By now you are probably aware that Aviva and Singlife are going to merge into one company. You may be wondering how it affects their policyholders and what is the impact of Singapore’s financial industry. Recently, I was interviewed by the Straits Times regarding my views on the merger.
If you think about it, since the 2008 global financial crisis, the entire world has shifted to a new digital era. By now, you can do almost everything online. However, this new online freedom does not yet apply to your core financial services. You still have to deal with tons of paperwork for an insurance application and investment account opening and transactions. And you still have limited access to quality financial products and services.
This is because while the world moved to a new digital era, the financial industry was spending all its time and resources dealing with “compliance” and post-crisis damage control.
I think the merger of Aviva and Singlife is going to change that.
Why insurers merge
Big size means better economies of scale. The mergers and acquisitions of financial institutions have intensified over the past two years. Just look at the number of mergers happening in the REITs market. According to the Straits Times, the British insurer Aviva has agreed to sell its Singapore operation to a homegrown rival, Singapore Life Pte Ltd (Singlife). If the deal goes through, they will become one of the largest companies in the South-east Asia insurer market and the largest in Singapore.
If you follow my blog, you know that I believe that the world is moving from an era of globalization to a de-globalized one. And the US-China trade war and the COVID-19 pandemic have accelerated this process.
I wrote before that every crisis or recession will lead to a wealth reshuffle. For example, after the global financial crisis, there were many mergers in the insurance market of Singapore. To name a few,
- In 2012, HSBC sold off its general insurance businesses to AXA and QBE;
- In 2012, AIG sold AIA Insurance;
- In 2015, Aviva bought Friends Provident International;
- In 2018, Singapore Life acquired Zurich Life Singapore.
Soon after the European debt crisis, many European financial institutions were badly hit. The additional regulatory requirement and compliance costs drained their cash. On the contrary, their Asia business centres have done well and remained good assets. I will not be surprised to see more mergers coming along. In fact, it was just reported that the French insurer AXA is weighing the sale of its Singapore business to raise cash.
What happens to your existing Aviva and Singlife policies?
As of now, the Aviva Singlife merger is still pending approval and will only happen in 1H 2021, both insurers will continue to operate independently until then. So you should expect no change in the way you deal with either insurer for now.
As far as the policy owners are concerned, life went on and it is business as usual. Because insurance is a binding contract and remains the liability of the current insurer, when the new insurer buys an existing insurer’s assets, they also take over the liability as well.
But we should expect a shift in product focus and operational changes. According to the insurer, you will receive an endorsement of your existing policy to be insured under the new entity’s name. Any standing premium payment instructions will be redirected automatically, and all claims and transactions will continue to be processed as per normal.
As all the insurance policies in Singapore are covered under the Policy Owner Protection Scheme, you should sleep well with this extra layer of protection.
What does the Aviva Singlife merger bring to Singapore’s financial market?
In the course of my work as an independent financial adviser, I have worked with both Aviva and Singlife.
For many years, I have been asking Singapore insurers the same question, “Why can’t you sell insurance products digitally?”. I have been given the same answers like “industry tradition” and “compliance reasons”. But I have never received a satisfactory reason that is of the benefit to the consumers.
But since being licensed in 2017, Singlife has reinvented the insurance experience. As its CEO Walter de Oude said, “We have blazed our way into the insurance marketplace.”
They proved that you do not need to sign 80 pages of documents for an insurance application; they proved that you can get underwriting results on the spot; they proved that you have a choice of not being pushed to buy expensive and complex products.
Singlife proved that a complete paperless insurance application process is possible and the word “compliance” was just an excuse for the other insurers to maintain the status quo.
Aviva was the pioneer of digitalizing the insurance industry too. They own wealth management platform Navigator and DollarDex, the key rival of iFast Financials. They are the early adopters of the paperless insurance application process via application EzSub. Even their group insurance policies are completely processed online now. So I definitely see a synergy between Aviva and Singlife.
Recently, I talk about ANT IPO because I believe digital finance is the future of the industry and if you have ever owned an AliPay Account, you will know what I mean.
However, the challenge is always the first step. Even though Singlife offered hassle-free term insurance and a short term endowment plan online, the take-up rate was not fantastic.
As I said during my interview with the Straits Times,
The challenge for Singlife is that its name is not well known… whereas Aviva already has an established presence here… When they launch new innovative products in the future, they will probably be more accepted by consumers. – Ivan Guan
In addition, there was part of the interview not published, where I stated that I think by leveraging on Aviva’s wealth management arm, Aviva Singlife can do more:
The inclusion of Aviva Singapore’s unit trust platforms Navigator and dollarDEX in the deal might also allow the new combined business to bring new technology solutions not only to the insurance industry, but also in wealth management. – Ivan Guan
Merging with Aviva will help Singlife bring their Fintech expertise to more than 1.5 million Aviva customers. It is a wakeup call for not insurers but other wealth management institutions in Singapore as well. They will need to embrace technology and focus on customer experiences.
If you want to know which financial sectors are going to be disrupted, you can make good sense from the key investors of Singlife:
- Private equity: IPGL Holdings
- Life insurer: Sumitomo Life
- Life and health insurer: Aflac Inc and
- Fund manager: Aberdeen Standard Investments.
Update on Nov 17, 2020: To fund the purchase, Aviva Singlife has issued their first SGD bond with an indicative 3.75% coupon.
Completion of Aviva Singlife Merger – Updated in Oct 2021
The Scheme of Transfer (“SOT”) to combine the two companies is scheduled to complete by 1 January 2022, subject to approval from the Monetary Authority of Singapore and the High Court of the Republic of Singapore.
The combined company will be known as Singapore Life Ltd.
The insurer will also reach out to their customers to update them about the SOT from 5 October 2021.
Hi Ivan! Do you think that the Merger of Singlife and Aviva will cause the current clients to experience changes in their premiums paid? What about any investment plans or savings plans bought from Aviva?
There shouldn’t be any change in the terms and conditions as they are contractual binding. Once Singlife takes over Aviva’s policy, they have to honor the previous contract.
What happen to jobs under such merger? Does that mean that there will be focus on tech under such situation we are under going? There is also news on AXA’s news on selling Singapore Business. Looks like many changes in insurance companies in Singapore.
Yes, there are many changes in the financial industry in Singapore this year. Typically, you will see job cut after a merger due to redundancy.
Income is the worst. 6 months ago they removed the monthly statement features which me and family had been using for decades with no notice. We have more than 10 policies. Basically everything was removed except the payment due notice which is very telling and keep sending SMS reminder which never happen3d before. So I paid for 2 policies. Then in the name of improving service after I wrote to them, they engaged a 3rd party to do an online survey on how they can improve the service and I was invited to participate. On clicking start survey, was asked my age. After I key in my age, an auto response said I am not eligible to participate because of my age and lock me out. WTF. Then why invite me? Serious doubt…dont think will buy more from them.
Hi, Henry, thank you for sharing your experience. Due to the pandemic, many insurers are “rushing” to digitalisation. So teasing issues are expected.
Etiqa is a true innovator and disruptor in insurance industry even beating Singlife. Could you give a review of the financial strength of this company?
eTiqa is also one of the earlier adopters to embrace technology. I was actually invited to review some of their earlier online products. Fitch gives them a stable “A” rating, which proves the company’s financial strength.
However, as a subsidiary of Maybank, the company will have a different focus and strategy comparing to an independent insurer like Aviva and Singlife. This will be shown in the suite of products that they offer.