Participating policies pay both guaranteed and non-guaranteed benefits to policy holders, who are entitled to receive non-guaranteed dividends or bonuses by sharing the product profits. At the point of sale of a participating policy, a potential policy holder will be provided with a document of benefit illustrations, which gives a view of the benefits projected into the future.
To help policy holders understand the past performance of non-guaranteed benefits declared by insurers, Guideline on Underwriting Long Term Insurance Business (Other Than Class C Business) (GL16) requires insurers to publish the fulfillment ratio of non-guaranteed benefits for participating policies. This demonstrates the insurer’s record of meeting its forecast up to that period. The fulfillment ratio is applicable to all participating products which has new policies issued since 2010 and has policies inforce in the reporting year.
In simple terms, the fulfillment ratio can be understood as the aggregate actual accumulated non-guaranteed benefits against the illustrated aggregate amounts for all relevant policies at the point of sale. A ratio close to 100% means the insurer has come close to achieving its projected non-guaranteed benefits. If the ratio is higher than 100%, it means that the actual payout was higher than the illustrated amount at the point of sale, and vice versa.
| Fulfillment ratio = | Aggregate actual accumulated amount of non-guaranteed benefits |
| Aggregate accumulated amount of non-guaranteed benefits illustrated at the point of sale |
Considering the features of different dividends and bonuses, insurers disclose three types of fulfillment ratios: annual dividends, reversionary bonuses, and terminal dividends or bonuses.
While the meaning should follow the policy contract, the dividends or bonuses typically have the features shown in the following table.
| Type of dividend or bonus | Dividend or bonus features | Notes on the calculation of the fulfillment ratio |
|---|---|---|
| Annual dividend |
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| Reversionary bonus |
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| Terminal dividend or bonus |
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Please visit the section Fulfillment Ratio Examples on this webpage for more details.
The Fulfillment Ratio disclosure is a regulatory requirement. Insurers are required to publish the fulfillment ratio figures on their websites. Go to the List of Insurers’ Websites on the Fulfillment Ratio to search for the insurers’ published fulfillment ratios.
Some insurers may have a number of fulfillment ratios for different types of participating products. While the fulfillment ratio is not directly comparable across all products, you can refer to the fulfillment ratio of a product series with the features that are similar to what you are interested in, such as the type of non-guaranteed benefits and product type. After selecting a product series, look at the ratios across all policy years to get a better understanding of how the insurer fulfills its non-guaranteed benefits over time.
To learn more about how to calculate the fulfillment ratio and points-to-note to interpret the figures, study the following sections of this website.