2.

The Regulatory Landscape & Industry Frameworks

CHAPTER 2
THE REGULATORY LANDSCAPE & INDUSTRY
FRAMEWORKS

CHAPTER OUTLINE

1. The Role Of The Regulator In Singapore

2. Nomination Of Beneficiaries For Personal Accident & Health Insurance Policies
3. Deposit Insurance And Policy Owners’ Protection Scheme Act 2011
4. Premium Payment Framework
Appendix 2A – Premium Payment Framework

LEARNING OUTCOMES

After studying this chapter, you should be able to:

▪ know the role of the Monetary Authority of Singapore (MAS) in insurance regulation
▪ know the nature and the classification of instruments issued by MAS
▪ understand the licensing and authorisation information as well as governing Acts
for the different types of insurance entities
▪ know the Risk Based Capital framework
▪ know the two options available to policyholders under the nomination of
beneficiaries for Personal Accident Insurance and Health Insurance policies
▪ describe the purpose of the Policy Owners’ Protection Scheme relating to general
insurance policies
▪ understand the Premium Payment Framework jointly issued by the General
Insurance Association of Singapore (GIA) and Singapore Insurance Brokers’
Association (SIBA)

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Basic Insurance Concepts and Principles

Contents
THE REGULATORY LANDSCAPE & INDUSTRY FRAMEWORKS................................. 23
CHAPTER OUTLINE ........................................................................................................ 23
LEARNING OUTCOMES ................................................................................................. 23
1. THE ROLE OF THE REGULATOR IN SINGAPORE ............................................. 25
A. Legal Instruments ...................................................................................25
B. Licensing .................................................................................................28
C. Risk Based Capital Framework ...............................................................29
2. NOMINATION OF BENEFICIARIES FOR PERSONAL ACCIDENT & HEALTH
INSURANCE POLICIES ....................................................................................... 30
3. THE POLICY OWNERS’ PROTECTION SCHEME ............................................... 31
4. PREMIUM PAYMENT FRAMEWORK ................................................................. 31
A. Payment Before Cover Warranty ...........................................................32
B. Premium Payment Warranty ..................................................................32
C. Premium Instalment Payment Warranty ...............................................33
D. Re-marketing After Cancellation Due To Breach Of Premium Payment
Warranty ..................................................................................................33
E. Suspension And/Or Reinstatement Of Cover If Payment After Breach34
Appendix 2A ................................................................................................................... 35

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 2. The Regulatory Landscape & Industry Frameworks

1. THE ROLE OF THE REGULATOR IN SINGAPORE

1.1 The regulator of the insurance industry in Singapore is the Monetary Authority
of Singapore (MAS) which is governed by the Monetary Authority of
Singapore Act 1970, which confers on it powers to issue legal instruments for
regulation and supervision of financial institutions including insurers,
reinsurers, insurance brokers etc. In addition, MAS also has frameworks and
guidelines in place which cut across various classes of financial institutions.

1.2 The Insurance Department, under the Financial Supervision Group of the MAS,
supervises and regulates insurance companies in Singapore, and has as its
primary objective the protection of policyholders' interests. The Department
adopts a risk-focused approach in the prudential and market conduct
supervision of insurance companies. In its standards setting role, the
Department works closely with the industry associations to promote the
adoption of best practices by the industry.

1.3 Among the legal instruments adopted by MAS is the Insurance Act 1966 which
governs the regulation of insurance business in Singapore, including insurers,
insurance intermediaries and related institutions. While this Act is the primary
instrument adopted by the MAS in its supervision of the insurance industry,
there are other instruments adopted by MAS in this regard. We shall now
examine the nature and classification of these instruments.

A. Legal Instruments

1.4 The various instruments adopted by the MAS can be classified as follows:
▪ Acts
▪ Subsidiary Legislation
▪ Directions
▪ Directives
▪ Notices
▪ Guidelines
▪ Practice Notes
▪ Circulars
▪ Policy Statements

A1. Acts

1.5 Acts contain statutory laws under the purview of the MAS passed by
Parliament. These have the force of law and are published in the Government
Gazette. Besides the Insurance Act 1966, other Acts applicable to the insurance
industry include the Financial Advisers Act 2001 which regulates financial
advisers and their representatives and supervisors, and for other purposes
relating thereto or connected therewith.

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Basic Insurance Concepts and Principles

1.6 Another example is the Deposit Insurance and Policy Owners' Protection
Schemes Act 2011 which reconstitutes the Deposit Insurance Scheme for the
purpose of providing limited compensation to insured depositors under
certain circumstances. It also establishes a Policy Owners’ Protection Scheme
for the purpose of compensating (in part or whole) or otherwise assisting or
protecting insured policy owners and beneficiaries under certain
circumstances. The Policy Owners’ Protection Scheme shall be discussed in
further detail in Section 3 of this chapter.

