Most People Do Not Get What ILP Is

Fidrec found during its mediation sessions that most consumers do not really understand what an ILP is.

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"They thought that it is some kind of endowment policy or savings policy that will give them regular returns," Ms Chua said.

But the returns actually fluctuate depending on how the chosen sub-funds in the ILP perform in the markets, she added.

Sub-funds are investment funds that are managed by professional fund managers and available only to policyholders of the ILP plan.

The Monetary Authority of Singapore (MAS) is seeking feedback on whether these ILPs should be classified as complex products, with a prominent red band to alert customers.

A spokesperson said the returns of an ILP are subject to the sub-funds' performance and ongoing insurance premium charges.

These factors, the spokesperson noted, are generally beyond investors' control and are not known beforehand, so it is difficult for them to get a gauge of the ILP's risk and return characteristics.

Ms Chua said the role of the financial adviser takes on greater importance, especially for ILPs.

In Singapore, financial advisers are regulated under the Financial Advisers Act.

The MAS spokesperson said that financial institutions (FIs) and their representatives are required to demonstrate that they have considered their clients' needs and financial circumstances before recommending suitable investment products to them.

"Material information, such as a product's features, fees and charges, as well as associated risks, must also be clearly communicated and disclosed," the spokesperson added.

Ms Chua cited a real-life case study where a financial adviser had failed in his duty to his clients.

The adviser mis-sold an ILP as a plan that would allow the customer to earn relatively higher interest rates than what fixed deposits offer.