SINGAPORE – Reforms are in the works that should strengthen protection for policy owners if and when insurance firms go belly up.
The Monetary Authority of Singapore (MAS) on Dec 7 proposed changes to the Policy Owners’ Protection (PPF) Scheme to enhance its coverage, simplify its design and improve its operational efficacy.
Set up in 2011, the pre-funded scheme acts as a safety net to protect consumers when insurers face bankruptcy and, for example, can no longer pay out claims. It covers owners of life insurance policies and some general insurance policies.
The scheme has never seen action, as an MAS spokesman noted: “There has been no insurer failure in Singapore to date. Hence, the PPF scheme has never been activated.”
The Straits Times understands that the proposed changes are part of the authority’s routine reviews of the scheme, with the previous one completed in 2017.
The latest proposals include extending coverage to mandatory third-party liability insurance that businesses buy for certain mobility devices such as bicycles, power-assisted bicycles, motorised wheelchairs and scooters. Another suggestion is for coverage to be extended to personal travel insurance policies taken out by companies or employers on behalf of individual travellers or employees.
MAS also wants to set out a more explicit list of benefits covered and not covered under the scheme for specified types of personal insurance. It suggests extending the scheme to cover claim events, except surrenders of policies, that happen while a failed insurer is being liquidated. This is to mitigate any disruption to consumers.
Another suggestion is for a standardised methodology to calculate refunds of unused premiums for general insurance policies covered by the scheme, rather than each insurer taking its own approach.
This should make it easier for consumers to understand what to expect and should accelerate the processing of refunds.
MAS is also proposing a simpler way to calculate the maximum benefits protected by the scheme for applicable whole life, endowment and term policies, a process that will take into account the aggregate guaranteed death benefits alone.
This will prevent policy owners with total guaranteed death benefits of up to $500,000 per life assured from seeing their aggregate death benefits reduced, a possibility under the current system. It will also make the scheme easier to understand and apply.
MAS and the Singapore Deposit Insurance Corporation are working to improve processes needed to implement payouts when an insurer goes bust.
For example, they are setting out what to do in a range of scenarios, which will prevent undue payout delays.
MAS assistant managing director (banking and insurance) Marcus Lim said the proposals complement “efforts to maintain trust and confidence in Singapore’s insurance sector”.
The public can submit written feedback about the proposed changes to MAS by Feb 16, 2024. The consultation paper is available on the MAS website.
