Knowledge Highlights 2 May 2024
MAS consults on enhancements to Policy Owners’ Protection Scheme
On 7 December 2023, the Monetary Authority of Singapore (“MAS”) published a consultation paper seeking feedback on proposed changes to the Policy Owners’ Protection Scheme (“Scheme”) to enhance its coverage, simplify its design and improve its operational efficacy. These proposals are part of MAS’ regular reviews to ensure the Scheme remains up to date with market developments. The consultation closes on 16 February 2024.
Background
The Scheme protects policy owners of all life insurance policies and certain general insurance policies in the event of a failure of a direct life or general insurer (“Scheme member”). The Scheme was introduced in 2011 following the enactment of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011 (“Act”).
Enhanced coverage
Extension of coverage
To enhance the protection for consumers, MAS proposes to extend the Scheme to cover:
- mandatory third-party liability insurance under the Active Mobility Act 2017 that businesses purchase for specified mobility devices such as bicycles, personal mobility devices, power-assisted bicycles, motorised wheelchairs and mobility scooters; and
- personal travel insurance policies issued to corporates as the policy owner (e.g. employers, travel agencies and credit card companies) where payouts are due to individual travellers.
To ensure the expeditious payment of all claims, MAS proposes to extend the Scheme to also cover claim events, except surrenders, that occur even after the failed insurer has been put in the hands of liquidators. This proposal aims to minimise disruption to consumers as liquidators explore options to ensure continuity of the protected life insurance policies, such as looking for buyers, or setting up a new company, to take over these policies.
List of benefits covered and not covered
For greater clarity and transparency to Scheme members and consumers, MAS will set out in legislation a more detailed list of benefits that are covered as well as not covered for the various specified personal line insurance policies under the Scheme.
Direct general insurers which are Scheme members will be required to clearly state the benefits that are not covered in their policy documents.
Design simplification
Calculation of refunds of unused premiums
MAS proposes a standardised methodology for calculating refunds of unused premiums for protected general insurance policies, which can be used by policy owners to find alternative cover. Scheme members currently use different approaches to calculate such refunds. Standardising the approach will make it simpler for consumers to understand what to expect and can expedite the processing of refunds.
Calculation of maximum benefits for applicable whole life, endowment and term policies
MAS also proposes a simpler methodology for computing the maximum benefits that are protected under the Scheme for the applicable whole life, endowment and term policies. The simplified methodology will rely on the aggregate guaranteed death benefits alone, and ensure that policy owners who currently have total guaranteed death benefits of up to S$500,000 per life assured would not have their aggregate death benefits scaled down, as might occur under the current methodology. The proposal will make the Scheme easier to understand and operationalise.
Improved operational efficacy
MAS has worked closely with the Singapore Deposit Insurance Corporation Limited (“SDIC”) to improve on the processes needed to operationalise Scheme payouts if an insurer fails. This includes clarifying the key roles and responsibilities of the parties involved, such as MAS, SDIC, Scheme members and liquidators. MAS also seeks feedback on measures to improve operational efficiency under various payout scenarios, including during the compensation payout stage, run-off stage, and termination stage.
Other proposals in the consultation paper to enhance the operational efficiency of the Scheme include:
- giving SDIC greater flexibility in paying compensation on non-Central Provident Fund Investment Scheme insured policies;
- allowing SDIC to accumulate recovered amounts paid in excess or in error, and make aggregated payments to relevant stakeholders; and
- transferring the administration of unclaimed moneys from the Public Trustees’ Office to SDIC.
Future developments
MAS intends to conduct a subsequent consultation on the legislative changes to the Act to implement the relevant proposals.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg:
