What Will Happen To My Insurance Policies If My Insurer Goes Bankrupt?

Did you know if your insurer goes bankrupt, you are still protected under the policy protection scheme, as long as you bought your insurance from a MAS-licenced insurer.

4 May 2020

Find out if you are still protected under the Policy Owners’ Protection (PPF) scheme and other options, in the event your insurer goes bankrupt

Regulated by the Monetary Authority of Singapore (MAS), all life insurers operating in Singapore have stringent capital requirements to comply with and adhere to. It requires them to have financial resources at least equal or more than the total of their underwriting and investment risks. However, should an insurer still go under despite these regulations, there is still protection found under the Policy Owners’ Protection (PPF) Scheme.

What kind of protection do I have under Policy Owners’ Protection (PPF) Scheme?

As long as you have bought life insurance from a MAS-licensed insurer who is also a PPF Scheme member, you can be assured of protection of up to $500,000 sum assured or $100,000 surrender value on all your whole life, term, and endowment policies.

This is aggregated on a per life assured per insurer basis. So how does this work?

Example 1:

Tom owns two-term policies from company A. Policy 1 gives him $500,000 death coverage and Policy 2 gives him $300,000 death coverage. In the event, the life insurer fails, and Tom’s family needs to make a claim on these policies, they are assured of claims of up to $500,000.

Example 2:

Jane owns an endowment policy from company B which will mature next year for a maturity value of $150,000. In the event the life insurer fails, she is still assured of up to $100,000 in cash when the plan matures.

Is this the only course of action available?

In fact, this isn’t MAS’ preferred course of action. In the event that an insurer winds up, MAS has three possible options:

Transfer the entire insurance business to another insurer.
The insurer taking over must provide coverage to policy owners up to an amount no less than what is covered under PPF. Flashback to September 2003 when Manulife acquired all the assets under John Hancock. Another example more recently in 2018, when Zurich Life closed its business in Singapore, it transferred all its policies to Singapore Life.
Run-off the existing policies until all policies have matured or expired.
The Singapore Deposit Insurance Corporation (SDIC) will step in to take over as the life insurer, providing coverage of up to an amount no less than what is covered under PPF.
Terminate all existing policies and compensate policyholders an amount up to the protection limits mentioned above and pay off any claims outstanding.

How do I know that my policy is protected under this scheme?

One quick way to know for sure that your policy is covered is to look at your policy documents. You should be able to find the following paragraph towards the end of your documents.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC web-sites (www.lia.org.sg or www.sdic.org.sg)

Where should I go to find more information?

SDIC has been administering the Deposit Insurance (DI) Scheme and PPF Scheme in Singapore since 2006.

Where required, MAS will activate the use of the PPF Life Fund and PPF General Fund to support policyholders based on their decided course of action following the winding up of the insurer’s business. This fund is established from the annual levies that all members must pay in proportion to their liabilities. Find out more at www.sdic.org.sg.

You can also speak to us at MoneyOwl to understand more about your insurance policies or find out if you are adequately covered. We partner with 7 insurers to bring you fit-for-purpose low-cost solutions to meet your protection needs. What’s more, for policies purchased with us that are eligible for commission rebates, we will rebate up to 50% of the agent’s commissions to lower your insurance cost.