A2. Subsidiary Legislation (Which Includes Regulations, Orders, Declarations &

Notifications)

1.7 Subsidiary legislation is issued under the authority of the relevant Acts and
typically provides greater detail of the provisions of an Act, and spells out in
greater detail the requirements that financial institutions or other specified
persons (for example, financial adviser representatives) have to adhere to.

1.8 Subsidiary legislation has the force of law and may specify that a
contravention is a criminal offence. They are also published in the Government
Gazette. Examples are the Insurance (Intermediaries) Regulations, Insurance
(Lloyd’s Asia Scheme) Regulations, Insurance (Actuaries) Regulations 2013,
Insurance (Approved Marine, Aviation and Transit Insurance Brokers and
Approved Reinsurance Brokers) Regulations and Insurance (Nomination of
Beneficiaries) Regulations 2009.

A3. Directions

1.9 In addition, the MAS is empowered to issue Directions, which detail specific
instructions to financial institutions or other specified persons to ensure
compliance. These Directions have legal effect; meaning that the MAS can
specify whether a contravention of a direction is a criminal offence.

1.10 Directions consist of the following:

▪ Directives - primarily impose legally binding requirements on an individual
financial institution or a specified person; and
▪ Notices - primarily impose legally binding requirements on a specified class
of financial institutions or persons. Examples are the Notice No.: MAS 211
on Minimum And Best Practice Training And Competency Standards For
Direct General Insurers, MAS 106 Appointment of Director, Chairman,
Member of Nominating Committee, and Key Executive Person for Insurers
and Notice 502 Minimum Standards and Continuing Professional
Development for Insurance Brokers and their Broking Staff.

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A4. Guidelines

1.11 Guidelines set out principles or “best practice standards” that govern the
conduct of specified institutions or persons. While contravention of guidelines
is not a criminal offence and does not attract civil penalties, specified
institutions or persons are encouraged to observe the spirit of these
guidelines. The degree of observance with guidelines by an institution or a
person may have an impact on the MAS overall risk assessment of that
institution or person. Examples are the Technology Risk Management
Guidelines for Financial Institutions, and the Guidelines on Standards of
Conduct for Insurance Brokers.

1.12 Another example is the introduction in December 2020 of the MAS Guidelines
on Environmental Risk Management for Insurers. These Guidelines aim to
enhance the insurance sector’s resilience to and management of
environmental risk through setting out sound risk management practices. It
applies to all insurers, including insurers carrying on business in Singapore
under a foreign insurer scheme established under Part 2A of the Insurance Act
1966. The Guidelines are applicable to insurers’ underwriting and investment
activities, and other activities that expose insurers to material environmental
risk.

A5. Practice Notes

1.13 Practice Notes are meant to guide specified institutions or persons on

administrative procedures relating to, among others, licensing, reporting and
compliance matters. Contravention of a practice note is not a criminal offence,
unless a procedure stated in the practice note is also required by an Act or
regulation. An example is the Practice Note on Recommendations on
Investment Products [FAA PN-02] which provides guidance to financial
advisers and their representatives on the assessment they must conduct on a
client before recommending any complex investment product to their clients.

A6. Circulars

1.14 Circulars are documents which are sent to specified persons for their
information or are published on the MAS Website for public information.
Circulars have no legal effect. Examples are ID 07/20 Issuance of Insurance
(Valuation And Capital) (Amendment) Regulations 2020 and New MAS Notice
133 on Valuation and Capital Framework for Insurers.

A7. Policy Statements

1.15 Policy statements outline broadly the major policies of the MAS. Details of
these instruments relating to the financial services industry can be obtained
from the MAS Website at: http://www.mas.gov.sg/

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B. Licensing

1.16 Insurers in Singapore comprise licensed insurers, authorised reinsurers,

approved marine, aviation and transit (MAT) insurers and foreign insurers.
Insurance brokers in Singapore comprise registered insurance brokers,
approved MAT insurance brokers and approved reinsurance brokers. The
licensing of these entities is governed under the Insurance Act 1966.

