Universal life insurance plans are designed to be held long term. Through the crediting interest rate declaration, the policyowners participate in the financial performance of the universal life insurance plans. We aim to ensure a fair sharing of profits between policyowners and shareholders, and among different groups of policyowners.
We will review and determine the crediting interest rate at least once per year, and a smoothing process is applied when the actual crediting interest rate is determined. The crediting interest rate declared may be higher or lower than those illustrated in any product information provided. The universal life insurance plans also have other non-guaranteed interest/bonus and policy charges which are subject to review regularly and may adjust if necessary. Review of the crediting interest rate, other non-guaranteed interest/bonus and policy charges would be approved by the Chairman of the Board, one Independent Non-Executive Director and the Appointed Actuary of the Company. In case of any change in the actual crediting interest rate, other non-guaranteed interest/bonus and/or policy charges against the illustration or should there be a change in the projected future crediting interest rate, other non-guaranteed interest/bonus and/or policy charges, such change will be reflected in the policy annual statement and benefit illustration.
To determine the crediting interest rate as well as other non-guaranteed interest/bonus and policy charges, we may consider the past experience and future outlook of various factors such as:
- Investment returns: include both interest income and change in market value of the assets supporting the policies. The investment returns could also be subject to market risks such as change in interest rate, credit quality and default, equity price movement, as well as currency price of the backing assets against your policy currency etc.
- Claims: include the cost of providing death benefit and other insured benefits under the policies.
- Surrenders: include policy surrenders and withdrawals; and the corresponding impact on investment.
- Expenses: include both direct expenses which are directly related to the policies, such as commission, underwriting, issuance and premium collection expense etc., as well as indirect expenses such as general overhead costs allocated to the policies.