MAS has released a consultation paper on the deposit insurance scheme and policy owners protection scheme. This consultation paper appears to be an advance stage of the proposal prior to submitting to parliament for approval. The original Deposit Insurance Act (Chapter 77A) is to be repealed so as to be replaced with a ‘DEPOSIT INSURANCE AND POLICY OWNERS’ PROTECTION SCHEMES ACT 2011’

Previously I was asked by a local magazine on my opinion of the policy owners protection scheme. During that time, the world was facing a global financial crisis. Big names like AIG was bail out by tax payer monies while AIA faced an unprecedented crisis of policy holders lining up at its office to surrender its policies. In my opinion, the lack of confidence among Singaporeans was partly due to the fact that no financial advisers in Singapore was clear how life insurance policies were protected. There was no exact mechanics being officially spelt out on how MAS was going to protect these policies. The proposed legislation will help to clarify and improve clarity. The following are the changes proposed:

Life insurance are protected from 90% to 100% subjected to the following cap:

1. Individual life policies: Cap of S$500,000 for sum assured and S$100,000
2. for surrender value per life assured per insurer.
3. Individual term policies: Cap of S$500,000 for sum assured per life assured per insurer.
4. Individual annuities: Cap of S$100,000 for commuted value of guaranteed benefits per life assured per insurer.
5. Group term policies: Cap of S$100,000 for sum assured per life assured per policy.
6. Group endowment policies: Cap of S$100,000 for sum assured and S$50,000 for surrender value per life assured per policy.
7. Group annuities: Cap of S$100,000 for commuted value of guaranteed benefits per life assured per policy

Note that the above is still in proposal stage and is subjected to change.

The consultation paper released on 29 Dec 2010 can be found HERE.

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