Under normal circumstances, the fulfillment ratio in earlier policy years may be close to 100%, as investment performance over a short period should be closer to what the insurers expected in accordance with their set investment strategy. It should be noted that this may not be the case in extreme financial market situations.
As participating policies are long term in nature, the ratio in the later policy years may, in general, better reflect the long-term performance. You should be aware of the volatility of fulfillment ratios over time, and look at the fulfillment ratios across all policy years to get an overview of the insurance product’s historical performance instead of focusing only on a single point in time.
Even if policies are effected in the same year, the variation of the declaration of non-guaranteed benefits versus those illustrated at the point of sale may be different. As the fulfillment ratio is an average measure across all policies of a product series for each policy year, the actual fulfillment ratio for an individual policy may vary from the fulfillment ratio presented by the insurer.
As there are multiple factors in play in determining the non-guaranteed benefits of an insurance product, the actual value paid in future years may be higher or lower than that illustrated at the point of sale, based on the insurer’s actual performance. Therefore, the fulfillment ratio may serve as a useful reference of past performance for policy holders and potential policy holders, but it is by no means the sole indicator of the future declaration of the insurance product.
There are many factors affecting the performance and volatility of the fulfillment ratio, including the investment strategy and performance of the insurer and other non-investment factors, such as the number of claims paid out and operational expenses. You should be apprised of a number of factors at the point of sale and read the non-guaranteed rate philosophy of the product, which includes the investment policies, objectives and strategy, to better understand the investment risks underlying a specific product.
Please note that the fulfillment ratio should not be used as the sole determining factor in deciding whether to purchase a policy. You should also consider other important factors, such as the suitability, affordability, key features and risks of the products, before making your decision.