Compensation
In the event a life insurer which is a PPF Scheme member fails and
- you have a claim under a life-insured policy which happened before the PPF Scheme member failed;
- you have given notice to the life insurer that you want to surrender a life-insured policy before the failure; or
- if your policies have matured before the insurer fails; or
- you have been receiving annuity payments,
you are entitled to be paid compensation for the guaranteed benefits payable under your life-insured policy. This is subject to certain caps.
The caps applicable are as follows:
- Individual life and voluntary group life policies (with the exception of annuities): Cap of S$500,000 for the aggregated guaranteed sum assured and S$100,000 for aggregated guaranteed surrender value per life assured per insurer.
- Individual and voluntary group annuities: Cap of S$100,000 for the aggregated commuted value of guaranteed benefits (i.e. annuity payments, death or surrender benefits) per life assured per insurer.
- Non-voluntary group term life policies: Cap of S$100,000 for guaranteed sum assured per policy.
- Non-voluntary group whole life or endowment policies: Cap of S$100,000 for guaranteed sum assured and S$50,000 for guaranteed surrender value per policy.
- Non-voluntary group annuities: Cap of S$100,000 for commuted value of guaranteed benefits per policy.
No caps are applicable to the compensation payable under individual or group A&H policies, or riders to any policy issued to an individual except for riders which accelerate part of the sum assured of the main insured policy in case of a specified event such as illnesses. These riders are subject to the caps applicable to the main insured policy. Also, no caps will be applied to any accumulated values, including interest accrued on such values, of coupon deposits, advance premium payments and unclaimed monies. Unclaimed monies are monies for claims which have been ascertained by the failed insurer to be due and payable before the date the insurer fails but which have not been received by the policy owner or beneficiary entitled to the payment. Investment-linked policies with benefits directly tied to the value of the underlying net assets would not be covered since they are not guaranteed benefits. However, coupon deposits, advanced premium payments and unclaimed monies are covered if the underlying life policies are covered.
Illustration 1 - Calculation of compensation where policy owner and life assured are the same person
Suppose you, as a policy owner, have 3 individual life insured policies with life insurer X and you are also the life assured under these policies. There are 3 different beneficiaries (A, B and C) for the respective policies. The total guaranteed sum assured (this will include any bonuses, where applicable depending on type of policy, which have already been declared and vested) of your policies is S$600,000 and the total guaranteed surrender value (similarly, this will include any bonuses, where applicable depending on type of policy, which have already been declared and vested) is S$150,000. As such, your total sum assured and total surrender value exceeded the caps of S$500,000 and S$100,000 respectively.
In the event life insurer X fails and there is a claim on your policies or you decide to surrender your policies, protection ratios would have to be applied to determine your compensation entitlement.
In a death claim on the 3 policies, A will receive S$166,667, B will receive S$83,333 and C will receive S$250,000. If you surrender your 3 policies, you will receive S$100,000. The calculation is as follows:
| Beneficiaries of Policies |
Guaranteed Sum Assured |
Guaranteed Surrender Value |
|
|---|---|---|---|
| Policy 1 (e.g Individual Whole Life Policy) |
A | S$200,000 | S$100,000 |
| Policy 2 (e.g Individual Endowment Policy) |
B | S$100,000 | S$50,000 |
| Policy 3 (e.g Individual Term Policy) |
C | S$300,000 | – |
| Total | S$600,000 | S$150,000 | |
| Amount protected (Subject to caps) |
S$500,000 | S$100,000 | |
| Protection Ratios | 83.3%¹ | 66.7%² | |
| Compensation Entitlements after applying Protection Ratios | |||
| Policy 1 | A | S$166,667³ | S$66,667⁴ |
| Policy 2 | B | S$83,333 | S$33,333 |
| Policy 3 | C | S$250,000 | – |
| Total | S$500,000 | S$100,000 | |
Notes:
1. 500 ÷ 600 x 100% = 83.3%
2. 100 ÷ 150 x 100% = 66.7%
3. S$200,000 x 83.3% = S$166,667
4. S$100,000 x 66.7% = S$66,667
Suppose you, as a policy owner, have 3 individual life insured policies with life insurer X and you are the life assured for one policy and your spouse is the life assured for the other two policies. There are 3 different beneficiaries (A, B and C) for the respective policies. The guaranteed sum assured of the policy where you are the life assured is S$200,000 and the guaranteed surrender value is S$100,000. Since the amounts do not exceed the caps, no protection ratios are applied to determine the compensation entitlement.
The total sum assured of the 2 policies where your spouse is the life assured is S$600,000 and the total surrender value is S$150,000. As such, the total sum assured and total surrender value exceeded the caps of S$500,000 and S$100,000 respectively. In the event life insurer X fails and there is a claim on these 2 policies or you decide to surrender these 2 policies, protection ratios would have to be applied to determine your compensation entitlement.
