Shocking ILAS Statistics (#4): Insurers Collected Over Half a Trillion Dollars in ILAS Premiums Since 1997

ILAS In-Force Business 1997 to Mid 2014

Annual data was collected from OCI’s website here. Provisional data was collected from here. Dollars are in HKD. Data prior to 1997 is not available. If a policy is “in-force”, it has not been terminated, and insurers are still collecting their unjustifiably high fees. According to OCI, “office premiums” means (a) for policies with the single payment of premium, the premiums paid by the policy holders during the financial year; or (b) for policies with regular mode of payment, the annualized premiums of the policies. “Annualize” means to calculate as for an entire year. Office premiums is to be distinguished from revenue premiums. “Revenue premiums” means the premiums paid and payable to the insurer during the financial year. “Net liabilities” means the policy reserve set aside by the insurer before reinsurance as at the end of the financial year. The policy reserve will include the amount provided for the value of the units held for policy holders and the amount required to be provided for claims and expenses, etc.

The yellow section of the chart shows that insurers reported over half a trillion HK dollars in office premiums since 1997. Data isn’t available yet for 2013 and 2014, but it would probably push the figure near $600 billion.

The amount of fees insurers have collected is definitely in the tens and maybe in the hundreds of billions.

The #1 bestselling ILAS product is 25-year savings scams. When insurers sell these, they typically steal the first two years of savings, and then they collect at least 1.5% annually on the rest (in addition to the fund managers’ fees).

In the book, “The Great Expat Financial Planning Ripoff“, savings plans were called a “multi-million dollar worldwide scam”. Maybe this statistic was correct at the time the book was written, but now, the industry has seemingly grown into a multi-billion dollar scam (even if calculated in USD).

The above chart shows that nearly 1.7 million ILAS policies were still in-force as of two months ago. This is truly horrifying, given that 99% of people in Hong Kong should not own an ILAS policy.

Clearly, the quality of investment advice in Hong Kong is abysmal. Regulators need to wake up and address the root of the problem: the commission-based advisory model. The UK has banned this corrupt system, and Hong Kong should do likewise.

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