Insurers say premiums unlikely to go up despite S$47.6m in deferred payments

SINGAPORE — Life and health policy premiums of S$47.6 million were deferred between April 1 and June 5, but insurers told TODAY that it will not be a reason for them to raise premiums, although deferments mean a loss in investment income being used to pay policy benefits.

Among them was AIA, which said that while more than 11,000 policyholders opted to defer their premium payments as of June 8, the total deferred amount of some S$20 million it faces would have no impact on its ability to pay out any claims due.

“We are prepared to absorb (investment) losses to support our customers during this difficult time,” it added. Life insurers typically require investment income to make their products viable.

The insurers were reacting to figures provided by the Monetary Authority of Singapore (MAS), which rolled out a slew of measures with the Life Insurance Association (LIA) and the General Insurance Association, among others, on March 31 to help those affected by the economic fallout from the Covid-19 pandemic.

The measures include allowing individuals to defer premium payments for life and health insurance for up to six months and opt for flexible instalment plans for general insurance policies, such as for property and vehicles, while maintaining insurance coverage throughout.

MAS’ survey found that between April 1 and June 5, close to 25,000 life and health insurance policyholders applied to temporarily stop paying their premiums. Ninety per cent of these applications were approved, resulting in S$47.6 million in premiums being deferred.

MAS also said that another 826 policyholders have asked to switch to flexible instalment plans for general policies in the same period, and 82 per cent had their requests approved.

PREMIUMS UNLIKELY TO INCREASE BECAUSE OF DEFERMENTS

The LIA, whose membership comprises 25 direct life insurers and seven life reinsurers, does not foresee premiums increasing as a result of the deferments.

It noted that a delay in premiums received had inevitably hit life insurers’ cash flow, which then affected the investments of these insurers. But it said: “We are mindful of the financial difficulties faced by some policyholders during this trying time, and providing the appropriate support remains a priority for life insurers in Singapore.”

As such, life insurers had also committed to waiving the interest chargeable on the deferred premium, and are prepared to consider an extension of the deferment period beyond the current Sept 30 deadline if the situation worsens, it added.

“As an industry, we are sensitive to the challenges faced by many during this period. Additionally, it would be counterintuitive for life insurers to increase premiums during a time when the unemployment rate is climbing and income levels are affected,” it said.

An Aviva spokesperson said that an increase in premiums is usually influenced by unexpected claims experiences, such as when the amount of claims exceeds what insurers have priced for.

But as premium deferments are temporary, it is unlikely that there will be an impact on premiums, the spokesperson said. Aviva received about 1,500 deferment applications.

Figures provided by the MAS provided a glimpse into Covid-19’s impact on claim payouts. It said 3,857 claims, totalling S$4.4 million in payouts, were paid as of June 5. They include three death benefit disbursements, hospital cash benefits, quarantine order benefits and diagnosis benefits, as several insurers had stepped up support by providing free insurance coverage for risk events related to the coronavirus.

AIA’s spokesperson said the firm is not expecting to increase premiums owing to the deferral of premiums. She added that a significant portion of its life insurance business had guaranteed premium rates.

Great Eastern said it is an industry practice to review premiums on a yearly basis, and it is “still too early to project ahead” at this point. It, however, assured its customers that the deferment will not have a bearing on any potential future premium adjustments to new or existing insurance plans.

Mr Andrew Yeo, NTUC Income’s chief executive officer, said: “We will continue to monitor the situation and our customers’ needs very closely and adapt, if necessary, as the situation progresses, as our intent is to help our customers stay insured and continue to be protected during this period of uncertainty.”

Beyond granting deferments, NTUC Income offers other support schemes, such as temporary protection plans to stand in for lapsed regular premium policies and discounts on motorcycle insurance if the vehicle is registered for delivery business, he said.

As of June 5, it received more than 6,200 applications for its suite of support schemes, with slightly over a third being premium deferments.

Manulife Singapore’s chief operations officer, Ms Tan Lay Hoon, said her firm’s priority is to ease the financial pressures customers may be facing because of the pandemic. She said that the firm had pledged S$1 million to enhance its protection coverage.

The enhanced coverage includes offering a diagnosis benefit of S$3,500 for a confirmed Covid-19 patient who has to be hospitalised for five days or more, and paying out an extra S$30,000 on top of the death benefit from customers’ existing policies.

Prudential’s head of corporate affairs, Ms Tan Ping Ping, said that her firm wants to help its customers keep their coverage “as much as possible”, adding that insurers have a responsibility to ensure that their customers stay protected in good and bad times.

HOW WILL POLICYHOLDERS PAY BACK DEFERRED SUMS?

Deferred premiums will have to be repaid eventually. Come Sept 30, if no extension of the deferment period is granted, how will individuals who may still be cash-strapped pay their premiums?

LIA told TODAY deferred premiums must be paid in full at the end of the deferment period “in general”, but policyholders needing additional support may still get help in the form of instalment repayment.

Prudential, for instance, will give its customers a six-month grace period to repay owed monthly premiums. Any payment made in this grace period will be used to pay off the longest outstanding premium first, until the outstanding premiums are paid up.

If deferred premiums remain unpaid, LIA said the policy will be managed accordingly:

• For life or health insurance policies: The policy and coverage will lapse. The policyholder may apply for a reinstatement of the policy if the policy contract allows, subject to the conditions stated in the reinstatement clause of the policy.

• For policies that have acquired some cash value: The automatic premium loan will be activated, and interest will be charged accordingly. This means that the unpaid premiums will automatically be paid from the cash value as a loan, reducing the level of benefits originally contracted.

• For investment-linked policies with a “premium holiday” feature: The policy will automatically be placed on the premium holiday, whereby the policyholder takes a break from paying the premium for a certain period, for as long as the policy has enough cash value to keep it in force.

“We urge policyholders to speak with their respective life insurers or insurance representatives to ensure that they are well-informed and advised before making any decision,” LIA said.