Frequent questions asked by the clients and addressed to our agents, accompanied by our answers
1. I have a traditional life insurance policy with ING, am I still getting my money at the maturity of the contract?
The traditional* life insurance is a product that offers guaranteed benefits; in other words benefits you are aware of when signing the contract. Therefore in case of the traditional insurance with a saving component, at the maturity of the contract you will receive the insurance indemnity, which is calculated based on • the sum assured in case of survival and • the profit sharing (which can vary based on the market changes.)
In case of your decease, your beneficiaries receive the sum assured (also, a guaranteed benefit) plus the profit sharing if it exists (it depends on your contract conditions). If you have an Academica contract, in case of your decease the guaranteed benefit consists in the company paying your premiums so that the policy can function until its maturity and accumulate the sum you wanted to save for your child.
*The traditional life insurance products offered by ING Life Insurance are the followings: Regal, Prudent, Academica, Marton, Phoenix and Smart.
2. If I surrendered my contract right now, how much money would I get in return?
In the case of the savings plan policies, if the client requests the contract surrender before its maturity, ING will pay the surrender value. This value is calculated based on the paid premiums and the profit sharing accumulated until the surrender date, from which the contract issue, administration and risk related costs are deducted. Is it very important to know that the surrender value is not the equivalent of the paid premiums and, moreover, in the first 3 contract years the surrender value is zero, because it has to cover the above mentioned costs. To find out your exact surrender value, please contact your consultant.
3. What does “surrender value” mean and why is it lower than the sum of the premiums I paid?
The surrender value represents the sum of the money that the insurance company has to pay if a) a client decides to surrender his contract before its maturity or b) when the policy is terminated without any insurance indemnity having been paid (in other words, if the insured event doesn’t occur). The premium that client pays contains: • a sum for saving/investing • risk covering costs and • policy administration costs. The surrender value is applied on the saving/investment part.
To be more precise, for the traditional contracts this value is calculated based on the paid premiums amount until the surrender date and the cumulated profit sharing, from which the issuing and administrative costs have already been deducted.
There is also an additional cost for risk coverage that ING supports during this period. And that’s because ING has to be ready to pay the insurance indemnity “in case something happens”.
Because of these cumulated deductions, that occur before the contract ends, the surrender value is lower than the sum of the paid premiums. This is the reason why for the traditional insurance products the surrender value is zero in the first 3 years of the contract.
That is also why the voluntary surrender of the contract before its maturity does not benefit the clients, because it causes penalties (that in the first policy years can reach 100%). When the economy is in recession you may think that the “money from the policy” could help you, but based on the above mentioned reasons this would be an extreme solution. This decision will destroy everything you built for your future. And it’s now even a good deal.
There are some alternatives to surrendering your insurance policy. You can stop the premium payments for a limited period of time or you can reduce your insurance premium. The best would be to discuss these options with your consultant.
4. Giving to the current market situation, does ING still guarantee the sum assured in case the insured event occurs?
Complying with the insurance contract is an “essential” business principle for ING. That is why according to the contract conditions offered to every client, the sum assured is an absolute guarantee.
5. If I have a traditional contract, why should I keep it? Every time a financial crisis strikes, people pay more attention to protection and savings. Buying a life insurance policy is a decision meant to diminish the financial stress and to assure your family’s protection. It’s practically an investment in the family’s safety. If this was true in normal conditions, when the economy was doing well, why wouldn’t it be applicable during the crisis, when the main is characteristic uncertainty?
The traditional policy guarantees protection tomorrow, 6 month from now or at the end of the contract.
You may think you can end your contract now and later on, when the crisis is over, you can sign another one. But, you see, an insurance contract is not like a leasing contract.
If a leasing contract for a car can be cancelled at any time in the same good or even better conditions, a life insurance contract can’t be signed in the same conditions. And that is because in the period of time elapsed form the moment you signed the contract it’s possible that you, the client, suffered some health changes. So, if you think about buying a new insurance policy after the financial crisis is over, you may not be able to do it in the same good conditions – the insurance premiums can be increased or you can become not eligible due to your new health status. Your age only can lead to an increase of your premiums. So it’s better for you if you don’t surrender your policy.
6. If I have an investment product, should I surrender it right now? If not, what is going to happen to my investments?
In times like these it’s quite understandable that anybody would be concerned with what might happen to his investments. On the other hand, all the financial experts (fund administrators, insurance companies, financial analysts) say that it’s very important “to remain calm” and “to think long term” in order to make the best decisions.
You have to ask yourselves: what is the reason you have a UL contract? Is it for investment or does it have a speculation purpose? If the answer is investment, then ask yourselves why you invested in the first place: for your child’s education, an additional income when you retire or just some money to help you follow a dream?
To invest is to place your money carefully, knowing in what and how much you invest and taking into consideration that the market can grow or decrease.
