Debated in Parliament on 4 Jan 2021.
Mr Murali Pillai asked the Prime Minister (a) over the past three years, what has been the percentage of life insurance policies that have been surrendered on a per year basis; and (b) whether MAS intends to regulate the secondary market involving the sale of life insurance policies so as to protect the policy holders’ long-term interests and to prevent them from prematurely surrendering their life policies for reasons other than the inability to make premium payments.
The percentage of life insurance policies surrendered averaged 1.1% per year during 2017 to 2019. In the first three quarters of 2020, the percentage of policies surrendered was about 0.7%.
Policyholders who surrender their policies may not be able to find a policy with similar coverage at the same cost once it has been terminated. The Monetary Authority of Singapore (MAS) has put out financial education messages targeted at policyholders on the risks or disadvantages associated with surrendering or selling their life insurance policies. For policyholders who are unable to pay premiums, insurers have been providing them some support, such as offering grace period for payment and premium loans.
There are also situations where holding on to a life insurance policy no longer makes financial sense. For example, when the insurance coverage is no longer required because the policyholder does not have a dependent anymore, or where the policyholder has more important alternate uses for the cash value in the policy. Under these circumstances, the policyholder may sell his policy in a secondary market for a higher cash value to a third party company, who in turn sells it to investors.
These third party companies are currently not regulated in Singapore. This is similar to other jurisdictions such as Hong Kong and Japan. While they are regulated in the US and UK, the focus is on the protection of investors who purchase the re-sold policies rather than the policyholders. We will continue to monitor the market for potential risks, and will introduce regulatory safeguards if necessary.
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