1.17 Refer to the table below for licensing and authorisation information as well as
governing Acts for the different types of insurance entities.1

Types of Insurance
Governing Act Licensing and Authorisation
Entities
Licensed insurers Insurance Act • Direct insurer
Section 11 • Reinsurer
− Special Purpose
Reinsurance
Vehicle
• Captive insurer
Foreign insurers Insurance Act Part 2A • Lloyd's Asia Scheme
• Lloyd's Scheme
Authorised Insurance Act Section Authorised reinsurer
reinsurers 42
Approved marine, Insurance (Approved Approved MAT insurer
aviation and transit Marine, Aviation and
(MAT) insurers Transit Insurers)
Regulations
regulation 5
Registered Insurance Act Registered insurance broker:
insurance brokers Sections 75-76 • Registered direct
insurance broker*
• Registered general
reinsurance broker
• Registered life
reinsurance broker
• Registered direct
insurance broker
authorised to place risks
with Lloyd's of London
under the Lloyd's
Scheme
Approved insurance Insurance (Approved Approved insurance brokers:
brokers Marine, Aviation and • Approved MAT insurance
Transit Insurance broker
Brokers and Approved • Approved general
Reinsurance Brokers) reinsurance broker
Regulations • Approved life
regulation 4 reinsurance broker

1
Source: https://www.mas.gov.sg/regulation/Insurance/Types-of-Insurers-in-Singapore

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Types of Insurance
Governing Act Licensing and Authorisation
Entities
Representative Insurance Act Section Set up insurance
office 9 representative office
General insurance Insurance Act Part IIB Registration with the General
agents Division 1 Insurance Association of
Singapore (GIA)'s Agents’
Registration Board (ARB)

C. Risk Based Capital Framework

1.18 Insurance companies are facing greater challenges in their businesses,

particularly in terms of volatility of assets and diversity of insurance risks, as
well as keener competition from other financial institutions. While previous
statutory solvency frameworks, which relied on undisclosed margins and
approximations, had served their purpose well, they were not sufficiently
transparent or risk-focused to adequately reflect the true financial conditions
of the insurance companies in the new environment. To address these
inadequacies, the MAS adopted a risk-based capital (RBC) framework in 2004,
which was formulated in close consultation with insurance practitioners and
representatives from the actuarial and accounting professions.

1.19 The RBC adopts a risk-focused approach to assessing capital adequacy and
seeks to reflect the relevant risks that insurance companies face. In order to
align the framework with international standards and best practice, and in light
of the evolving market developments, there was a need to enhance its risk
sensitivity and coverage. The new RBC framework’s i.e. RBC2’s key objectives
are to enhance policyholder protection, observe international standards and
best practices and to ensure insurers can perform its economic and social role
on a sustainable basis.

1.20 The minimum capital requirements prescribed under the framework serve as
a buffer to absorb losses. The RBC framework also provides clearer
information on the financial strength of insurers and facilitates early and
effective intervention by MAS, where necessary.

1.21 Insurers in Singapore are well-capitalised. The objective of RBC 2 is therefore

not to raise the industry’s overall regulatory capital requirements, but to
ensure that the framework for assessing capital adequacy is more aligned to
an insurer’s business activities and risk profiles.

1.22 The RBC framework for Singapore insurance companies is risk based and
reflects the differences in risk profiles of various insurers. These differences
can be based on the type of class and insured, extent of reinsurance, terms
and conditions. It then considers the capital adequacy of these insurers.
Capital requirements prescribed under the framework are meant to absorb the
fluctuations in asset and liabilities.

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1.23 In February 2020, MAS published a circular informing all licensed insurers
about the issuance of the Insurance (Valuation and Capital) (Amendment)
Regulations 2020 and of the new MAS Notice 133 on Valuation and Capital
Framework for insurers in Singapore.

1.24 The Regulations and Notice set out requirements under the risk-based capital
framework for all licensed insurers, including the way in which assets and
liabilities are to be valued. The Insurance (Valuation and Capital) (Amendment)
Regulations 2020 and MAS Notice 133 came into effect on March 31, 2020.

2. NOMINATION OF BENEFICIARIES FOR PERSONAL ACCIDENT & HEALTH

INSURANCE POLICIES

2.1 When intermediaries arrange personal accident and health insurance policies
for the policyholders, the latter need to know that their loved ones will be
financially supported in the unfortunate event of their demise or disability. The
policyholders need to know who will receive the benefits and how the benefits
will be distributed. A knowledge of insurance nomination law will enable
intermediaries to give the policyholders the appropriate advice in this regard.

2.2 The insurance nomination law, Insurance (Nomination of Beneficiaries)

Regulations 2009, under the Insurance Act 1966 came into effect on 1
September 2009. This law gives policy owners two options when nominating
beneficiaries under their policies for Life Insurance, Personal Accident (PA)
Insurance, as well as Health Insurance (such as Critical Illness Insurance or
Dread Disease Insurance, where there is coverage of death benefit). They can
choose to make a revocable nomination or a trust nomination, to ensure that
the death proceeds under such policies are distributed to their beneficiaries in
accordance with their wishes made during their lifetime.

