Will Income keep to social mission? Govt cites NTUC's track record, MAS to ensure existing policies are honoured
Members of Parliament raised questions about the proposed Income-Allianz deal, asking about Income Insurance's social mission and MAS' assessment as a regulator.
The NTUC Trade Union House at Bras Basah Road on Jul 25, 2024. (Photo: CNA/Try Sutrisno Foo)
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SINGAPORE: The National Trades Union Congress (NTUC) has a track record of caring for workers and fulfilling its social mission "time and time and time and time again", Minister of State for Culture, Community and Youth Alvin Tan said in parliament on Tuesday (Aug 6).
Mr Tan was responding to a question about how public assurances given by the labour movement would not ring hollow after the completion of the proposed Income-Allianz deal.
Deputy chairman of the Monetary Authority of Singapore (MAS) Chee Hong Tat also said the central bank would hold Income and Allianz to account for their commitments to honour existing policies.
Discussions about the deal took up the bulk of question time during Tuesday's sitting, with Members of Parliament (MPs) raising questions about Income's social mission and MAS' assessment as a regulator.
Last month, Allianz announced that it was planning to buy a majority stake in Income Insurance for S$2.2 billion (US$1.6 billion). It said it would offer S$40.58 per share for 51 per cent of shares in the company.
The proposed deal, which is subject to regulatory approval, was met with concerns from members of the public and experts, who were worried that Income Insurance would lose sight of its roots as a co-operative and social enterprise.
The Government will continue to support the cooperative movement to ensure that the economic and social needs of Singaporeans are met and that these goods and services remain affordable and of good quality, said Minister of State for Culture, Community and Youth Alvin Tan. Replying to MPs’ questions in Parliament on Tuesday (Aug 6), Mr Tan said the Government values the role played by NTUC and its enterprises. He pointed out that NTUC Income was established in 1970 to provide Singaporeans, especially underserved workers, with essential and affordable insurance. But social enterprises must be sustainable, he said. Mr Tan said the insurance market is very competitive now, with many options available to Singaporeans. The Government has also significantly strengthened Singapore’s social support system, with public healthcare heavily subsidised. Mr Tan said Income has to operate in this new environment and pointed out that premiums for several of its schemes are not the cheapest in the market. Besides competitive pressures, there are also regulators who ensure that policyholders’ interests are protected, said Mr Tan. He stressed that Singaporeans, including lower-income workers, are well-served by national insurance programmes in Singapore’s competitive and well-regulated insurance industry. All these provide Singaporeans with wider choices and better value in insurance services and products, he said. The current situation for Income cannot be sustained, he added. Addressing concerns that the deal with Allianz may impact Income’s social objectives, Mr Tan said Allianz has committed to honour Income’s existing policies, participate in national insurance programmes and continue its charity commitments. NTUC and Income have given the assurance to keep premiums affordable for Income’s low-cost schemes for its members. “Ultimately, the best way to keep prices affordable is to facilitate competition, ensure options for customers and put in place a sound regulatory framework. And that is what the Government is committed to doing,” he said.
Mr Tan responded to NCMP Leong Mun Wai's (PSP) question on whether the government is concentrating on the capital adequacy of Income and disregarding its social mission.
He listed out "proof points that in crisis and in peacetime", NTUC has kept to its social mission.
"Since its founding in 1961, NTUC has protected and uplifted workers' lives and livelihoods," said Mr Tan.
"They have kept true to its mission, and since (the 1969 labour modernisation seminar) 55 years ago, NTUC has continued to care for workers and families," he added.
He also pointed out that NTUC recently worked to raise the wages of low-wage workers through the progressive wage model, launched the Job Security Council during the COVID-19 pandemic and contributed more than S$300 million to various charity programmes over the years.
"NTUC has shown time and time and time and time again, since its founding, since NTUC Income's establishment in 1970, that it has continued its social mission, it has continued to not just (talk about it), but fulfilled the social mission," he said.
FINANCIALLY SUSTAINABLE
But social enterprises must be sustainable financially, said Mr Tan.
"If a social enterprise cannot sustain itself financially and government subsidy is needed to prop up the entity, then we will have to consider whether such a service ought to be provided by the government.
"Taxpayers must also be prepared to pay their share of taxes to fund the service," he added.
NTUC Enterprise previously said a social enterprise model alone cannot shoulder growth in Singapore's insurance environment, and that Income lost out on several key contracts to global and regional competitors.
It added that the circumstances in which Income was founded in 1970 are "vastly different" from the landscape today - a view Mr Tan echoed on Tuesday.
"It is now a very competitive market with many options available to Singaporeans. The government has also significantly strengthened our social support system," he said, pointing to heavily subsidised public healthcare, as well as MediSave, MediShield Life, MediFund and CPF Life.
He noted that the premiums for several of Income's schemes are not the cheapest in the market.
