Oral reply to Parliamentary Questions on Income-Allianz Deal

Date: For Parliament Sitting on 6 August 2024

Names and Constituencies of Members of Parliament

Mr Sitoh Yih Pin, MP, Potong Pasir SMC
Mr Ang Wei Neng, MP, West Coast GRC
Ms Joan Pereira, MP, Tanjong Pagar GRC
Mr Lim Biow Chuan, MP, Mountbatten SMC
Mr Yip Hon Weng, MP, Yio Chu Kang SMC
Ms Foo Mee Har, MP, West Coast GRC
Ms He Ting Ru, MP, Sengkang GRC
Mr Mark Lee, NMP
Ms Hazel Poa, NCMP
Mr Zhulkarnain Abdul Rahim, MP, Chua Chu Kang GRC
Mr Christopher de Souza, MP, Holland-Bukit Timah GRC

Questions

To ask the Prime Minister and Minister for Finance (a) what is the Government's assessment on how NTUC Enterprise Co-operative's proposed divestment of its majority stake in Income Insurance Ltd to Allianz Insurance Singapore Pte Ltd will impact upon the competitiveness of the insurance industry; and (b) whether this development will adversely affect Singaporean's accessibility to affordable insurance policies.

To ask the Prime Minister and Minister for Finance (a) whether MAS will be working with the Competition and Consumer Commission of Singapore to scrutinise the planned purchase by Allianz Insurance of a 51% stake in Income Insurance Ltd; and (b) whether MAS will take into consideration of the ability for Income Insurance Ltd to continue fulfilling the social mission of providing affordable insurance plans to Singaporeans after the acquisition by Allianz Insurance as one of criteria for approving the acquisition.

To ask the Prime Minister and Minister for Finance (a) what are the main factors being considered as the regulators assess the application by Allianz to buy a majority stake in Income Insurance Ltd; and (b) whether there are other non-monetary considerations such as the importance of having a locally controlled insurance company to set benchmarks for affordable quality coverage for lower-income groups for the Singapore insurance sector.

To ask the Prime Minister and Minister for Finance in view of NTUC Enterprise's proposed sale of its stake in Income insurance Ltd to a foreign insurance company, how can MAS ensure that insurance policies will remain affordable for Singaporeans.

To ask the Prime Minister and Minister for Finance (a) whether MAS is aware of the key considerations behind the planned acquisition of Income Insurance Ltd by Allianz Insurance; (b) if so, what are they; (c) what is MAS' assessment of the impact of the acquisition on (i) the availability of existing and future insurance products that were designed for social good and (ii) the options available to Singaporean consumers and SMEs; and (d) whether MAS is aware if Income Insurance Ltd's mission as a social enterprise will be preserved post-acquisition.

To ask the Prime Minister and Minister for Finance how will the Income-Allianz deal impact the board composition, management and the jobs and livelihood of about 2,000 employees at Income Insurance Ltd.

To ask the Prime Minister and Minister for Finance (a) how will Allianz's majority stake in Income Insurance Ltd impact the expense ratios of policies for Income Insurance Ltd's existing customers and how will the returns and payouts of these policies be affected; and (b) what assurance can the Allianz-Income entity give to Singaporeans that competitively priced insurance products will continue to be made available.

To ask the Prime Minister and Minister for Finance (a) what is MAS' assessment of the impact of the planned acquisition of Income Insurance Ltd by Allianz Insurance on the social mission of Income Insurance Ltd in providing affordable and well-structured insurance products for Singaporeans; and (b) what avenues and measures are available for Income Insurance Ltd policyholders to allay their concerns about the balance of interests shifting in favour of the new potential shareholder.

To ask the Prime Minister and Minister for Finance (a) whether the sale of a majority stake in Income Insurance Ltd to Allianz aligns with the Government's strategy to build national champions that can compete globally; (b) if so, how; and (c) what measures will be implemented to ensure that Singapore (i) retains control over strategic national assets in the insurance sector (ii) safeguards the interests of local policyholders and stakeholders and (iii) balances the benefits of foreign investment with the need to develop and support homegrown companies.

To ask the Prime Minister and Minister for Finance (a) whether the approval of MAS is required for the sale of Income Insurance Ltd; and (b) if so, what are the criteria that will be taken into consideration by MAS.

To ask the Prime Minister and Minister for Finance whether the Ministry is studying the impact of the announced acquisition of a majority stake of the shareholding in Income Insurance Ltd by a foreign company, on future affordability of premiums for medical and hospitalisation insurance policies.

To ask the Prime Minister and Minister for Finance (a) whether the Government is aware of how Income Insurance Ltd intends to continue prioritising the interests of all stakeholders and not just those of shareholders, particularly when the market prices for insurance rise; and (b) if so, how.

To ask the Prime Minister and Minister for Finance (a) whether the Government is aware of how Income Insurance Ltd ensured no conflicts of interest occurred when the decision of its proposed acquisition by Allianz was made; and (b) if so, how.

Answer by Mr Chee Hong Tat, Minister for Transport and Second Minister for Finance, and Board Member of MAS, on behalf of Mr Gan Kim Yong, Deputy Prime Minister and Minister for Trade and Industry, and Chairman of MAS:

1. Madam Deputy Speaker, may I have your permission to answer oral PQs 11 to 14 and written PQ 3 in today's Order Paper together, regarding the proposed deal between Income Insurance Limited and Allianz Europe B.V? My reply will also cover Parliamentary Questions on the same subject matter which several Members have filed for subsequent Sittings.

