"Cashback 960% but the real return is only 1%"
This has become a hot topic on social media, shaking the entire financial industry as "savings insurance" faces renewed scrutiny from investors and consumers. This has led to heated threads and posts analyzing the true return figures, or IRR (Internal Rate of Return).
Looking back, this controversy did not arise randomly but aligns with Thailand's highly competitive insurance market structure. Statistics from 2024 show that premiums sold through corporate brokers (including bancassurance channels) accounted for as much as 448.683 billion baht, representing 47.8% of total system premiums.
With nearly half the market share passing through intermediaries, combined with some agents' marketing behaviors focused on "point chasing, target hunting, seeking commissions and travel incentives," sales techniques emphasize stimulating figures, leading to widespread misunderstanding.
The controversy originated from advertising methods highlighting "cashback during the contract" as high percentages to attract attention. For example, a 19/9 savings insurance plan (pay premiums for 9 years, coverage for 19 years) promises a 9% annual cashback and a lump sum of 960% at maturity; or the 15/6 plan guaranteeing 6% cashback annually and a 606% lump sum at the final year.
Undeniably, these figures create illusions for general consumers, leading to the misconception that these are "deposit interest rates" or "annual investment returns." In reality, the actual return rate (IRR) of such products is often much lower than advertised.
Most are close to regular bank fixed deposit rates. This has resulted in continuous complaints to the Office of Insurance Commission (OIC) and the Financial Consumer Protection Center (FCP) that sales staff provide incomplete information, conceal conditions, or use partial disclosures to pressure decisions.
When the debate arose, two sides emerged. Insurance agents often explain that the cashbacks comply with contract terms, representing safe savings with guaranteed returns as scheduled.
Meanwhile, investors and financial experts see it differently. Associate Professor Dr. Udomsak Rakwongwan, a financial mathematics expert and owner of the Facebook page "Tid Lao with Ajarn M," offered an insightful view that the discomfort in selling savings insurance comes not from the product itself but from the use of the term "saving money" showcased as high returns, such as summing all cashbacks over the contract and claiming a 15% return—portrayed as highly worthwhile.
. . . These products disguise themselves as savings and are designed to appear as high-return investments. However, when actual returns are calculated using IRR, they are approximately 1.15%. Including the life insurance value might increase this to 1.5%. For taxpayers in the 20-25% bracket, tax deductions might raise IRR to the high 2% to 3% range, comparable to bond markets.
Ajarn M also points out a critical issue: "liquidity." Funds are locked for a long time; if emergency funds are needed and the policy is terminated early, severe penalties apply, causing significant losses. The problem lies in whether sellers can honestly explain pros and cons so consumers understand and choose appropriately, rather than being enticed by exaggerated figures.
The greatest confusion arises from calculating cashback percentages during the contract (e.g., 6% or 9%). Insurance companies calculate percentages based on the "sum insured" (insured amount), not on the "actual premiums paid" by consumers. In most savings insurance plans, premiums paid per installment are significantly higher than the sum insured. For example:
However, when applying the "time value of money" concept through IRR, considering the 10-year fund lock-in, no interim withdrawals, and inflation eroding future money value, the actual return rate is very low—comparable only to fixed deposits. Therefore, "cashback" differs entirely from "actual yield."
Nonetheless, looking objectively, the biggest issue in this drama is not the savings insurance product itself but "incorrect comparison of financial products."
It's like racing an SUV against a sports car on a track; the SUV loses in speed but is not a bad car because its role is safety and cargo capacity.
Similarly, comparing savings insurance with stocks, government bonds, or bond mutual funds to see which yields higher percentage profits is a flawed comparison from the start. When the sales pitch uses other asset investment returns as a benchmark, misleading advertising arises, causing misunderstanding. The key question is: what should savings insurance actually be compared to?
If compared to "fixed deposits," savings insurance has a significant disadvantage in "liquidity" because funds cannot be withdrawn immediately, but it offers tax benefits and life coverage.
If compared to "bond funds," savings insurance does not fluctuate with financial market conditions but guarantees principal safety if held to maturity. Using terms like "saving money" or "return" across such different product types misleads consumers.
However, in reality, many consumers are satisfied and choose savings insurance due to other benefits.
The conclusion focuses on consumers' "right to complete information for decision-making." Just like buying mutual funds includes prospectuses with returns and risks, or bonds clearly state yields, and deposits specify interest rates.
Buying savings insurance should transparently disclose IRR to consumers across all sales platforms to establish equal industry standards.
Currently, the OIC enforces strict market conduct rules requiring agents and brokers to clearly explain terms, benefits, and risks, prohibiting misleading statements equating policies to deposits and banning concealment of key information.
To protect themselves, consumers should thoroughly check information through these five key questions.
1. Does it qualify for tax deduction? Premiums for savings insurance can be deducted up to 100,000 baht annually only if the policy covers at least 10 years and annual cashback does not exceed 20% of yearly life insurance premiums. Exceeding this limit disqualifies tax benefits according to Revenue Department rules.
2. How much risk are you willing to accept if you surrender early? Canceling or surrendering before 10 years requires filing retroactive tax returns to repay deducted taxes plus a 1.5% monthly penalty on unpaid taxes from each filing date.
3. How much cash value remains if you stop midway? Savings insurance is not a deposit you can withdraw anytime. Early surrender yields cash according to the "policy surrender value table," which during years 2-5 is substantially less than premiums paid. Borrowing against surrender value incurs contractually specified interest charges.
4. Have you truthfully disclosed health information? Insured persons must disclose treatment history and health status honestly (Duty of Utmost Good Faith). Concealing facts or false declarations to bypass medical exams may allow insurers to "void the contract" and deny claims legally.
5. Are you aware of the Free Look Period? If after signing you find the policy unsuitable, you have the right to cancel and return the policy for a full refund within 15 days from receipt if purchased via agents/brokers, or 30 days if purchased via phone or online. The company deducts actual issuance and health check costs up to 500 baht.
This IRR drama does not necessarily mean "savings insurance is not worthwhile" but reflects that "consumers and sellers may use the term 'return' differently." Transparent disclosure benefits consumers choosing products aligned with life goals and supports ethical insurance agents.
Sources: OIC, Finnomena, Krungthai Bank, Muang Thai Life Assurance, AIA, Prudential, SET, Bank of Thailand, SCB.
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