Hong Kong consumers angry after being sold complex insurance product ILAS
Financial advisers sell hard-to-understand schemes to bamboozled consumers, leaving many locked into decades-long contracts
In February last year, Leung Chung-yan, 27, had some potentially cancerous masses removed from her breasts. The kindergarten teacher did not have medical insurance to cover the operation and had to borrow money from her family to pay the bill.
Worried that she would have to undergo more operations - her aunt was losing a long battle with breast cancer - she decided she better save some money. Knowing little about investing, Leung met a friend, Cat Lau, who worked at Convoy Financial Services, an advisory firm.
Lau recommended Leung take out Standard Life's "Harvest 101 Investment Plan", an investment-linked assurance scheme, or ILAS. An ILAS is a complicated product with complex fees and charges. Instead of helping Leung to save money that she could easily access if she faced a medical emergency, the product locked up her money for 25 years.
If Leung tried to cash in her plan in the first year, she would have lost everything that she had paid. The penalty fell to 80 per cent of everything she had contributed in the first two years if she tried to access her money in the fourth year of the policy's term.
"Harvest 101 did the opposite of what I wanted. Instead of helping me have more money available to pay for a medical emergency, I had less money available," Leung says.
Convoy says the firm analysed Leung's needs. They say she said she wanted a retirement plan - not to save money for medical bills. They say Leung signed a document saying she wanted a plan to create "extra saving apart from MPF [Mandatory Provident Fund]".