2. MCCY has just replied to the PQs pertaining to Income's social mission and NTUC Enterprise's reasons for entering into this proposed deal with Allianz. I will focus on the following areas from MAS' perspective as regulator of the insurance sector:

a. First, how would MAS assess the proposed deal for regulatory approval? And did the deal involve any conflicts of interests?

b. Second, would the proposed deal affect Singaporeans' access to affordable insurance products?

c. Finally, what will be the impact on Income's existing policyholders and employees?

MAS' Assessment

3. MAS' primary role as regulator is to promote a sound and progressive financial sector. For the insurance sector, we want insurers to manage their risks well so that policyholders are assured that their long-term policies are safe and will be adequately protected.

4. When MAS assesses the application for a change in substantial shareholder in an insurer, we will consider a range of criteria, in particular, the applicant's track record, financial soundness, reputation, as well as fitness and propriety.

5. For example, we will assess if the proposed shareholder has the financial capacity to support the insurer when needed, coupled with the willingness and ability to ensure that the insurer's operations are well-run. The insurer must also have effective risk management systems and controls so that it can continue to meet its obligations to policyholders for the long-term.

6. For the Boards of major licensed insurers, including Income, MAS requires the majority of Board members to comprise directors independent of the shareholders, management and business relations. Board appointments are also subject to MAS' approval. When assessing an application, MAS' considerations include the background, skillset and experience of the applicant.

7. With regard to Mr de Souza's question on the management of conflicts of interest, MAS had reviewed and was satisfied with the relevant processes Income's Board had put in place to address conflicts of interest with respect to the appointment of its financial advisor on this proposed deal, and the decision to enter into the deal with Allianz. In the appointment of the financial advisor for the deal, the Chairman of Income's Board had recused himself. The decision to enter into the deal was made by the Board, comprising a majority of independent directors.

Accessibility to affordable insurance products

8. Fostering a competitive insurance market with financially strong insurers is a key part of MAS' approach to ensuring that insurers operate sustainably and serve the public well. We believe that a competitive market is the most effective way to meet the insurance needs of Singaporeans, and facilitate access to affordable insurance options and good service over the longer term.

9. Allianz is one of the largest insurers globally, although it only has a small retail and Small and Medium-sized Enterprise (SME) insurance presence in Singapore today. Allianz Insurance Singapore Pte Ltd is ranked 14th in general insurance with a market share of 2% based on written premium. There is no significant overlap between Income and Allianz's overall insurance business in Singapore, and hence there is no concern about adverse impact of the proposed deal on competition in the sector.

10. The insurance market in Singapore is highly competitive. There are currently more than 50 direct insurers in Singapore offering a wide range of insurance products to meet the insurance needs of individuals and businesses.

11. In both life and general insurance, Income has market shares of less than 10% based on written premium. For many insurance products, Income does not always offer the lowest prices compared to other insurers.

12. Take life insurance as an example. A check on CompareFirst, an online portal that allows consumers to compare life insurance products from various insurers, shows that the most competitive rates for Direct Purchase Insurance Term and Whole Life products include a mix of local and foreign insurers.

13. With regard to Integrated Shield Plans (IPs), the Ministry of Health (MOH) helps to exercise regulatory oversight over the IP insurers and they have to seek approval from MOH for changing IP premiums or terms and conditions. MOH also publishes a comparison of indicative lifetime premiums and coverage across different IPs. There is strong competition in the IP market, with each insurer offering plans for different levels of coverage to the public, and it is not dominated by any single insurer. Income's IPs are also not the cheapest in the market for most categories.

Existing Policyholders and Employees

14. Finally, I would like to address the impact on Income's existing policyholders and employees. We understand their concerns. Like other Honourable Members, I too have residents from Bishan-Toa Payoh who are existing policyholders and employees of Income.

15. Should the proposed deal be approved, there will be no change to the terms and conditions of existing insurance contracts. MAS expects Income to fulfil its obligations to all policyholders under the terms of its existing insurance contracts. I note that Allianz has also publicly stated its intent for Income to continue to honour the terms of the existing policies underwritten by Income and ensure a seamless transition with no impact to existing policyholders. MAS will hold Income and Allianz to account to these commitments.

16. In addition, MAS has regulatory requirements and guidance in place for insurers to maintain sufficient capital reserves, put in place robust governance and risk management frameworks, and also to treat their customers fairly.

17. For participating policies where policyholders share in the profits of the participating fund, MAS protects the interests of policyholders by restricting the ratio of profits allocated to shareholders and the type of expenses insurers may charge to the participating fund.

18. With regard to employees, MAS does not regulate employment decisions of financial institutions. However, we expect all financial institutions, including Income, to treat their employees fairly and to fully comply with the Ministry of Manpower's employment laws and guidelines.

19. To conclude, Madam Deputy Speaker, MAS encourages all insurers, both local and foreign, to continually innovate, adopt best practices and ensure robust risk management. This will foster a competitive insurance market that offers choice, value and stability to protect the interests of policyholders.

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