2.3 With a revocable nomination in accordance with Section 133 of the Insurance
Act 1966, the policy owner continues to retain full ownership of the policy. He
retains the right to change, add or remove nominated beneficiaries at any time
without the consent of the nominated beneficiaries. The policy owner will
receive living benefits, and only death benefits will be paid to the nominated
beneficiaries.

2.4 With a trust nomination, also known as irrevocable nomination, in accordance

with Section 132 of the Insurance Act 1966, the policy owner relinquishes all
rights to the policy. This means that, while he is still obliged to pay the
premiums due, all policy benefits (whether living and/or death) belong to the
nominated beneficiaries. The policy owner can regain his rights to own the
policy benefits only with the written consent of all nominated beneficiaries.
Only a spouse or child of the policy owner is eligible to become a nominated
beneficiary in this respect. An advantage of such a nomination is that the
policy proceeds are protected from the creditors in the event of bankruptcy.

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3. THE POLICY OWNERS’ PROTECTION SCHEME

3.1 The Policy Owners’ Protection Scheme, created by the Deposit Insurance and
Policy Owner’ Protection Act 2011, that came into effect on 1 May 2011, is an
additional safety net that protects the interests of policy owners or
policyholders in the event that an insurer defaults. The scheme encompasses
a Policyholders’ Protection Fund (PPF), administered by Singapore Deposit
Insurance Corporation Limited (SDIC). SDIC is a company limited by guarantee
under the Companies Act 1967. The board of directors is accountable to the
Minister in charge of the MAS.

3.2 All insurance companies are regulated entities in Singapore. The scheme
provides added assurance that there is compensation available for policy
owners, to reduce the financial impact on individuals in the event that an
insurer default.

3.3 The scheme relating to general insurance provides 100% coverage for the
types of general insurance policies covered under the scheme. However, there
are also caps, on a per policy basis, for own property damage motor claims
(S$50,000) under personal motor insurance policies and property damage
claims under personal property insurance (S$300,000). Coverage is automatic,
and there is no charge to any policyholder. Levies are paid by the insurers.

3.4 All compulsory insurance policies under the Motor Vehicles (Third-Party Risks
and Compensation) Act 1960 and Work Injury Compensation Act 2019, and
Singapore policies of specified lines issued by registered general insurers that
are scheme members are covered under the scheme. A Singapore policy
insures risks arising in Singapore, or where the insured is a Singapore
resident, or has a permanent establishment in Singapore.

3.5 All insurers registered by the MAS that carry out direct general business (other
than captive or specialist insurers) are PPF Scheme Members. Details of the
scheme and its members are available on the SDIC Website at:
http://www.sdic.org.sg

4. PREMIUM PAYMENT FRAMEWORK

4.1 In this section, we shall discuss the Premium Payment Framework which
establish rules for premium payment management in general insurance.
Intermediaries and policyholders need to be aware of the provisions of the
Premium Payment Framework as any breach of the premium payment
warranties will result in no benefits whatsoever being payable by the insurer.
In other words, if policyholders do not pay their general insurance premiums
in time, the insurers will not pay any claims in relation to the policies
concerned. In addition, the policy coverage will be terminated. Insurance
intermediaries therefore need to know the Premium Payment Framework so
that they can render the appropriate advice to policyholders.

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4.2 The Premium Payment Framework is a code, jointly issued by the General
Insurance Association of Singapore (GIA) and the Singapore Insurance
Brokers Association (SIBA), that came into effect on 1 September 2016. This
single set of code will jointly apply to insurers and intermediaries.

4.3 The objectives of the Premium Payment Framework are to:

▪ improve efficiency in the collection of premiums for general insurance
policies; and
▪ minimise the possibility of disputes between insurers and policyholders.

4.4 To facilitate the collection of premiums from policyholders, three types of

premium payment warranties are incorporated into policies issued by insurers
who are members of GIA:
▪ Payment Before Cover Warranty;
▪ Premium Payment Warranty; and
▪ Premium Instalment Payment Warranty.

A. Payment Before Cover Warranty

4.5 The Payment Before Cover Warranty applies to the following:

▪ Personal Lines policies; or
▪ Bonds.

4.6 A Personal Lines policy or a Bond shall not be in force, unless the premium is
paid to the insurer or intermediary on or before the date of inception of the
policy or Bond.

4.7 In the event that the total premium due is not paid to the insurer or the
intermediary on or before the inception date or the renewal date of the policy
or Bond, then no benefits whatsoever shall be payable by the insurer. Any
payment received thereafter shall be of no effect whatsoever, as the cover has
not attached.

