WE OWN around 5 million whole life and endowment policies worth over $60 billion. It averages $60,000 per household and is our second biggest investment after our homes. It is huge.

TNP PHOTO ILLUSTRATION: SIMON ANG

The money goes into participating funds that are regulated by the Monetary Authority of Singapore and the Risk Based Capital framework.

But to a consumer advocate like me, there is still not enough information on what has been done with our $60 billion.

AIA, GE Life, NTUC Income and Prudential are the leading life insurers and they can be more forthcoming with such information.

A recent concern of mine is a large chunk of money called 'orphaned money'.

These are funds that have grown from the early termination of policies.

How? Well, because insurers 'underpay' such policyholders, compared to those who wait till their policies have matured. Over time, the unpaid portion of money can grow to billions, in my view.

No orphaned money

But the Life Insurance Association (LIA) maintains that in the Singapore context, the concept of 'orphaned funds', as described by me, does not exist.

In a letter sent to The New Paper last Sep, LIA said that 'regulations ensure that any funds resulting from early termination are redistributed to the remaining policyholders through future bonuses.

'The 90:10 distribution rule means that the majority of monies have to be paid out eventually to policyholders if shareholders are to receive any benefit.

'The Appointed Actuary ensures that distribution is fair.'

It repeated this position in a letter to me this month: 'Our final comment is that our life insurers hold no orphaned monies. The concept of orphaned monies does not exist.'

So what are consumers to make of all this?

One way is to put aside the vexing term 'orphaned money' and just look at the money that has been held back - namely, 'funds resulting from early termination' which LIA says will eventually be 'redistributed to the remaining policyholders through future bonuses'.

It came about because life insurers underpaid policyholders upon early surrender. Policyholders did not approve of the underpayments, but it was done anyway.

It is understood that insurers feel that it would not be prudent and is against the primary objective of such products to pay out the entire assets on voluntary early withdrawal.

On trail of retained funds

So where are the retained assets parked?

It is nearly impossible to trace these in financial statements.

From what I can tell, life insurers have buried the retained money in 'other assets', where it is listed as a debt that policyholders owe their insurance company. It is not a good sign.

What we're asking for is a little transparency to help straighten out the whole thing.

We need to know:

(1) Why they account for it as debt owed insurance companies, (2) exactly how much is it and (3) what is the timetable - if any - for it to be 'redistributed to the remaining policyholders through future bonuses'.

What others have done

Since 1 July 2005, Malaysia has required that policyholders receive their fair share - called asset share - of the policyholders' fund when they terminate their policy.

Nearly all retained money from early surrenders is paid out to policyholders at the end of each year.

This is a good way of handling it and can serve as a model for our life insurance companies.

It would also be good for insurers to state if they have taken a 10 per cent share of profits from investments generated by the funds they retained.

Such questions have been raised after Aviva in the UK recently made a huge $2 billion payout to policyholders. In the end, Aviva took 30 per cent of retained funds and policyholders got the remaining 70 per cent.

Given these unsettling times, consumers want more answers to the questions raised, not fewer.

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