Insurance products with a savings element are very common, such as life insurance policies that distribute dividends or bonuses (so called participating policies). Some insurance intermediaries may highlight high returns as a key feature of participating policies, while in fact the returns are not fully guaranteed. The returns from a participating policy are generally divided into two parts: guaranteed benefits and non-guaranteed benefits (i.e. dividends/bonuses). Some policies may appear to offer attractive dividends, but as they are not guaranteed, it is important to know whether and how much they can be realised in the end.

The term of an insurance policy may last for decades and there is no telling how much dividends an insurance company will pay out in the future. Yet we can find out an insurance company’s past dividend payout performance by looking up the “fulfillment ratio”. Fulfillment ratio is the aggregate actual accumulated dividends against the illustrated aggregate dividends at the point of sale. A ratio close to 100% means the insurance company has come close to achieving its projected dividends. If the ratio is lower than 100%, the actual payout is lower than the illustrated amount at the point of sale, and vice versa, as can be seen in the following example:

Consumers can go to the List of Insurers' Websites on the Fulfillment Ratio of the Insurance Authority website to search for the insurance companies' published fulfillment ratios. You should note the following points to understand fulfillment ratio:

Participating policies are long-term in nature. Generally speaking, less dividends can be expected at the early stage of the policy, and it is easier for insurance companies to achieve a near 100% fulfillment ratio in that period. In general the longer the term of a policy is held, the larger the dividends. And thus, the ratio in the later policy years may better reflect the long-term performance. Having said that, consumers should not focus on the fulfillment ratio of a single period because the ratio will fluctuate over time. You should look at the ratios across all policy years (especially the long term ones) to gain a better understanding of the past performance of the participating policy.

There are different types of dividends/bonuses, such as annual dividend, reversionary bonus and terminal dividend/bonus. Considering the features of different dividends and bonuses, insurance companies will disclose different types of fulfillment ratios. If the participating policy has more than one type of bonus/dividend, consumers can check the dividend breakdown in the benefit illustration document. For example, if the amount of reversionary bonuses account for a majority portion, its fulfilment ratio will be more important.

Insurance companies generally announce the fulfilment ratio one year after the product launch. If the participating policy is a new product or new series, it may have no or very short history of fulfillment ratio. Thus, it does not give much information by looking at its fulfillment ratio. In this instance, consumers can take reference of the fulfillment ratios of other participating products with similar features of the same insurance company to understand its track record in realising dividends.

While fulfullment ratio is a good reference reflecting an insurance company's performance in paying out dividends, it is only a record of past performance and not an indicator of future dividends. When taking out an insurance policy, consumers should not take the fulfillment ratio as the only point of consideration.  Other important factors to consider before making a decision include whether the policy is suitable for you, your affordability, the product’s key features and risks.