B. Premium Payment Warranty

4.8 The Premium Payment Warranty applies to policies issued for ALL classes of
general insurance relating to commercial lines transacted by insurers or
intermediaries.

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4.9 Under the warranty, if the period of insurance is more than 60 days, the
policyholder is required to pay the premium due under the policy in full, within
60 days from the date of inception of the policy. If this warranty is not complied
with, then the policy is automatically terminated from the expiry of the 60-day
period, and the insurer will be entitled to a pro-rata premium for the 60-day
period that the insurer has been on risk. If the period of insurance is less than
60 days, then the insured is required to pay the premium due under the policy
in full, within the period of insurance.

4.10 Under the Premium Payment Framework, commercial lines refer to

commercial general insurance, but it excludes the following types of policies:

▪ Marine Cargo ▪ Bonds

▪ Marine Hull ▪ Trade Credit
▪ Marine Liabilities ▪ Political Risk
▪ Aviation ▪ Global/Regional Programmes

C. Premium Instalment Payment Warranty

4.11 The Premium Instalment Payment Warranty also applies to policies issued for
all classes of general insurance relating to commercial lines business
transacted by insurers or intermediaries.

4.12 Under this warranty, insurers are at liberty to schedule payments provided
that:
▪ the first instalment must be paid within 60 days from the commencement
of the policy; and
▪ the remaining instalments shall be paid by the subsequent due dates.

4.13 There are also provisions (similar to that in the Premium Payment Warranty)
in that the automatic termination of the policy applies, and that the insurers
are entitled to the pro rata premium if the premiums are not paid within the
respective premium due dates.

4.14 As for other practices relating to the Premium Payment Framework applicable
to commercial lines, please refer to Appendix 2A where the complete Premium
Payment Framework can be found.

D. Re-marketing After Cancellation Due To Breach Of Premium Payment

Warranty

4.15 To avoid an abuse of the system by cancelling covers and placing through
other intermediaries or with other insurers, all intermediaries and insurers (for
direct accounts) shall insert declarations in the quotation slips and insurance
policies to the effect that policies applied for have not been in whole or in part
terminated by another insurer due to non-payment of premiums in the last 12
months.

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Basic Insurance Concepts and Principles

4.16 If the policyholder declares a breach of Premium Payment Warranty in the last
12 months, confirmation must have been first received from the insurer of the
previous policy that time on risk premiums have been paid before cover
incepts.

E. Suspension And/Or Reinstatement Of Cover If Payment After Breach

4.17 When premium, including the time on risk premium, is paid by the
policyholder after the period or date allowed under the Premium Payment
Warranty, insurers will suspend cover from the date of breach to the date of
payment.

4.18 Insurers may reinstate cover from the date of receipt of full payment to the
original expiry date. Alternatively, insurers can allow the policy to lapse and
issue a fresh replacement policy.

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Appendix 2A

Premium Payment Framework

[1 September 2016]

1. Objective of the framework

To establish rules for premium payment management in general insurance.

2. Definitions
For ease of reference and clarity, the definitions of some important terms used in this paper
are given below.

Personal Lines Policies issued to any individual.

Commercial Lines Policies issued for all classes of general insurance for businesses and
commercial establishment (with the exception of marine cargo policies,
marine hull policies, marine liabilities policies, aviation policies, bonds,
trade credit policies, political risk policies and global/regional
programmes).

Intermediaries Refers to general insurance agents and insurance brokers as stipulated

in the Insurance Act 1966.

Global/Regional Refers to insurance programmes

Programmes (a) Emanating from Singapore and covering multiple countries
(including Singapore) for each programme; or
(b) Where a Singapore insurer issues local policies as part of an
insurance programme emanating from a country other than
Singapore.
All Workmen’s Compensation and Motor insurance policies are excluded
from this definition, unless the terms of cover and issuance of these
policies fall within the control of the Global/Regional Programme.

Marine Cargo Means a policy of insurance

Policy (a) upon goods, merchandise or property of any description
whatever on board vessels; or
(b) against transit risks (whether is by sea, inland water or air, or partly
one and partly another) including risks incidental to the transit
insured from the commencement of the transit to the ultimate
destination covered by the insurance.

Marine Hull Means a policy of insurance upon vessels or the machinery, tackle,
Policy furniture or equipment of vessels.

Marine Liabilities Means a policy of insurance

Policy
(a) against damage arising out of or in connection with the use of
vessels or aircraft, including third-party risks; or
(b) against risks incidental to the construction, repair or docking of
vessels, including third-party risks.

