Impact of NTUC Enterprise's Divestment of Income Insurance Ltd on Insurance Industry Competitiveness

Mr Sitoh Yih Pin asked the Prime Minister and Minister for Finance (a) what is the Government's assessment on how NTUC Enterprise Co-operative's proposed divestment of its majority stake in Income Insurance Ltd to Allianz Insurance Singapore Pte Ltd will impact upon the competitiveness of the insurance industry; and (b) whether this development will adversely affect Singaporeans' accessibility to affordable insurance policies.

*Note: The Member has given notice of his declaration of interest as a non-executive and independent director of China Taiping Insurance (Singapore) Pte Ltd.*

I will answer oral Parliamentary Question (PQ) Nos 11 to 14 and written Parliamentary Question No 3 in today's Order Paper together, regarding the proposed deal between Income Insurance Limited and Allianz Europe B.V. My reply will also cover PQs on the same subject matter, which several Members have filed for subsequent Sittings.

The Ministry of Culture, Community and Youth has just replied to the PQs pertaining to Income's social mission and NTUC Enterprise's reasons for entering into this proposed deal with Allianz. I will focus on the following areas from the Monetary Authority of Singapore's (MAS') perspective as regulator of the insurance sector:

First, how would MAS assess the proposed deal for regulatory approval? Did the deal involve any conflicts of interests? Second, would the proposed deal affect Singaporeans' access to affordable insurance products? Finally, what will be the impact on Income's existing policyholders and employees?

MAS' primary role, as regulator, is to promote a sound and progressive financial sector. For the insurance sector, we want insurers to manage their risks well so that policyholders are assured that their long-term policies are safe and will be adequately protected.

When MAS assesses the application for a change in substantial shareholder in an insurer, we will consider a range of criteria. In particular, the applicant's track record, financial soundness, reputation as well as fitness and propriety.

For example, we will assess if the proposed shareholder has the financial capacity to support the insurer when needed, coupled with the willingness and ability to ensure that the insurer's operations are well-run. The insurer must also have effective risk management systems and controls so that it can continue to meet its obligations to policyholders for the long-term.

For the Boards of major licensed insurers, including Income, MAS requires the majority of Board members to comprise directors independent of the shareholders, management and business relations. Board appointments are also subject to MAS' approval. When assessing an application, MAS' considerations include, the background, skillset and experience of the applicant.

With regard to Mr Christopher de Souza's question on the management of conflicts of interest, MAS had reviewed and was satisfied with the relevant processes Income's Board had put in place to address conflicts of interest, with respect to the appointment of its financial advisor on this proposed deal and the decision to enter into the deal with Allianz. In the appointment of the financial advisor for the deal, the Chairman of Income's Board had recused himself. The decision to enter into the deal was made by the Board, comprising a majority of independent directors.

Fostering a competitive insurance market with financially strong insurers is a key part of MAS' approach to ensuring that insurers operate sustainably and serve the public well. We believe that a competitive market is the most effective way to meet the insurance needs of Singaporeans and facilitate access to affordable insurance options and good service over the longer term.

Allianz is one of the largest insurers globally, although it only has a small retail and small and medium-sized enterprise (SME) insurance presence in Singapore today. Allianz Insurance Singapore Pte Ltd is ranked 14th in general insurance, with a market share of 2% based on written premium. There is no significant overlap between Income and Allianz's overall insurance business in Singapore and, hence, there is no concern about adverse impact of the proposed deal on competition in the sector.

The insurance market in Singapore is highly competitive. There are, currently, more than 50 direct insurers in Singapore offering a wide range of insurance products to meet the insurance needs of individuals and businesses.

In both life and general insurance, Income has market shares of less than 10% based on written premium. For many insurance products, Income does not always offer the lowest prices compared to other insurers. Take life insurance as an example. A check on CompareFirst, an online portal that allows consumers to compare life insurance products from various insurers, shows that the most competitive rates for Direct Purchase Insurance Term and Whole Life products include a mix of local and foreign insurers.

With regard to Integrated Shield Plans (IPs), the Ministry of Health (MOH) helps to exercise regulatory oversight over IP insurers and they have to seek approval from MOH for changing IP premiums or terms and conditions. MOH also publishes a comparison of indicative lifetime premiums and coverage across different IPs. There is strong competition in the IP market, with each insurer offering plans for different levels of coverage to the public and it is not dominated by any single insurer. Income's IPs are also not the cheapest in the market for most categories.

Finally, I would like to address the impact on Income's existing policyholders and employees. We understand their concerns. Like other hon Members, I, too, have residents from Bishan-Toa Payoh, who are existing policyholders and employees of Income.

Should the proposed deal be approved, there will be no change to the terms and conditions of existing insurance contracts. MAS expects Income to fulfil its obligations to all policyholders under the terms of its existing insurance contracts. I note that Allianz has also publicly stated its intent for Income to continue to honour the terms of the existing policies underwritten by Income and ensure a seamless transition with no impact to existing policyholders. MAS will hold Income and Allianz to account to these commitments.

In addition, MAS has regulatory requirements and guidance in place for insurers to maintain sufficient capital reserves, put in place robust governance and risk management frameworks and, also, to treat their customers fairly.

For participating policies where policyholders share in the profits of the participating fund, MAS protects the interests of policyholders by restricting the ratio of profits allocated to shareholders and the type of expenses insurers may charge to the participating fund.

With regard to employees, MAS does not regulate employment decisions of financial institutions. However, we expect all financial institutions, including Income, to treat their employees fairly and to fully comply with the Ministry of Manpower's employment laws and guidelines.

To conclude, MAS encourages all insurers, both local and foreign, to continually innovate, adopt best practices and ensure robust risk management. This will foster a competitive insurance market that offers choice, value and stability to protect the interests of policyholders.