Enhancing Protection For Insurance Policy Owners
It was a typical morning for me on a weekday in mid-September 2008 as I parked my vehicle at Hong Leong Building. As I walked out of the building and headed towards OUB Centre (where my office was then located), an unusual sight greeted me: about 20 people had gathered outside American International Assurance's (AIA) customer service centre. The sight of queues in Singapore is nothing unusual - just think of the regular PC fairs and launches of residential properties and gadgets (such as iPhones) - except for the fact that my watch read 0715hrs.
It never occurred to me at that moment that those policyholders were seeking to end their policies amid fears that New York-based American International Group (AIG) - the parent firm of AIA - might be on the brink of collapse.
Over the next few days, thousands of policyholders flocked to AIA's offices: some wanted to know how the unfolding financial situation in the US will affect their investments while others wanted to surrender their policies.
The situation prompted the Monetary Authority of Singapore (MAS) to assure the public that "AIA currently has sufficient assets in its insurance funds to meet its liabilities to policyholders", a point also underscored by the insurance firm. MAS also urged policyholders against acting hastily to terminate their insurance policies "as they may suffer losses from the premature termination and lose the insurance protection they may need".
AIA, on its part, took out full page advertisements in local newspapers to reiterate its pledge that it could meet all obligations to its policyholders. The insurance giant also offered to reinstate, without any penalty charges, the plans of policyholders who had surrendered their policies between 15th and 19th September 2008.
That all insurance companies in Singapore are required under the Insurance Act to maintain statutory insurance funds - which are segregated from their head offices and other shareholders' funds - had failed to assure thousands of policyholders epitomised the fragility of investor confidence amid the financial crisis.
Almost 1? years later, how has the insurance industry evolved? INVEST takes a look at four key issues: the recent move by the MAS to enhance protection for policyholders; the shift in consumer behaviour and appetite; the sentiment of consumers today; as well as the challenges facing the industry.
The MAS announced in December 2009 that it would be reviewing two sets of measures aimed at strengthening the protection of insurance policy owners. One of these is the Policy Owners' Protection Fund (PPF), a scheme which requires players in the insurance sector to contribute to a fund to compensate policy owners in the event of the default of an insurer. The other set of measures seeks to enhance MAS' powers relating to the resolution of insurers in Singapore, a move aimed at strengthening its ability to secure continuity in insurance coverage, particularly for life policies.
According to the MAS, the PPF "helps to alleviate the loss of insurance coverage to individual policy owners, limit the potential disruption to the society and economy, and enhance public confidence in the insurance sector".
