Product disclosure
Regulatory measures introduced since 2013 have enhanced the transparency of the sales process of investment-linked assurance schemes (ILAS) products. To make the best use of product disclosure, you should carefully look at the important information which is more prominently disclosed in ILAS product key facts statement (KFS) and Important Facts Statement (IFS), and be clear that the assumed rates of returns shown in the illustration document do not guarantee future gains nor represent any past performance.
- Product Key Facts Statements (KFS)
To find out all relevant information about an ILAS, read its offering documents including the Product KFS.
Product KFS summarises the key features and risks of the ILAS in easy-to-understand language. Issuers are required to disclose additional important information more prominently.
- First and foremost, the first section reminds you the ILAS is "a long-term investment-cum-life insurance product" and what types of investors this ILAS is only suitable for, and warns you "This ILAS policy is not suitable for investors with short- or medium-term liquidity needs."
- The section "Fees and charges" states that the total fees and charges in investing in an ILAS as a percentage of your premiums to be paid at policy level.
The percentage is calculated based on certain assumptions for illustration purposes. The actual percentage of your premiums for covering the fees and charges may vary depending on individual circumstances of each case, eg your circumstances and the premium amount and the sum insured of your policy. - The section "Long-term features" explains:
- certain percentage of your premiums may be deducted upfront as charges and this may reduce the amount available for investment in early policy years;
- there may be an early surrender/withdrawal charge of up to a certain percentage of the policy value (or other basis depending on the feature of the ILAS) in case of policy termination/surrender/partial withdrawal/suspension of or reduction in premium payment;
- you may be entitled to a loyalty or special bonus up to a certain percentage of the policy value if you keep your policy for a certain number of years.
- The section "Intermediaries' remuneration" explains that although you may pay nothing directly to the intermediary who sells/distributes this ILAS policy to you, your intermediary will receive remuneration which, in effect, will be borne out of the charges you pay. Your intermediary should disclose to you in writing at the point-of-sale information (ie the Important Facts Statement) about intermediary remuneration. The amount of remuneration actually receivable by your intermediary may vary from year to year and may be higher in the early policy years. You should ask your intermediary before taking up your ILAS policy to know more about the remuneration that your intermediary will receive in respect of your ILAS policy. If you ask, your intermediary should disclose the requested information to you.
The ILAS Product KFS also highlights the key facts below:
- Quick facts of the ILAS
- What this product is and how it works
- What the key risks are
- If there is any guarantee feature
- Fees and charges levied at policy level and underlying/reference funds level
For a guide to reading the Product KFS of investment products in general, please refer to How to Read Product Key Facts Statements booklet.
- Important Facts Statement (IFS)
At the point of sale, you will be asked to confirm (Note) your reasons of buying the ILAS product in the "Statement of purpose" section in the IFS. The IFS highlights some important facts of the ILAS product to increase your awareness of these facts such as the long-term nature of ILAS policies, fees and charges, early termination penalties; and intermediary remuneration. 
Note: Before recommending any ILAS product to the client, banks and other insurance intermediaries are required to (i) request the client to set out his/her reasons/considerations for procuring an ILAS product in the “Statement of purpose” paragraph in the IFS; and (ii) take due account of the reasons/considerations set out by the client, together with other relevant information, in assessing whether or not the ILAS product is suitable for the client.
- Illustration document
Intermediaries selling the ILAS must explain the illustrated cost structure to you as a potential ILAS buyer.
The insurance company must prepare a personalised illustration document for you to review and sign before you sign the application form of an ILAS. The document typically shows you the amount that you would expect to receive upon surrender of the ILAS policy and projected death benefits based on certain assumed rates of returns after deduction of all relevant fees and charges at policy level as disclosed. The figures do not guarantee future gains (unless the policy offers a return guarantee) nor represent any past performance.
So, the purpose of the illustration document is to show the impact of fees and charges on surrender values and death benefits based on the certain assumed rates of returns. The assumed rates of returns are for illustrative purpose only. Don't confuse the assumed rates (ie hypothetical) with the actual rate of return of an ILAS. The actual return may be different.
Illustration shall be made using one of the following options:
- four assumed rates of return (ie 0%, 3%, 6% and 9% per annum) on two pages with surrender value and death benefit shown on first and second page respectively; or
- three assumed rates of return (ie 0%, 3% and 6% per annum) on one page with both surrender value and death benefit shown on the same page.
The assumed rates of return are requirements imposed by the Insurance Authority on insurers and are applicable to all ILAS policies.
An illustration document with four assumed rates of return: 
An illustration document with three assumed rates of return: 
Don't sign under the declaration unless you fully understand the information in the illustration document, and have received the offering documents.