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3. Code of Practice for Premium Payment

All existing guidelines issued by the General Insurance Association of Singapore
(GIA) and the Singapore Insurance Brokers Association (SIBA) to their members will
now be codified under this Premium Payment Framework. This single set of code
will jointly apply to insurers and intermediaries.

4. Premium Payment Warranty

To facilitate the collection of premiums from policyholders, 3 types of premium
payment warranty will be incorporated into policies issued:
4.1 Payment Before Cover Warranty
4.2 Premium Payment Warranty
4.3 Premium Instalment Payment Warranty
4.1 Payment Before Cover Warranty
The Payment Before Cover Warranty will apply to the following:
(a) all Personal Lines policies; or
(b) all Bonds
The Payment Before Cover Warranty will apply for Bonds as banks or other principal
organisations would generally require irrevocable demand bonds and would want to
ensure that the Bonds do not carry any written qualification that allows it to be
terminated during its currency.

A Personal Lines policy or a Bond shall not be in force unless premium is paid to the
insurer or intermediary on or before the date of inception of the policy or Bond.
N
4.1.1 Recommended Endorsement Wordings for Payment Before Cover Warranty
E

(1) The premium due must be paid to the Insurer (or the intermediary through whom
IM

this Policy or Bond was effected) on or before the inception date (“the inception
date”) or the renewal date of the coverage. Payment shall be deemed to have been
effected to the Insurer or the intermediary when one of the following acts takes
C

place:
E

(a) Cash or honoured cheque for the premium is handed over to the Insurer or
the intermediary;
P

(b) A credit or debit card transaction for the premium is approved by the issuing
S

bank;
(c) A payment through an electronic medium including the internet is approved
by the relevant party;
(d) A credit in favour of the Insurer or the intermediary is made through an
electronic medium including the internet.

(2) In the event that the total premium due is not paid to the Insurer (or the
intermediary through whom this Policy or Bond was effected) on or before the
inception date or the renewal date, then the insurance shall not attach and no
benefits whatsoever shall be payable by the Insurer. Any payment received
thereafter shall be of no effect whatsoever as cover has not attached.

(3) In respect of insurance coverage with Free Look provision, the policyholder may
return the original policy document to the Insurer or intermediary within the Free
Look period if the policyholder decides to cancel the cover during the Free Look
period. In such an event, the policyholder will receive a full refund of the premium
paid to the Insurer provided that no claim has been made under the insurance and
the cover shall be treated as if never put in place. Free Look provision does not
apply to Bond.

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4.1.2 Should there be extenuating circumstances resulting in non-payment of premiums, and

thereby a breach of the Warranty, insurers should consider the circumstances on a case-
by-case basis and review the cover within a reasonable time to ensure a fair outcome.

4.2 Premium Payment Warranty

The Premium Payment Warranty will apply to policies issued for ALL classes of general
insurance relating to Commercial Lines transacted by insurers or intermediaries.

Under the warranty, if the period of insurance is more than 60 days, the policyholder is
required to pay the premium due under the policy in full within 60 days from the date of
inception of the policy. If this warranty is not complied with, then the policy is
automatically terminated from the expiry of the 60-day period and the insurer will be
entitled to a pro-rata premium for the 60-day period they have been on risk. If the period
of insurance is less than 60 days, then the insured is required to pay the premium due
under the policy in full within the period of insurance.

4.2.1 Recommended Endorsement Wording for Premium Payment Warranty

(1) Notwithstanding anything herein contained but subject to clause 2 hereof, it is
hereby agreed and declared that if the period of insurance is 60 days or more,
any premium due must be paid and actually received in full by the Insurer (or
the intermediary through whom this Policy was effected) within 60 days of
the inception date of the coverage under the Policy, Renewal Certificate or

N
Cover Note.
(2) In the event that any premium due is not paid and actually received in full by the
E
Insurer (or the intermediary through whom this Policy was effected) within the
IM
60-day period referred to above, then:
(a) the cover under the Policy, Renewal Certificate or Cover Note is
automatically terminated immediately after the expiry of the said 60- day
C

period;
E

(b) the automatic termination of the cover shall be without prejudice to any
P

liability incurred within the said 60-day period; and

(c) the Insurer shall be entitled to a pro-rata time on risk premium subject to a
S

minimum of S$25.00
(3) If the period of insurance is less than 60 days, any premium due must be paid
and actually received in full by the Insurer (or the intermediary through whom
this Policy was effected) within the period of insurance.

4.2.2 To bring about greater policyholder awareness and to enhance transparency, the
tax invoices issued by insurers and/or debit notes issued by intermediaries must
incorporate an Important Notice to highlight the application of the Premium Payment
Warranty. If premiums are not received, the insurers (for direct accounts) or the
intermediaries must also send a reminder to the policyholders at least 2 weeks before
the expiry of the Premium Payment Warranty period.

