Client Update: Consultation paper on group insurance policies released
11 August 2010
In brief: The Monetary Authority of Singapore has released a consultation paper inviting comment on the proposed introduction of legislative safeguards aimed at protecting insureds under a group policy by minimising the opportunities for fraud on the part of the policy owner. Partner Matthew Skinner (view CV) and Senior Associate Justin Simpkins report.
- Background
- Exemptions
- Premium payment and disclosure of insurance details directly to the insured
- Claims payment
- Marketing
- Impact
- Timing
Background
The paper defines a group insurance policy, generally, as referring to an insurance policy that has a single entity named in the policy as the policy owner on behalf of a number of identifiable group members, who are named as insureds.1
The Monetary Authority of Singapore (the MAS) considers that the current requirements governing group policies do not sufficiently protect insureds against the risk of fraud by the group policy owner. In that context, the MAS has issued a consultation paper on group insurance policies in which it seeks comments and feedback from interested parties on a number of proposed additional safeguards. The safeguards relate to disclosure of insurance details directly to the insured, premium payment, claims payment and marketing.
The proposed safeguards will supplement existing provisions in the Insurance Act (Cap. 142) (Singapore).
Exemptions
Policies which meet the following criteria will be exempt from the new requirements:
- the relationship between the policy owner and the insureds is that of employer and employee (but not an employee's family members); and
- the policy owner will be disadvantaged (ie suffer a loss) if the insured event occurs.
Premium payment and disclosure of insurance details directly to the insured
Section 35Q(2) of the Insurance Act provides that payment to the group policy owner by the insured will constitute payment to the insurer. The MAS proposes imposing, in addition to s35Q, the following requirements on the insurer issuing the group policy:
- the insurer must provide a certificate of insurance which states the premium, benefits provided, key exclusions/restrictions and the amount of coverage. Insureds will also be given the right to request additional policy documents from the insurer; and
- the certificate of insurance (and other policy documents, if requested by the insured) are to be sent directly by the insurer to the insured. Other correspondence such as letters acknowledging changes to policy status or terms and conditions are to be handled in the same way.
Claims payment
Currently, in respect of group policies where the insured is liable to pay a premium, s35Q(3) of the Insurance Act allows insurers to obtain good discharge by paying to either the insured or any person 'entitled through him' to receive such payments.
The MAS proposes tightening this requirement so that payments can only be made to rightful beneficiaries. There will be no option to pay any other person other than the beneficiary, even with the beneficiary's written request.
Marketing
The MAS proposes requiring group policy owners who market (their own) group policies to fulfil the same training and competency requirements as other insurance intermediaries. Insurers will not be allowed to accept business from group policy owners who do not meet the training and competency requirements.
Impact
According to the consultation paper, savings in administrative and distribution costs have driven an increase in group policies where the policy owner has no insurable interest in the insureds. The consultation paper outlines a number of key amendments to the existing legal framework regulating group insurance policies.
Anyone involved in non-exempt group insurance policies, whether as an insured, policy owner or insurer, will be affected by the proposed safeguards.
Existing group insurance policies will not be exempt from the new safeguards although insurers will be given a grace period to meet the additional requirements.
Timing
Interested parties need to lodge their comments on the recommendations set out in the consultation paper by 31 August 2010.
Footnotes
For further information, please contact:
- Matthew SkinnerPartner,
Singapore
Ph: +65 6535 6622
Matthew.Skinner@aar.com.au - Simon McConnellManaging Partner - Hong Kong and China,
Hong Kong
Ph: +852 2840 1202
Simon.McConnell@aar.com.au - Mun YeowPartner,
Hong Kong
Ph: + 852 2840 1202
Mun.Yeow@aar.com.au
