Insurance policy protection for private-hire drivers, higher deposit safeguards to be in place from April 2019

DEPOSITORS could enjoy greater insurance coverage for their savings, while private-hire car owners could be protected against a collapse of their insurers from April 1, 2019 after the Monetary Authority of Singapore (MAS) received broad support for those changes.

Following a public consultation process, the MAS said that it will go ahead with a proposal to increase the insurance coverage for Singapore-dollar deposits under the Deposit Insurance Scheme to S$75,000 per depositor from the current S$50,000. The Deposit Insurance Scheme is administered by the Singapore Deposit Insurance Corp (SDIC).

The greater coverage limit will require the SDIC to increase the size of the fund backing the deposit insurance by increasing the premium rates, which are charged to banks, by between 0.5 and one basis point. MAS said that the fund build-up period will be extended to a target date of 2028 from the current 2020.

The increased coverage amount will fully insure more than 90 per cent of depositors, the MAS said.

The MAS will also extend the coverage of the Policy Owners' Protection Scheme, which covers insurance policies in the event of the insurer's failure, to private-hire drivers and people who work from home offices. To ensure that individuals using personal properties such as cars and homes for commercial purposes are covered, the MAS will define a "personal" insurance policy as one that is owned by a natural person.

The regulator clarified that a natural person will, however, not include sole proprietorships and partnerships. Motor insurance policies that cover vehicles hired from a car rental company for personal use or for hire-and-reward will also not be included as long as the motor insurance policy is purchased and owned by the car rental company.

The MAS will also proceed with its proposal to cap certain property damage claims to keep premiums under the Policy Owners' Protection Scheme affordable. For own-property damage claims under personal motor insurance policies, the cap will be set at S$50,000; for property damage claims under structure and contents types of personal property insurance policies, the cap will be set at S$300,000.

The MAS acknowledged that it is probable that less than 1 per cent of property damage claims will exceed the cap levels, but said that it is nevertheless prudent to limit the protection fund's exposure to high-value claims.

The changes will require parliamentary approval for relevant legislative amendments. The MAS plans to effect the changes on April 1, which the regulator said will provide members under the schemes "sufficient lead time to put in place procedures" to cater to the revisions.

Amendment note: An earlier version of the story said that the build-up period of the deposit insurance fund will be from 2020 to 2028. Instead, the target date for the build-up period has been extended to 2028 from 2020 currently.