Lapsed Life Insurance Policies/Saving Plans Due to Non-payment of Premiums
Prime Minister's OfficeSpeakers
Summary
This question concerns the number of life insurance policies lapsing due to non-payment and whether agents should inform customers about the secondary market. Mr Gan Thiam Poh inquired about surrender statistics and whether the Ministry would mandate disclosure of options to sell policies to third parties. Deputy Prime Minister Tharman Shanmugaratnam stated that surrender rates rose slightly to 3.6% in 2016, which is lower than rates in Hong Kong and the European Union. He explained that MAS does not mandate secondary market advice due to ethical concerns about unrelated parties benefiting from a life insured's death or disability. Instead, policyholders are encouraged to explore options like policy loans, surrendering for value, or reducing coverage to manage premium payments.
Transcript
1 Mr Gan Thiam Poh asked the Prime Minister (a) in the past six years, how many policyholders have allowed their life insurance policies/saving plans to lapse due to non-payment of premiums; and (b) whether the Ministry will require all insurance agents and agencies to inform their customers that they can sell their life insurance and saving plans in the secondary market.
Mr Tharman Shanmugaratnam (for the Prime Minister): Between 2011 and 2016, the percentage of life insurance policies/savings plans in-force with licensed insurers in Singapore which were surrendered each year increased slightly from 3.2% to 3.6%. The absolute number of surrendered policies was about 196,000 in 2016. These include policies surrendered voluntarily for reasons other than an inability to continue premium payments.
In comparison, the surrender rates in Hong Kong from 2011 to 2016 range from 3.6% to 4.4%. In the European Union and Switzerland, the rate is 5% to 6%, based on data from 2010 to 2014.
Life insurance policies are designed to yield the intended benefits only if the policies are held for their full terms. Therefore, there are rules requiring insurance agents and financial advisers, in recommending these policies, to conduct a proper client needs analysis, including the financial ability and willingness of their clients to commit to premium payments for the full term of the insurance product.
MAS does not require insurance agents and financial advisers to advise their clients that they can sell their life insurance policies in the secondary market. Whilst this is possible, some policyholders may be concerned that potential owners of these policies will benefit from the death or disability of the life insureds1, even though they are unrelated to the life insureds.
However, if policyholders find themselves unable to continue paying their premiums, they could avail themselves of various options provided by insurers. These include obtaining a loan against the policy value from the insurer to pay for the premium, surrendering the policy for a sum of money, or reducing the protection coverage. Policyholders could approach their insurers, insurance agents or financial advisers for help in considering these options.