By JAMIE LEE

American International Assurance (AIA) has been sued by a policy holder who claims the insurance giant is asking for additional premium payments over a period well beyond the initial guaranteed payment period.

Zhu Yong Zhen says in 1993 she bought a Singapore Financial Guardian life policy with a sum assured of $200,000, court documents obtained by BT show.

Ms Zhu, a Chinese national who has taken Singapore citizenship and is self-represented, says she was given a quote that detailed the premium to be paid and the annual dividends accumulated as part of the policy.

Based on this document, described by her as the 'original policy quotation' (OPQ), she says that she had to pay an annual premium of $2,091.50 for a sum of $100,000 insured for up to 16 years, explained under an expression known as 'critical year'.

According to her, at the end of 16 years the remaining premiums for the policy - which provides whole life protection until the age of 100 - were to be paid with dividends that snowballed over the same period.

The rolling dividends stated in the document were based on an interest rate of 7 per cent on the annual dividend awarded to the policy holder.

Explaining the interest rate, an accompanying note at the bottom of the document said 'the rate is not guaranteed' and ' is used for illustration purposes only'.

Ms Zhu says the same note did not state how the non-guaranteed dividends and interest rate would affect cumulative dividends, and that the latter, as well as the 'critical year', were not guaranteed.

AIA has rejected her claims, saying the OPQ - which it knows as the 'policy benefit illustration' (PBI) - 'clearly stated' that it was for illustration purposes.

'The PBI did not have contractual effect and/or was not part of the policy,' says AIA, which is represented by Rajah & Tann's Adrian Wong.

Ms Zhu knew of this, AIA says in its court document. 'The terms of the PBI were clear,' it says.

'The PBI was for illustration purposes only, future dividends as calculated in the PBI were not guaranteed and the interest rate at which dividends were to be calculated, as stated in the PBI, was not guaranteed.'

AIA has counter-claimed for defamation, alleging that a blog created by Ms Zhu around October last year to talk about the issue contained comments that were false and with the intent of causing AIA 'maximum embarrassment ... and loss of business'.

This article was first published in The Business Times.