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

Investment-linked policies (ILPs) in Singapore have seen a surge in sales despite rising complaints, according to industry experts. Over three years, weighted new business premiums more than doubled, reaching S$2.88 billion (US$2.2 billion) in 2025 from S$1.31 billion in 2022. However, claims related to ILPs at the Financial Industry Disputes Resolution Centre (FIDReC) have also increased significantly, from 42 in 2022 to 164 in 2025, with a notable spike in 2024.

The rise in claims is primarily due to issues like misrepresentation, inadequate disclosure, and unclear advice on the policies. Older age groups are increasingly filing complaints, with those aged 61 and above accounting for 35% of the total in the first half of 2026, up from just 7% in 2022. Many consumers lack a proper understanding of ILPs, often assuming they are similar to traditional insurance policies or that returns are guaranteed.

Two key design changes in ILPs have contributed to their growth: the elimination of lengthy health underwriting questionnaires and the inclusion of a "welcome bonus" - extra units in the fund offered to new customers, which increases their holding despite the initial cost. However, these bonuses are often funded through higher charges in the early years and come with a minimum investment period.

Experts suggest that strong capital markets over the past decade have made ILPs more appealing, as they offer the potential for wealth growth. Many consumers, who are not highly investment-savvy, rely heavily on financial advisers, leading them to opt for ILPs over direct investments. ILPs are often viewed as "safer" due to their insurance product nature, despite not being insurance products themselves.

However, it is crucial for consumers to understand that returns and capital in ILPs are not guaranteed and can fluctuate based on market conditions. The LIA warns that the term "capital guaranteed" should not be confused with a "death benefit," as the latter is an insured payout upon death, while the former fluctuates with market conditions. FIDReC also notes that consumers frequently assume ILPs are safe like traditional insurance, failing to realize that returns vary depending on the chosen investments.

To navigate these complexities, experts advise consumers to be cautious of various charges associated with ILPs, such as policy fees, fund fees, and administration charges. They should also be aware of the importance of regular monitoring, as returns depend on the chosen investments. By understanding these factors and seeking appropriate advice, consumers can make informed decisions about whether an ILP aligns with their financial goals and risk tolerance.