4.3 Premium Instalment Payment Warranty

The Premium Instalment Payment Warranty will apply to policies issued for ALL classes of
general insurance relating to Commercial Lines business transacted by insurers or
intermediaries.

Insurers are at liberty to schedule payments provided:

• The 1st instalment must be paid within 60 days from the commencement of the
policy; and
• The remaining instalments shall be paid by the subsequent due dates.

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4.3.1 Recommended Endorsement Wordings for Premium Instalment Payment Warranty

(1) Notwithstanding anything herein contained but subject to clauses 2 and 3 hereof,
it is hereby agreed and declared that:
(i) the 1st instalment due must be paid and actually received in full by the
Insurer (or the intermediary through whom this Policy was effected) within
60 days of the inception date of the coverage under the Policy, Renewal
Certificate or Cover Note;
AND
(ii) the 2nd and subsequent instalments, if any, of the total premium due, in such
amounts as specified by the Insurer for each instalment, must be paid
and actually received in full by the Insurer (or the intermediary through
whom this Policy was effected) on or before the respective due dates as
specified by the Insurer.

(2) In the event that the 1st instalment is not paid and actually received in full by the
Insurer (or the intermediary through whom this Policy was effected) within the 60-
day period referred to above, then:
(a) the cover under the Policy, Renewal Certificate or Cover Note is automatically
terminated immediately after the expiry of the said 60-day period;

N
(b) the automatic termination of the cover shall be without prejudice to any
liability incurred within the said 60-day period; and
E
(c) the Insurer shall be entitled to a pro-rata time on risk premium.
IM

(3) In the event that the 2nd or any subsequent instalment of the total premium due is
C

not paid and actually received in full by the Insurer (or the intermediary through
whom this Policy was effected) on or before the respective due dates as
E

specified by the Insurer, then:

P

(a) the cover under the Policy, Renewal Certificate or Cover Note is
automatically terminated immediately after the respective due date in
S

respect of which the instalment has not been paid; and

(b) the automatic termination of the cover shall be without prejudice to any
liability incurred within the period before the respective due date in
respect of which the instalment has not been paid.

4.3.2 Illustration of Instalment Payment Plan

1ST INSTALMENT MUST BE PAID The remaining instalments

(up to insurers to schedule)

60 days Rest of policy periods

Date of Inception

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 2. The Regulatory Landscape & Industry Frameworks

5. Terms of Settlement Between Intermediaries And Insurers

Terms of settlement refer to the handing over of payments received by the intermediaries
from the policyholders to the insurers.

(i) Agents
The settlement terms of both Cash Agents and Credit Agents will be governed by their
respective Agency Agreements and the General Insurance Agents Registration
Regulations (GIARR).

(ii) Brokers
Regardless of the types of policy, settlement terms of all Brokers are required to comply
with the Insurance Broking Premium Accounts requirements established in the Insurance
(Intermediaries) Regulations. Pursuant to Regulation 7 (14) of the Insurance
(Intermediaries) Regulation, Brokers must pay all premiums received from the
policyholder by the 90th day from the date of commencement of cover. The following
illustration will help put settlement requirement for Brokers in perspective.

5.1 An Illustration of the Settlement Requirements For Intermediaries and Policyholders

Scenario 1
Insurer A: Financial Closing Date - 31 May 2015
Bill date – 27 May 2015

May Jun
N July
E
IM

27/5 – Billing
C

Date 30/6 – Premium

Payment Due Date for
E

insured
1/5 – May statement of 30/7 – Premium
P

Commencement date account will reflect Payment by

of policy
S

transaction Intermediary to
Insurer

Scenario 2
Insurer B: Financial Closing Date - 25 May 2015
Bill date – 27 May 2015

May Jun July

25/5 –
Financial
Closing Date June statement of
account will reflect
1/5 – transaction 30/7 – Premium
Commencement date 27/5 – Payment by
of policy Billing Date Intermediary to
30/6 – Premium
Insurer
Payment Due Date for
insured

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Basic Insurance Concepts and Principles

6. Recommended Practice Applicable to Commercial Lines Business

6.1 New or Renewal Policy or Endorsement
The following will be adopted for New or Renewal policies or Endorsements where the
insurers have yet to receive a complete set of the required information:
(i) Intermediaries have to present their closings to insurers on or prior to the inception
date.
(ii) In the event that intermediaries issue hold covered instructions to insurers, the
following shall apply:
(A) In respect of new business
(i) Where the risk has been bound and the insurers have yet to receive a
complete set of the required information, the insurers will proceed to issue
the policy based on essential information received from the intermediaries
(“the New Policy”).
(ii) Insurers are to issue tax invoices and policy documents within 30 days after
the inception date of the New Policy.
(iii) Upon subsequent receipt of the required information, the insurers shall be
entitled to issue endorsements to extend or amend the cover of the New
Policy and issue tax invoices for these endorsements accordingly.

