MAS seeks feedback on moves to beef up protection scheme when an insurer fails
THE Monetary Authority of Singapore (MAS) is seeking feedback on a set of changes to the policy owners’ protection (PPF) scheme to enhance coverage and improve efficiency of the scheme through a consultation paper published on Thursday (Dec 7).
The changes proposed include extending the scheme to cover mandatory third-party liability insurance that businesses purchase for specified mobility devices such as bicycles, personal mobility devices, power-assisted bicycles, motorised wheelchairs or mobility scooters.
The scheme should also cover personal travel insurance policies issued to corporates as the policy owner, such as an employer, travel agency or credit card company, where payouts are due to individual travellers, said MAS.
The PPF scheme protects policy owners when a direct life or general insurer fails. It pays out the guaranteed benefits of one’s insurance policies, though it is subject to caps.
This means that changes to the scheme will only affect policyholders when an insurer collapses – which has not yet happened in Singapore.
Hence, the PPF scheme has never been activated thus far. However, MAS said it continues to review the scheme regularly to ensure that the scheme remains up to date with market developments.
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Under its proposals to expand the scheme’s coverage, MAS will also specify a list of benefits that are covered (or not) under the scheme, and require insurance providers to clearly state the benefits which are not covered in their policy documents.
The central bank also proposed that the scheme be extended to cover claims that are reported after the failed insurer has been handed to a liquidator.
Currently, a policyholder will be paid by the failed insurer if the claim was made on or before the quantification date, or within 30 days of the quantification date. The quantification date is broadly understood as the date on which an insurer begins winding up, or when MAS initiates use of the PPF funds in a payout scenario.
Claims that happen after the quantification date would be subsequently settled by the new buyer of the failed insurer when the transfer takes place, or by the company that will be set up using PPF funds.
However, MAS said during its review that such a process can take years, which would delay the payout of claims. The extension of the scheme to cover claims that occur after the quantification date and before the date of transfer of the failed insurance provider, will thus allow for more prompt compensation to covered parties, MAS said.
Other proposed scheme changes include:
- Standardising the industry’s method of calculating refunds of unused premiums for protected general insurance policies;
- Simplifying the calculation of maximum benefits for whole life, endowment and term policies;
- Introducing a seven-year time limit for reporting a claim event that is eligible for compensation under the scheme.
There is currently no time limit for policyholders to report a claim, and such a proposal would help balance policy owners’ interest while keeping costs of administration low, said MAS.
The present method to calculate payouts for life, accident and health policies is subject to certain caps that take into account both the guaranteed sum assured and the guaranteed surrender value. To simplify computation of the caps, MAS proposes to use only the guaranteed sum assured.
Marcus Lim, assistant managing director for banking and insurance at MAS, said a robust policy owners’ protection scheme would help maintain trust and confidence in Singapore’s insurance sector.
Members of the public may submit their comments on the proposals to MAS by Feb 16, 2024.
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