In a death claim on these 2 policies, B will receive S$333,333 and C will receive S$166,667. If you surrender these 2 policies, you will receive S$100,000. The calculation is as follows:
| Life Assured | Beneficiaries of Policies | Guaranteed Sum Assured | Guaranteed Surrender Value | |
|---|---|---|---|---|
| Policy 2 (e.g Individual Endowment Policy) |
Your Spouse | B | S$400,000 | S$50,000 |
| Policy 3 (e.g Individual Term Policy) |
Your Spouse | C | S$200,000 | S$100,000 |
| Total | S$600,000 | S$150,000 | ||
| Amount protected (subject to caps) |
S$500,000 | S$100,000 | ||
| Protection Ratios | 83.3%1 | 66.7%2 | ||
| Compensation Entitlements after applying Protection Ratios | ||||
| Policy 2 | B | S$333,3333 | S$33,3334 | |
| Policy 3 | C | S$166,667 | S$66,667 | |
| Total | S$500,000 | S$100,000 | ||
Notes:
1. 500 ÷ 600 x 100% = 83.3%
2. 100 ÷ 150 x 100% = 66.7%
3. S$400,000 x 83.3% = S$333,333
4. S$50,000 x 66.7% = S$33,333
Suppose you, as a policy owner, have 3 individual life insured policies with life insurer X and you are also the life assured under these policies. There are 3 different beneficiaries (A, B and C) for the respective policies. You have also taken a loan of S$40,000 against one policy. The total sum assured of your policies is S$600,000 and the total surrender value is S$150,000. As such, your total sum assured and total surrender value exceeded the caps of S$500,000 and S$100,000 respectively.
In the event life insurer X fails and there is a claim on your policies or you decide to surrender your policies, protection ratios would have to be applied to determine your compensation entitlement. The policy loan of S$40,000 will also have to be deducted from your compensation entitlement.
In a death claim on the 3 policies, A will receive S$126,667, after deducting the policy loan of S$40,000, B will receive S$83,333 and C will receive S$250,000. If you surrender your 3 policies, you will receive a compensation payment of S$60,000 after deducting your policy loan of S$40,000. The calculation is as follows:
| Beneficiaries of Policies | Policy Loan | Guaranteed Sum Assured | Guaranteed Surrender Value | |
|---|---|---|---|---|
| Policy 1 (e.g Individual Whole Life Policy) |
A | S$40,000 | S$200,000 | S$100,000 |
| Policy 2 (e.g Individual Endowment Policy) |
B | S$100,000 | S$50,000 | |
| Policy 3 (e.g Individual Term Policy) |
C | S$300,000 | – | |
| Total | S$600,000 | S$150,000 | ||
| Amount protected (subject to caps) |
S$500,000 | S$100,000 | ||
| Protection Ratios | 83.3%1 | 66.7%2 | ||
| Compensation Entitlements after applying Protection Ratios | ||||
| Policy 1 | A | S$166,6673 | S$66,6674 | |
| Policy 2 | B | S$83,333 | S$33,333 | |
| Policy 3 | C | S$250,000 | ||
| Total | S$500,000 | S$100,000 | ||
| Compensation Entitlements in death claim after deducting policy loan | ||||
| Policy 1 | A | S$126,6673 | ||
| Policy 2 | B | S$83,333 | ||
| Policy 3 | C | S$250,000 | ||
| Total | S$460,000 | |||
| Compensation Entitlements in surrender event after deducting policy loan | ||||
| Policy 1 | S$26,6676 | |||
| Policy 2 | S$33,333 | |||
| Policy 3 | – | |||
| Total | S$60,000 | |||
Notes:
1. 500 ÷ 600 x 100% = 83.3%
2. 100 ÷ 150 x 100% = 66.7%
3. S$200,000 x 83.3% = S$166,667
4. S$100,000 x 66.7% = S$66,667
5. S$166,667 – S$40,000 = S$126,667
6. S$66,667 – S$40,000 = S$26,667
Suppose you, as a policy owner, have 2 life insured policies with life insurer X, where you are also the life assured. You and your spouse also have a joint policy with life insurer X (where both of you are life assureds). The total guaranteed sum assured of all the 3 policies is S$700,000 whereas the total guaranteed surrender value is S$250,000. Each joint policy owner is assumed to have an equal share in the joint policy, unless the PPF Scheme member has records that show otherwise.