(B) In respect of renewal business

(i) The insurers will proceed to renew based on the essential information
received from the intermediaries or expiring sums insured/wageroll/limits
(“the Renewal Policy”).
(ii) Insurers are to issue tax invoices and policy documents within 30 days after
the inception date.
N
(iii) Upon subsequent receipt of further information, the insurers shall be entitled
E
to issue endorsements to extend or amend the cover of the Renewal Policy
and issue tax invoices for these endorsements accordingly.
IM

(C) Collection of Premium

(i) Intermediaries will be given 60 days from inception date of the New Policy,
C

Renewal Policy or their respective endorsements, to collect the premium

E

from their policyholders.

P

6.2 Overdue Premiums

S

If the intermediaries are unable to collect the premium from their policyholders within
60 days from inception of the New Policy, Renewal Policy or the applicable
endorsement:
(i) The policy or endorsement will automatically terminate effective from the 61st
day of cover.
(ii) The intermediaries must notify the policyholders immediately by fax, email and/or
mail, of the cessation of cover, copied to the insurers.
(iii) Whether the liability or claims is incurred or not by the insurers within the 60-day
period, the policyholders are liable to pay time on risk premiums.
(iv) Intermediaries are required to notify the insurers of the policyholders who have
breached the Premium Payment Warranty within 5 working days of the breach.
(v) If the intermediaries notify the insurers within 5 working days of the breach, the
intermediaries will not be liable for the collection of the time on risk premiums.
(vi) If the intermediaries do not notify the insurers within 5 working days of the
breach, then the intermediaries will be liable for the collection of the time on risk
premiums.

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 2. The Regulatory Landscape & Industry Frameworks

6.3 Re-marketing after cancellation due to breach of Premium Payment Warranty

To avoid an abuse of the system by cancelling covers and placing through other
intermediaries or with other insurers, all intermediaries and insurers (for direct accounts)
shall insert the following declarations in the quotation slips and insurance policies to the
effect that policies applied for have not been in whole or in part terminated by another
insurer due to non-payment of premiums in the last 12 months.

If they declare a breach of premium payment warranty in the last 12 months, confirmation
must have been first received from the insurer of the previous policy that time on risk
premiums have been paid before cover incepts.

6.3.1 Recommended Wordings for Declaration in Quotation Slip

Quotation Slip

Condition Precedent
1. The validity of this Quotation is subject to the condition precedent that:
(a) for the risk quoted, the proposed policyholder has never had any insurance
terminated in the last twelve (12) months due solely or in part to a breach of any
premium payment condition; or
(b) if the proposed policyholder has declared that it has breached any premium
payment condition in respect of a previous policy taken up with another insurer
in the last twelve (12) months: N
(i) the proposed policyholder has fully paid all outstanding premium for time on
E
risk calculated by the previous insurer based on the customary short period
rate in respect of the previous policy; and
IM

(ii) a copy of the written confirmation from the previous insurer to this effect is
first provided by the proposed policyholder to the Insurer before cover
C

incepts.
E

6.3.2 Recommended Endorsement Wordings for Policy

P

Insurance Policy
S

Condition Precedent
1. The validity of this Policy is subject to the condition precedent that:
(a) for the risk insured, the named policyholder has never had any insurance
terminated in the last twelve (12) months due solely or in part to a breach of any
premium payment condition; or
(b) if the named policyholder has declared that it has breached any premium
payment condition in respect of a previous policy taken up with another insurer
in the last twelve (12) months:
(i) the named policyholder has fully paid all outstanding premium for time on
risk calculated by the previous insurer based on the customary short period
rate in respect of the previous policy; and
(ii) a copy of the written confirmation from the previous insurer to this effect is
first provided by the named policyholder to the Insurer before cover incepts.

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Basic Insurance Concepts and Principles

6.4 Suspension and/or Reinstatement of Cover if Payment After Breach

When premium (including without limitation, the time on risk premium) is paid by the
policyholder after the period or date allowed under the Premium Payment Warranty,
cover must be suspended from the date of breach to date of payment.

Cover may be reinstated from the date of receipt of full payment to the original expiry
date. This would serve to encourage the policyholder to remain with the same insurer.

Alternatively, the insurer can allow the policy to lapse and issue a fresh replacement
policy.

Source: General Insurance Association of Singapore

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