Monday, October 17, 2011

What happens if an insurance company goes bankrupt in Singapore?

Will an insurance company go bankrupt? I guess you can never tell now in such an uncertain world where anything can happen.


So what happens if an insurance company does go bust? You'd be happy that there's something known as Policy Owners' Protection Scheme.


Here's what the information from the Life Insurance Association of Singapore's website. Here are some of the pointers to note:



If my life insurer goes bankrupt, are my policies covered?
All members of the Life Insurance Association are members of the PPF Scheme. Please refer to our membership page for more details.




How do I know if my policies are covered by the Policy Owners’ Protection Scheme?

Individuals with life insurance policies with members of the Life Insurance Association, which are also PPF Scheme members, are covered.
From 20 July 2011, you can request for a register of insured policies from any life insurer which are PPF Scheme members to find out which insurance policies are covered. Also, from 1 January 2012, the policy documents and product summary will disclose which insurance policies are covered.

What types of life insurance policies are covered under the Policy Owners’ Protection Scheme?



All life insurance policies (including riders) are covered. This would include policies issued to non-Singapore residents (offshore policies), but not policies issued by overseas branches of a registered direct life insurer incorporated in Singapore.
Examples of life insurance policies include the following:
  • Individual term policies
  • Individual whole life policies
  • Individual endowment policies
  • Individual annuities
  • Individual short-term or long-term accident & health (A&H) policies (e.g. Hospital Cash, Medical Expense, Personal Accident, Disability Income, Long-term Care)
  • Group term policies
  • Group whole life policies
  • Group endowment policies
  • Group annuities
  • Group short–term or long-term (A&H) policies (e.g. Hospital Cash, Medical Expense, Personal Accident, Disability Income, Long-term Care)


What is the Policy Owners’ Protection Scheme?

The Policy Owners’ Protection (PPF) Scheme protects policy owners in the event a life insurer which is a PPF Scheme member fails. The PPF Scheme provides 100 per cent protection for the guaranteed benefits of your life insurance policies, subject to caps where applicable. For example, for individual life and voluntary group life policies, there are aggregate caps applicable, namely S$500,000 for the guaranteed sum assured and S$100,000 for the guaranteed surrender value per life assured per insurer.


How does the Policy Owners’ Protection (PPF) Scheme work?

All members of the Life Insurance Association are members of the PPF Scheme. In the event that a PPF Scheme member fails, the Monetary Authority of Singapore (MAS) will decide whether to activate the PPF Fund and whether the PPF Fund would be applied in termination or transfer or run-off of the business of the failed insurer. MAS will then request the Singapore Deposit Insurance Corporation (SDIC) to step in. Accordingly, SDIC will make announcements to all policy owners of that PPF Scheme member through the media and provide the details on how their policies would be affected.


Are riders on individual life policies covered by policy owners’ protection and are they subjected to caps?



Yes, all riders are covered. Only term riders that provide additional coverage, except for riders that accelerate payment of part/all of the sum assured under the main policy upon occurrence of a specified event such as illnesses, would be aggregated with the main policies in determining if the caps are exceeded and they include the following:
  • Level term rider
  • Decreasing term rider
  • Critical illness term rider that provides for additional coverage instead of accelerating the benefits under the main policy
Other riders that are covered but not subject to caps include the following:
  • Waiver of premium rider
  • Payor benefit rider
  • Accident and Health riders (e.g. personal accident rider, disability income rider and hospital cash benefit rider)
Accelerated benefit rider (e.g. riders that accelerate payment of part/all of sum assured of the main policy when the claim happens), though not aggregated with the main policies in the aggregation process, may be scaled down if the benefits under the main policy is reduced because of the aggregate cap.
For example, the policy owner, who is also the life assured, owns (a) a whole life policy of guaranteed sum assured S$100,000 with an accelerated critical illness rider of a similar sum assured of S$100,000; and (b) an individual term policy of S$525,000 sum assured. As a result, the main whole life policy is only protected for S$80,000 (i.e. 500,000/625,000 x S$100,000), and correspondingly, the sum assured of the accelerated critical illness rider also has to be reduced to S$80,000.

Are accident and health policies and riders purchased from PPF life insurers covered by policy owners’ protection and are they subject to caps?


Yes, individual and group accident and health (A&H) policies and riders are covered and are not subject to caps. The A&H policies covered include the following:
  • Personal Accident
  • Medical Expenses Plan
  • Long-term Care (e.g. Eldershield)
  • Disability Income


Are annuities covered by policy owners’ protection and are they subject to caps?
Yes, individual annuities and voluntary group annuities, whether deferred or immediate, are covered and are subject to an aggregate cap of S$100,000 on the total commuted value of the annuities, on a per life assured per insurer basis.
Non-voluntary group annuities are also covered and subject to a separate cap of S$100,000 on the commuted value per policy per insurer. Only the guaranteed benefits of annuities are covered. In determining commuted value, all the future guaranteed benefit payments (be it annuity payments, death or surrender benefits) are converted into a single lump-sum present value.

For more information, visit  http://www.lia.org.sg/consumers/faq?tid=102

4 comments:

  1. My husband get bankruptcy rite now, u say bankrupt person can travel overseas. How about he have to go to overseas cause his duty from his work or company? Is it allowed?he often going overseas, he said for business but lying, he go there coz meet with his young girl friend. Im happy if he cant go overseas, but he s smart he always made his work duty as a reason to go overses.

    ReplyDelete
  2. According to Ministry of Law FAQ:

    What if I have to travel frequently while I am still a bankrupt?

    If you have to travel frequently while you are still an undischarged bankrupt, you may apply for block periods of travel either for three or six months. During this period, you may travel as frequently as you wish.

    Please submit all applications for the Official Assignee’s permission to travel through our website for the Official Assignee’s consideration. For further information on applying for the Official Assignee’s permission to travel overseas, please refer to our website.

    You can refer to
    http://www.ipto.gov.sg/
    http://www.ifaq.gov.sg/

    As for young girlfriend.
    That we can't help you.

    ReplyDelete
  3. Great you explained the exact situation of if insurance company goes banhrupt.

    ReplyDelete
  4. I think this post definitely creates awareness all over the area in Singapore that insurance company goes bankrupt.

    ReplyDelete