"The point is that Singaporeans, including lower income workers, are well served by our national insurance programs and our competitive and well-regulated insurance industry," he said.
"All these provide Singaporeans with wider choices and better value in insurance services and products."
INCOME EXPECTED TO FULFILL OBLIGATIONS
Mr Chee, who is also Transport Minister and Second Minister for Finance, said MAS also believes 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.
For existing policyholders, MAS expects Income to fulfil its obligations under the terms of its existing contracts, he said.
"Should the proposed deal be approved, there will be no change to the terms and conditions of existing insurance contracts," Mr Chee said.
The Monetary Authority of Singapore (MAS) had reviewed and was satisfied with the relevant processes Income’s board had put in place to address conflicts of interest in the appointment of its financial adviser on its proposed deal with Allianz Insurance and the decision to enter into the deal, said Second Minister for Finance Chee Hong Tat. Replying to Parliamentary questions on Tuesday (Aug 6), he said 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. 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, he said. Mr Chee pointed out that there is no significant overlap between Income’s and Allianz’s overall Insurance business in Singapore. Hence, there is “no concern about adverse impact” of the proposed deal on competition in the sector, he said. Turning to the impact on Income’s existing policyholders and employees, Mr Chee said 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. Mr Chee noted that Allianz has 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, said Mr Chee. 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 treat their customers fairly, he added. As for employees, MAS does not regulate the employment decisions of financial institutions. However, it expects all financial institutions, including Income, to treat their employees fairly and to fully comply with the Ministry of Manpower’s employment laws and guidelines. “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,” said Mr Chee.
Workers' Party MPs sought clarifications in supplementary questions.
Leader of the Opposition Pritam Singh referred to a statement by NTUC secretary-general Ng Chee Meng, who pledged on Monday to hold Income to its commitment to keep two existing low-cost insurance schemes affordable.
Mr Singh asked if MAS had questioned NTUC about the "basis of such a commitment", especially since NTUC Enterprise will be a minority shareholder if the deal is approved.
"From a regulatory point of view, we do not go into the level of details in which the secretary-general of NTUC has provided because he has gone beyond what is the regulatory requirement," said Mr Chee.
"For him to give this assurance he has actually gone beyond, but he did it because he understands the concerns, and he wants to give the assurance to the low-wage workers that NTUC will continue to stand by them."
Mr Singh also asked Mr Chee about an exchange between former CEO Tan Suee Chieh, and NTUC Enterprise and Income.
Mr Tan Suee Chieh wrote an open letter to MAS chairman Gan Kim Yong last week, again raising objections to the proposed deal and asking government regulators to step in.
NTUC Enterprise and Income Insurance rebutted him in a joint statement days later. The former NTUC Enterprise and NTUC Income CEO then replied to this rebuttal in a Facebook post on Monday.
Mr Singh asked for MAS' position on a point of contention between the parties, which was whether NTUC Enterprise had made clear an undertaking not to redeem its shares for at least 10 years or "in perpetuity", as Mr Tan Suee Chieh claims.
In response to this, Mr Chee said that MAS will "do some further work" to establish the facts before assessing its position and next steps.
MP He Ting Ru (WP-Sengkang) asked if Allianz's criminal case in the US has any bearing on the current proposed deal.
Allianz paid around US$5 billion to investors, and more than US$840 million to US government authorities to settle the allegations, the company said at the time.
Ms He asked if MAS looked into this and was satisfied that corporate governance and controls have been strengthened.
In response, Mr Chee noted that Allianz Global Investors is a US entity under the Allianz group. Allianz Global Investors is not linked to the entity that would be entering the proposed deal with Income.
He added that the product that got into trouble with the US regulators was not managed or offered by the Allianz entity in Singapore.
Investigations into Allianz Global Investors in the US did not reveal the involvement of other entities within the Allianz group, Mr Chee said.
Ms He also asked about how the proposed deal and its resulting restructure will affect Income's approximately 1,900 employees.
"It is natural that existing staff, especially those who are more junior, will be concerned and wonder whether and how they will be supported through this," said Ms He.
Mr Chee cautioned not to jump "too far ahead" as the deal has not been approved yet. MAS does not regulate the employment practices of financial institutions, but expects them to comply with employment laws and guidelines, he said.
Ms He also asked about the financial sustainability of Income.
She noted a report in December 2023 which stated that the capital adequacy ratio of Income insurance was roughly 193 per cent, which exceeds "by a wide margin" the minimum required level of "120 per cent" under Singapore's Insurance Act.
A check of the Act shows that the minimum required level is 100 per cent.
Mr Chee referred to Mr Tan's earlier reply, on how NTUC Enterprise had to support Income with capital injections.
"And so maybe the healthy state of what Ms He has seen being reported is the outcome of NTUC Enterprise injecting additional capital into Income.
"This doesn't mean that in the immediate moment ... Income is having a problem with its finances. That's not the case," he said.
