Insurance policies used as security for personal loans
Samoa Life Assurance Corporation (S.L.A.C.) allows its customers to use their policy as security when applying for personal loans from commercial banks.
This was revealed in Parliament recently during a hearing before the Finance and Expenditure Committee on Samoa Life Assurance Corporation’s 2018 financial year report.
The report highlighted the partnership that the Corporation has with the Development Bank of Samoa (D.B.S.) in terms of this new initiative.
“The Corporation believes that most of the public tend to reach for assets and other properties in order to secure a loan, which is a hazard most of the time.
“The rationale behind this was to offer an affordable approach for the families with low income when applying for loans. The Corporation noted that the limit amount for such initiatives is $10,000," stated the Parliamentary Committee report.
Another issue highlighted by the Parliamentary Committee was the decrease of funds collected for the administration fees, while showing an increase in loans on policies.
According to the report, the funds collected from administration fees for the said financial year amounted to $280,147. It was a notable increase and was recognised for its loans on policies and mortgages for the 2017-2018 financial year.
“The Corporation responded that this was due to the high number of surrender claims at a total of $2.1 million in the F.Y. 2018 if compared to $1.6 million recorded versus the previous Financial Year.
“The Corporation also noted that there is no strict enforcement on clients who have loans on policies from surrendering their policy which is the main reason behind the controlling the public from surrendering their policies whenever they need it,” the Parliamentary Committee report added.
The same report also highlighted the Corporation's profit of $2.21 million while their revenue collection increased to $12.36 million in the 2018 financial year from $11.34 million in the previous financial year.
A total of 2,077 new insurances were recorded for the 2018 financial year with the total amount of insurance policies of 10,461 according to the report.
“The Committee tried to track down the total number of declined insurance applications; however this was not stated in the Corporations Annual Report and therefore the Committee advised S.L.A.C. to provide vital information in its report such as the total number of new purchased insurance; total of loans/mortgages and the total number of claims for the Committee and Legislative Assembly’s ease of reference during its deliberation.”
The Finance and Expenditure Committee also made recommendations to S.L.A.C. to provide “accurate number of people that applied for policy and the number of applications that were approved and declined for each year.
“Accurate number of surrender claims and their reasons; loan insurance at commercial banks and the D.B.S. and consulting actuary to the prime of $17.50 bonus per $1,000 and the $50 bonus per $1,000 on existing bonus.”