When you chose a unit linked product you trusted ING and considered it a partner that on a long term will provide you with a good return on your investment. So you do know in what and why you invest and you can fight the impulse of acting on a short term.
That is why all you have to do is decide when is it you really need the money: now or 10 years from now, when your contract matures? The market fluctuates, always has, always will. But, statistically speaking, the longer the investment period, the less significant the short term loss.
The market volatility can lead to short term decreases in the clients’ portfolio, but the stock market history proves that, on a long term, the market always makes up for these losses.
7. How does the financial crisis affect my ING contract?
In the current economic context the most affected contracts are the investment ones (UL products) due to stock evolution. From this point of view the crisis is affecting every insurance company and fund administrator.
The markets will always fluctuate, but the short term losses are compensated by long term investments. In a lot of cases when the investment markets bounce back, they have the tendency to grow and return to the pre-crisis level. That is why the surrender decision means throwing away future profitable opportunities. Moreover, the protection that your life insurance offers is not influenced by the market situation, it is a guaranteed benefit.
8. What guarantees does ING offer in these economic circumstances?
ING Life Insurance’s financial power is one of the many guarantees. The guarantees could be measured using the following indicators: a) the solvability margin b) the reinsurance (in other words the solidity of the company that reinsures your insurer) and c) the Insurance Guarantee Fund
a) The solvability margin shows both the value and the quality of the insurer assets. The minimum level of the margin is decided based on the structure and level of duties of the insurance company.
Every company is required to report at least every semester the solvability margin. This indicator cannot be lower that the level required by law. For ING Life Insurance the ratio between the available margin and the minimum margin was 1.94 at the end of 2008, the minimum level of the ratio being 1.
b) ING Group in Romania is reinsured by one of the biggest reinsurers of the world, Swiss Re, as well as ING Re.
c) The Insurance Supervision Commission (CSA) manages an Insurance Guarantee Fund to which all the insurance companies are required to participate. In that purpose, CSA sets an annual quota that is applied on the volume of the total premiums cashed by the insurers (for 2008 the quota was 0.3%). The purpose of this fund is to pay the sums assured to the beneficiaries in case the insurer becomes insolvable.
From a market position point of view ING Life Insurance is the market leader in Romania, with a 32% market share at the end of 2008. The sales force has over 2.600 agents and the distribution channels consist in 67 agencies in 61 cities in the country. The social capital of the company exceeds 63 million RON.
9. How does the decrease of the ING stock price affect me, the client?
The share prices of the major companies from all over the world dropped in this unusual and instable financial climate and ING makes no exception. But what you have to realise is that there is no direct relation between the clients’ deposits, their investments, their insurance policies, their pensions and the ING share price. The reason for that is that they didn’t invest in the ING Company, but through it. To be clearer, the clients’ money didn’t purchase ING stocks, so the drop of the stock price had no direct influence on the clients’ contracts.
10. Should the loss ING announced recently worry me? What is the impact on ING’s ratings?
If we take into account the size of the group and its financial power, ING can manage without any problems the 400 million Euro loss, announced for 2008. And that’s because every component of the company is healthy.
We had great commercial results in the first part of the year 2008, before being affected by the market situation, situation that influenced every financial organisation in the world. ING also took both risk prevention and cost reduction measures in order to constantly be able to adapt to the current market situation and to strengthen its position in 2009.
We are a permanently communicating with the rating agencies and we work together with them so that we make sure they fully understand the measures taken by the Group. That is why the ING Group ratings remain above average: AA with Standars&Poor`s, A1 with Moody’s and A+ with Fitch.
* A rating agency is a company that gives “grades” to those institutions that issue financial instruments (like stocks and bonds for example). The rating is an indicator that measures the solvability of an individual, a corporation (or even a country) and it is calculate based on a lot of factors such as financial history, assts and liabilities of that company. The most renowned agencies in the world are Standard& Poor’s, Moody’s and Fitch Ratings.
11. What are the guarantees of the private pension system?
There are at least 4 reasons why you should trust in the private pension system. First of all every company functioning on the voluntary and mandatory private pension market is authorised, supervised and controlled by The Private Pension System Supervising Commission (CSSPP).
Second of all, the assets of both mandatory and voluntary private pension funds are managed by other companies called assets depositaries. An assets depositary is an institution that safeguards all the assets of a pension fund. It also registers, verifies and monitors the assets of the pension fund.
All the financial operations of the pension fund take place through the depositary.
Thirdly, the independent financial auditors check upon the activity of pension fund and report the results to CSSPP. The activity of the Commission is controlled by Parliament.
And last, but not least, the performance of every pension fund is compared to the average profitability of all funds on the market. If the profitability is lower than the average for four consecutive trimesters, CSSPP withdraws the authorization of the pension fund administrator. In this case, the assets of the pension fund are transferred to a more performing fund.
