 1994 to 4.25% in 2021, reflecting this shift.

“The yield to maturity for the Foundation policy is approximately 4.9%, which is in line with Income Insurance’s overall par fund performance, averaging 5.2% per annum over the last 34 years,” Mr Yeo wrote.

He added that most of the reduction in the policy’s value occurred before 2009, prior to the company’s bonus restructuring. Between 2010 and 2023, bonuses for the Foundation policy were maintained.

For 2024, 95% of Income Insurance’s participating policies either maintained or increased their special bonuses, which Mr Yeo said “demonstrates the resilience of the participating fund”.

Tan Kin Lian acknowledges ‘actual maturity payout is fair’

In his reply, Mr Tan thanked Mr Yeo for the detailed clarification and said he accepted the explanation provided.

“I will convey to the policyholder that the actual maturity payout is fair and in accordance with the actual earnings of the participating fund,” he wrote.

He also acknowledged that the original 1991 projections were based on higher yields that “could not be achieved during the term of the policy”.

Income clarifies there was no ‘promise’ to increase bonuses

In response to MS News’ queries, Income Insurance clarified that while special bonuses were increased in 2009 to reflect that year’s participating fund performance, there had been no promise to continue doing so in subsequent years.

“Mr Tan’s claim that ‘there was a promise’ [to increase special bonuses] was untrue,” the insurer said.

Income explained that the bonus adjustments in 2009 were a one-off reflection of that year’s fund performance, not a commitment for future increases.

It added that all bonuses are reviewed annually to ensure fairness, prudence, and long-term sustainability, with changes — particularly to terminal bonuses — made in line with actual fund performance.

The insurer also noted that the policy’s yield to maturity and bonus adjustments were consistent with long-term market trends, which have been influenced by major events such as the Asian financial crisis, global financial crisis, and the Covid-19 pandemic.

“Income Insurance communicated the 2009 bonus restructuring to all policyholders,” it said, adding that participating policyholders receive annual bonus letters detailing the performance of the par fund and how it translates into their bonus payouts.

Also read: Ex-NTUC Income CEOs Tan Kin Lian & Tan Suee Chieh question alleged payout reductions for Income policies