Others in a similar situation are advised to seek their agents' counsel

By Lorna Tan
COMPANIES CORRESPONDENT

INSURANCE giant AIA has agreed to return extra premiums paid by three policyholders of 'critical year' coverage, whose plight was highlighted in The Straits Times yesterday.

The trio will receive a total of $2,068.58 and will now enjoy free insurance coverage without paying additional premiums.

The documents of the original policies they took out in 1988 had guaranteed this once they had paid premiums for 13 years - but AIA had continued to deduct payments.

AIA did not confirm if it would honour fixed cash payouts that were also stated in the trio's original documents.

But it did say: 'Based on their representations, we have informed them that we intend to honour their critical year and we are currently considering several additional requests they have with regard to their individual policies.'

The heartening gesture by AIA over refunding the premiums came as The Straits Times received a barrage of calls and e-mail messages from enraged readers, most of whom were AIA policyholders claiming to be in the same predicament over critical year coverage.

And this is the message AIA has for them: 'We believe that if clients have concerns on their original projection, they should approach their agent or the company so that we can counsel them on the benefits of their plan and their options.'

The concerns centre around the critical year - which is the point at which a policy has built up enough cash value to fund future premium payments, plus an annual interest cost.

The trio who highlighted the problem - Mr Khoo Choon Keong, 36, a supervisor with a transport company; his former army mate Yeo Kong Boon, 36; and the latter's wife Wendy Kwek - in 1988 took out AIA's Financial Guardian life plans that were sold with the critical year feature which was used widely to market whole-life plans then.

However, after the critical year - which in their case was the 13th year - the trio were upset to find that their premium payments were being extended because the policies had not built up sufficient cash values due to the poor investment climate.

They said their agent had, at the time, led them to believe that the critical year and fixed cash payouts were guaranteed. There was no disclaimer to say otherwise. Usually, the critical year is not guaranteed and this fact is mentioned in the sales illustration.

The trio's predicament hit a raw nerve with some readers yesterday. For several, it was the first time they learnt that the policies they had purchased were unlikely to live up to the benefits they were told about at the point of sale.

The country manager of a network systems firm, Mr David Hui, said: 'Honestly, I was unaware of this issue until I read your report.'

All the policyholders who called or wrote to the paper said they were unaware the critical year feature was not guaranteed.

Some said they learnt about this only after contacting AIA when they realised that premiums were still being deducted for their policies.

'They highlight the beauty of the policy with no mention of the downside,' said another reader, Mr W.S. Lee, who works in a bank.

There were also calls from some AIA agents who admitted that they were not entirely clear about the critical year products that they were marketing in the past.

As a result, they said, salient features such as the impact of interest rates on policies were not made clear to clients. It appears that AIA had also written letters to policyholders in the 1980s stating that no more premium payments were needed after a fixed period of time.

Although the letters stated that the unique feature of the policy was no more payments after a number of years, there was a statement that the critical year depended on deposit rates for insurance dividends.

Some of these letters were signed by the then AIA marketing manager, Mrs Hauw Soo Hoon, who is now the Monetary Authority of Singapore's (MAS') executive director of insurance supervision department, financial supervision group.

The MAS said yesterday in a statement that it takes complaints from the public 'seriously and encourages financial institutions to be open and transparent in their dealings and to respond fairly to all consumer complaints'.

THE ISSUE: How it came to light

THREE policyholders - Mr Khoo Choon Keong, Mr Yeo Kong Boon and Ms Wendy Kwek - bought AIA's Financial Guardian life plans in 1988.

They were told by their agent that the critical year and fixed cash payouts - if they chose to surrender the policies - were guaranteed, and there was no disclaimer to say otherwise. However, after reaching the critical year, AIA was still deducting premiums.

The three then sought refunds for the extra premiums and AIA's word that it would honour cash payouts promised.