Mailbox: Plight of the 'sophisticated investor'

Mr Tan Aik Meng's bitter experience with insurance is reminiscent of mine ("Insurer's bonus statement misleading"; Wednesday).

I read the small print and understand legalese, but this did not keep me from falling for the rosy projections on expected returns for the endowment insurance policies that I took up 20 years ago.

The projections were based on "historical returns", which seemed credible on paper then.

When my policy matured, I was aghast to find that my profits were just a tiny fraction of what was projected 20 years ago. No amount of remonstration could change the situation.

Such is the plight of the "sophisticated investor".

I have learnt never to use insurance as a form of investment.

Plain insurance policies with the lowest premiums are the ones to go for.

Going by current Central Provident Fund (CPF) rates of 2 per cent to 3 per cent a year, I would have been better off leaving my money in the CPF and buying a no-frills life insurance policy over the past two decades.

It is hard under current conditions for reputable major institutions to provide fail-safe returns beyond 1 per cent or 2 per cent annually.

But I wish insurance companies would not lure customers with unrealistic, unguaranteed returns.

Yik Keng Yeong (Dr)

This article was first published on JUNE 27, 2014.
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