You buy insurance for the guarantee of your financial future. But what if the insurance company goes bankrupt? The collapse of Lehman Brothers and near bankrupt of AIG during the global financial crisis has shown this concern is real.

Singapore consumers enjoy the benefits of a sound financial system, but MAS does not guarantee the soundness of individual financial institutions. Therefore, a Policy Owners Protection Scheme (PPF Scheme) has been set up to protect policy owners.

If a life or general insurer who is a PPF Scheme member fails, MAS may activate the PPF fund to compensate the policyholders. This article will explain to you how the Policy Owners’ Protection Scheme works in Singapore…

Policy Owners Protection scheme for life insurers

Types of life insurance policies covered

The PPF Scheme protects all life insurance policies (including riders) issued by registered life insurers which are PPF Scheme members.

This would include policies issued to non-Singapore residents (offshore policies), but not policies issued by overseas branches of a registered life insurer incorporated in Singapore. Examples of life insurance policies include the following:

• Individual term policies
• Individual whole life policies
• Individual endowment policies
• Individual annuities
• Individual short-term or long-term accident & health (A&H) policies (e.g. Hospital cash, Medical Expense, Personal Accident, Disability Income, Long-term Care)
• Group term policies
• Group whole life policies
• Group endowment policies
• Group annuities
• Group short-term and long-term accident & health (A&H) policies

Any accumulated values, including interest accrued on such values, of coupon deposits, advance premium payments and unclaimed money under all insured policies are also covered. Each PPF Scheme member maintains a register of insured policies it offers. To find out if a policy offered by your insurer is covered, you can refer to the institution’s register of insured policies.

How much compensation are you entitled

In the event a life insurer which is a PPF Scheme member fails, you can claim your entitlement if

• You have a claim to make under an insured policy or
• You have decided to surrender an insured policy or
• You have been receiving annuity payments

The caps applicable to the guaranteed benefits of the different types of policies covered are as follows:

Individual life and voluntary group life policies (with the exception of annuities):

• S$500,000 for the aggregated guaranteed sum assured
• S$100,000 for aggregated guaranteed surrender value
• This cap is applicable per life assured per insurer.

Individual and voluntary group annuities:

• S$100,000 for the aggregated commuted value of guaranteed benefits (i.e. annuity payments, death or surrender benefits)
• This cap is applicable per life assured per insurer.

Non-Voluntary Group term policies:

• Cap of S$100,000 for sum assured per policy.

Non-Voluntary Group whole life or endowment policies:

• Cap of S$100,000 for sum assured and S$50,000 for surrender value per policy.

Non-Voluntary Group annuities: Cap of S$100,000 for commuted value of guaranteed benefits per policy.

No caps will be applied to individual or group A&H policies, with the exception of riders which accelerate part of the sum assured of the main policy in case of a specified event such as illnesses. Also, no caps will be applied to any accumulated values, including interest accrued on such values, of coupon deposits, advance premium payments and unclaimed money.

Policy Owners Protection scheme for general insurers

Types of general insurance policies covered

The PPF Scheme protects all compulsory insurance policies under the Motor Vehicles (Third Party Risks and Compensation) Act and Work Injury Compensation Act and Singapore policies of specified lines issued by registered direct general insurers which are PPF Scheme members. A Singapore policy insures risks arising in Singapore or where the insured is a Singapore resident or has a permanent establishment in Singapore. The types of specified lines covered are:

• Personal motor insurance policies
• Personal travel insurance policies
• Personal property (structure and contents) insurance policies
• Foreign domestic maid insurance policies
• Individual and group short-term A&H policies

Each PPF Scheme member maintains a register of insured policies it offers. To find out if a policy offered by your insurer is covered, you can refer to the institution’s register of insured policies.

How much compensation are you entitled

In the event a general insurer which is a PPF Scheme member fails and you have a claim to make under an insured policy, your entitlement to compensation is as follows:

• For a compulsory insurance policy under the Motor Vehicles (Third Party Risks and Compensation) Act and Work Injury Compensation Act, the full amount of any liability of the failed PPF Scheme member as provided for under the relevant legislation is payable.
• For a Singapore policy of specified lines, the full amount of any liability of the failed PPF Scheme member to the insured policy owner under the terms of the insured policy is payable.

Policy owners will be compensated for claims incurred, up to 30 days after the winding up order, in respect of the insured policies.

No caps are applicable to general insurance policies.

Who are PPF Scheme Members

All insurers registered by MAS to carry on direct life business (other than captive insurers) or direct general business (other than captive insurers or specialist insurers) are members of the Policy Owners Protection Scheme (PPF Scheme members). MAS may, however, exempt life or general insurers from being members of the PPF Scheme.

Life insurers who are PPF scheme members

General insurers who are PPF scheme members

Currently, Singapore Deposit Insurance Corporation (SDIC) is operating the Policy Owners’ Protection Scheme (PPF). SDIC is also managing the Deposit Insurance Scheme for the banks. Do you know only $50,000 of your deposit in the banks are guaranteed by the scheme?