Understanding Investment-Linked Assurance Schemes

ILAS

An Investment-Linked Assurance Scheme (ILAS) product typically has the following features:

  • it is a long term life insurance policy issued by an insurance company;
  • it provides the policyholder with life insurance cover plus investment options (of which each usually solely links to an SFC-authorized fund);
  • it is designed for investors who are prepared to hold the investment for a long term period and pay a surrender charge which may be high if the policy is surrendered in early years;
  • there are different fees and charges including cost of insurance protection and costs relating to the administration of the investment platform offered and other services;
  • its policy value is determined by the insurance company based on the performance of the “underlying or reference funds (Note)” corresponding to the investment options selected by the policyholder. The return of the policy is subject to investment risks and market fluctuations;
  • the insurance company owns the underlying assets of an ILAS product, not the policyholders ; the policyholders have the ownership of the policy only; and
  • there is a cooling-off period during which the policyholder may cancel the policy, however, the policyholder may not get back all the premium paid if the value of the investment options they selected has gone down.

ILAS products may vary in the following areas:

  • the level of life insurance protection, i.e. high protection and low protection;
  • the mode of contribution, e.g. single, regular or both; and/or
  • the structure of fees and charges, e.g. at policy level, and/or underlying/reference funds level.

Buying an ILAS product is not the same as investing in a fund. It is important for consumers to understand the product’s features and risks and how to differentiate an ILAS from other financial products.

Note: If the insurance company invests the net premium received from the scheme participants into the funds corresponding to the investment options selected by the participants for its own asset liability management purpose, the term “underlying funds” will be used; otherwise, the insurance company should adopt the term “reference funds”.