Why investment-linked policy sales have surged even as complaints rise

SINGAPORE: Sales of investment-linked policies (ILPs) have more than doubled in three years, even as claims over alleged misrepresentation and inadequate disclosure keep climbing.

Weighted new business premiums – a measure of new sales – have risen for three consecutive years after falling in 2022 amid rising interest rates and market volatility, said the Life Insurance Association (LIA).

They reached S$2.88 billion (US$2.2 billion) in 2025, up from S$1.31 billion in 2022, said the association’s executive director Chan Wai Kit.

“This represents growth of approximately 120 per cent over three years, including a 27.8 per cent year-on-year increase in 2025,” he said.

Over the same period, claims related to ILPs at the Financial Industry Disputes Resolution Centre (FIDReC) rose from 42 in 2022 to 164 in 2025. This included a spike in 2024, which saw 211 claims. 

The industry mediator saw 104 claims in the first half of 2026, compared with 61 in the same period a year earlier.

The claims generally centre on allegations of market conduct, such as misrepresentation, inadequate disclosure of information about ILPs or inappropriate financial advice.

Over the years, the profile of complainants has shifted towards older age groups, said FIDReC chief executive Eunice Chua. Claims from those aged 61 and above made up 35 per cent of the total in the first half of 2026, up from 7 per cent in 2022.

Mediation sessions showed that many consumers lack a good understanding of the product, often assuming it is similar to traditional insurance or that returns and capital are guaranteed. 

Some are also unclear about the fees and charges or the premium commitment term.

WHY HAS DEMAND INCREASED?

Two design changes to ILPs account for much of the recent growth, said Alex Lee, president of the Singapore Actuarial Society.

Traditional policies balanced protection and investment, requiring customers to complete lengthy health underwriting questionnaires, he said. Newer ones carry only minimal death cover, so they can be issued with few or no health underwriting questions.

The “welcome bonus” that many newer ILPs offer may also have spurred sales, said Mr Lee, referring to extra units in the fund that are given to the customer when they first purchase the policy, so they are holding more than they paid for.

He noted, however, that the bonus is typically funded through higher charges in the early years and comes with a minimum investment period.

Mr Eddy Cheong, chief executive of insurance advisory Havend, said strong capital markets over the past decade may have made ILPs an easier sell.

“People like the idea of growing their wealth,” he said, adding that fixed deposits and endowment funds may be seen as too safe or too slow.

With hardly any long-term market corrections in recent years, people may also think investing is easy to navigate, he said.

Many customers are not investment-savvy and rely heavily on advisers, leading them to buy ILPs instead of investing directly, he added. Others may view the policies as “safer” because they are insurance products, even though they are not insurance.

WHAT BUYERS NEED TO KNOW

For those considering ILPs, the experts cautioned that returns and capital are not guaranteed – so money put into a policy may not grow and may even shrink.

LIA's Mr Chan said customers may mistake “capital guaranteed” for “death benefit”. 

A death benefit is an assured insurance payout triggered upon death. It should not be conflated with a capital guarantee during the policy term, because the investment value fluctuates with market conditions, he said.

FIDReC's Ms Chua said consumers frequently assume the policies are “safe” like traditional insurance products and need no active monitoring. Returns also fluctuate based on what the customer chooses to invest in, she added.

Mr Cheong, whose company does not recommend ILPs to its customers, said consumers should be aware of fees and charges that can eat into returns even when markets do well. 

ILP holders have to pay policy fees and fund fees, whereas those buying directly into the same investment fund only pay fund fees, he said. The policy fees are similar to what a consumer would pay for insurance, even though the ILP is more of an investment product, he added.

Mr Cheong also pointed to administration charges payable every year for the stipulated period. In some cases, the charge is a percentage of the account value – meaning the more your account grows, the higher the amount charged.

Mr Lee also pointed to charges for early termination and premium holidays. Premium holidays are periods in which the policy owner can stop paying premiums without surrendering the policy. The insurer usually sells existing units to pay for any charges during this time.

Consumers should make use of the 14-day free-look period, which allows buyers to get a refund, to review documents before deciding, they said.

TRAINING FOR FINANCIAL CONSULTANTS

Income Insurance told CNA that complaints related to ILPs arise for various reasons and are not limited to market misconduct.

It said financial advisers are required to conduct a needs-based assessment and explain relevant information to customers before making a recommendation, and that it supports this through structured training and development programmes.

Manulife’s chief distribution officer Khoo Poh Huat said the company continues to reinforce appropriate advisory and disclosure standards through consultant training and customer communications. 

“We are proactively working with customers to address their concerns and improve customer education around ILPs,” he said.