Hence, in the event life insurer X fails and there are claims under the policies or you and your spouse decide to surrender your policies, an equal share is applied on the joint policy to determine the compensation entitlements. The calculation is as follows:
| Policy Owner | Guaranteed Sum Assured | Guaranteed Surrender Value | |
|---|---|---|---|
| Policy 1 (e.g Individual Whole Life Policy) |
You | S$300,000 | S$100,000 |
| Policy 2 (e.g Individual Endowment Policy) |
You | S$100,000 | S$50,000 |
| Policy 3 (e.g Joint Whole Life Policy) |
You and Your Spouse | S$300,000 | S$100,000 |
| Total | S$700,000 | S$250,000 | |
|
Your share of policies Policy 1 |
S$300,000 | S$100,00 | |
| Policy 2 | S$100,00 | S$50,000 | |
| Policy 3 | S$150,0001 | S$50,0002 | |
| Total | S$550,000 | S$200,000 | |
| Amount protected (Subject to caps) |
S$500,000 | S$100,000 | |
| Protection Ratios | 90.9%3 | 50.0%4 | |
| Compensation Entitlements after applying protection ratio on you share of policies | |||
| Policy 1 | S$272,7275 | S$50,0006 | |
| Policy 2 | S$90,909 | S$25,000 | |
| Policy 3 | S$136,364 | S$25,000 | |
| Total | S$500,000 | S$100,000 | |
|
Your Spouse’s share of policies Policy 3 |
S$150,0001 | S$50,0002 | |
| Amount protected (Does not exceed caps) |
S$150,000 | S$50,000 | |
| Compensation Entitlement | S$150,000 | S$50,000 | |
Notes:
1. S$300,000 ÷ 2 = S$150,000
2. S$100,000 ÷ 2 = S$50,000
3. 500 ÷ 550 x 100% = 90.9%
4. 100 ÷ 200 x 100% = 50.0%
5. S$300,000 x 90.9% = S$272,727
6. S$100,000 x 50.0% = S$50,000
Suppose you are the policy owner and life assured of an individual whole life policy with life insurer X. The guaranteed sum assured of the policy is S$400,000 and the guaranteed surrender value is S$150,000. The policy has a level term assurance rider which provides an additional payout of S$200,000 (sum assured) upon death. As such, the total sum assured of S$600,000 and surrender value of S$150,000 would exceed the caps of S$500,000 and S$100,000 respectively. In the event life insurer X fails and there is a claim on the policy, or you decide to surrender the policy, protection ratios would have to be applied to determine your compensation entitlement.
If you surrender the policy, you will receive S$100,000. In the event of death, your beneficiary will receive S$500,000.
Transfer, Run-off or Termination
In the event a life insurer which is a PPF Scheme member fails, MAS may also transfer the business of the failed life insurer to another insurer or direct SDIC to continue to run the business of the failed insurer (run-off). Under the PPF Scheme, you will continue to be protected for an amount not less than the protected liabilities of your life insured policies. This is computed using the applicable protection ratios and guaranteed policy liabilities of your policies. SDIC will also compensate you for any claims or surrenders filed or if your policies have matured before the insurer fails. All compensation would be subject to the applicable caps under the PPF Scheme.
MAS may also terminate the policies issued by the failed insurer. Under the PPF Scheme, you will continue to be protected for an amount not less than the protected liabilities of your life insured policies. This is computed using the applicable protection ratios and guaranteed policy liabilities for each of the policies or the adjusted guaranteed sum assured and adjusted guaranteed surrender value, depending on the type of policies. SDIC will also compensate you for any claims or surrenders filed or if your policies have matured before the insurer fails. All compensation would be subject to the applicable caps under the PPF Scheme.
A combination of options may be adopted for the entire business of the failed insurer.
Entitlement under the PPF Scheme for General Insurance Policies
Compensation
In the event a general insurer which is a PPF Scheme member fails and you have a claim to make under a general insured policy, your entitlement to compensation is as follows:
- For a compulsory insurance policy under the Motor Vehicles (Third Party Risks and Compensation) Act and Work Injury Compensation Act, the full amount of any liability of the failed PPF Scheme member as provided for under the relevant legislation is payable.
- For a general insured policy of specified personal lines, the full amount of any liability of the failed PPF Scheme member to the insured policy owner under the terms of the general insured policy is payable.
Policy owners will be compensated for claims incurred, up to 30 days after the winding up order, in respect of the insured policies.
Caps are only applicable to compensation paid out of PPF Scheme for general insured policies in the following instances:
- limits specified under the law for compulsory insurance policies
- S$50,000 for own property damage motor claims, under personal motor insurance policies
- S$300,000 for property damage claims, under personal property (structure ad contents) insurance policies
Transfer, Run-off or Termination
In the event a general insurer which is a PPF Scheme member fails, MAS may also transfer the business of the failed general insurer to another insurer or direct SDIC to continue to run the business of the failed insurer (run-off). Under the PPF Scheme, you will continue to be protected in respect of your general insured policies. Just like in the situation where compensation is paid to you, the amount of protection that you would receive under the PPF Scheme would be capped only in specific instances.