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CHAPTER 10

THE GRAVY TRAIN

10.3.4An Instrument that provides UNEARNED PROFIT for the Life Assurance Company
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The many Risks we have exposed, that are associated with DEPENDENCE on Bonus, have an important bearing on the borrower’s / policyholder’s financial position. Clearly, disclosed information with regard to such Risks is highly significant to the borrower’s decision as to choice of Mortgage type.


But these Risks associated with DEPENDENCE on Bonus are further compounded by an even greater Risk: the Risk associated with the Probability that the borrower / policyholder will in fact achieve Bonus. As we have shown in Section 10.1 and Section 10.2 above, this Risk is very considerable indeed.


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The Life Assurance Company have empirical knowledge of the Probabilities that a borrower / policyholder will encash his Policy before the end of ANY particular year throughout the term of the Policy.


By using their knowledge of these Probabilities they have contrived an Instrument whereby the Payout from the Policy Life Assurance Fund, at any time throughout the Policy Term, will not be uniformly proportionate to the borrower’s / policyholder’s investments.


In the case of the Endowment Mortgages provided by the Irish Life Assurance Company, i.e. those instanced in this website-book, by applying Bonus over the last 5 years of the Policy, Irish Life have weighted the Payout from their Mortgage Fund towards the end of the Policy Term. They have weighted the Payout towards the time period when they KNOW that the Policy is least likely to be still in force.


They have used their knowledge and expertise to superimpose further Risk on the policyholder.


The Life Assurance Company have applied their skill to create the INSTRUMENT, the Investment-cum-Encashment Value mechanisms within their Policy Documents, that gives rise to this Risk.


They have, covertly, applied their knowledge and expertise to devise an Instrument that STACKS the odds Heavily Against the borrower / policyholder.


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The Life Assurance Company have the command of means of knowledge of the following facts regarding the Probability that the borrower / policyholder will achieve Bonus:

(1)

They KNOW that 75% of all Endowment Policies are surrendered before they reach maturity. In Bookmaker’s terms, the Life Assurance Company KNOWS that the odds that the borrower / policyholder will achieve the full 5 years Bonus (and thereby acquire the full Benefits of the Policy) are ‘3 to 1 Against’.

(2)

They KNOW that, in the case of a 20 Year Endowment Mortgage, 70% of borrowers / policyholders will never achieve Bonus. In Bookmaker’s terms, the Life Assurance Company KNOWS that the odds that the borrower / policyholder will achieve any Bonus in the case of a 20 Year Endowment Mortgage are ‘7 to 3 Against’.

(3)

They KNOW that, in the case of a 15 Year Endowment Mortgage, 64% of borrowers / policyholders will never achieve Bonus. In Bookmaker’s terms, the Life Assurance Company KNOWS that the odds that the borrower / policyholder will achieve any Bonus in the case of a 15 Year Endowment Mortgage are ‘6.4 to 3.6 Against’.


Note!
In the case of Endowment / Life Assurance Policies whose value at maturity is DEPENDENT upon the addition of Terminal Bonus, the Life Assurance Companies who proffer such Policies to the consumer KNOW that in 75% of cases they will NEVER have to pay out this Bonus. They KNOW, from the outset, that the odds that the borrower / policyholder will in fact achieve Terminal Bonus are ‘3 to 1 Against’.



It is important to understand the considerable ADDITIONAL Risk of financial harm that the STACKING of these ‘odds Against’ impose on the borrower / policyholder.


This Additional Risk caused by the stacking of these ‘odds Against’ is the direct result of an INSTRUMENT, the Investment-cum-Encashment mechanisms within their Policy Documents, created by the Life Assurance Company itself.


No Reward WHATSOEVER accrues to the borrower / policyholder for taking on the burden of this considerable Additional Risk.


All Reward flowing from the borrower’s / policyholder’s exposure to this Additional Risk accrues to the Life Assurance Company.


The Life Assurance Company have applied their knowledge and skill to contrive an Instrument, whereby they expose the borrower / policyholder to substantial Additional Risk, but ensure that ALL Reward commensurate to that Risk accrues to THEM, as Risk-Free Gravy.
(Remember odds stacked Against the policyholder mean odds stacked In Favour of the Life Assurance Company !)

 

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