PPF Scheme Expands Coverage to Sole Proprietors and Simplifies Insurance Products
The Monetary Authority of Singapore (MAS) has proposed several enhancements to the Policyholders’ Protection Fund (PPF) scheme, aiming to improve retail investor protection while increasing accessibility to more investment products.
Expansion of Coverage to Sole Proprietors
The MAS has proposed expanding coverage to sole proprietors under the PPF scheme. This change requires insurers to update their policy administration systems to correctly tag products that are covered by the PPF scheme and those that are not.
- Insurers will need to correctly categorize products as being covered or not covered by the PPF scheme.
- This change aims to provide better protection for sole proprietors, who are considered natural persons under the PPF scheme.
Simplification of Insurance Products
The MAS has also proposed a more pragmatic approach for calculating refund premiums and payment claims in the event of an insurer’s liquidation. Additionally, the authority is seeking to tighten governance over policy and claims tracking by requiring annual internal audits or periodic external audits to facilitate payments under the PPF scheme.
- The new approach aims to reduce complexity and improve efficiency in processing refund premiums and payment claims.
- Governance requirements aim to ensure that FIs have robust systems in place for tracking policies and claims.
Impact on Financial Institutions (FIs)
Financial institutions affected by these enhancements will need to update their systems and processes to comply with the new requirements. This may include:
- Issuing endorsements to split out risk components classified as different under the PPF scheme as riders.
- Updating policy administration systems to correctly tag products that are covered or not covered by the PPF scheme.
Simplification of Insurance Product Requirements
The MAS has published a consultation paper seeking feedback on proposals to simplify requirements for selected insurance products in accordance with the Basic Financial Planning Guide (the Guide). The Guide recommends that consumers obtain insurance protection coverage of:
- 9 times annual income for death and total and permanent disability
- 4 times annual income for critical illness
- Spend no more than 15% of take-home pay on their insurance protection
The proposed changes aim to reduce information collection by FIs on selected insurance products and encourage consumers to consider term insurance policies that meet their protection needs in a simple and cost-effective manner.
Complex Products Regime and Product Highlights Sheets (PHS)
The MAS has announced plans to initiate a holistic consultation on the Complex Products Regime, which is expected to touch on enhancements to disclosure requirements in PHS. The authority has also removed restrictions on securities lending and repurchase agreements, and expanded the criteria for Eligible Investment Products (EIPs) to include funds that invest in Systematic Internaliser (SI) instruments.
Overall, these changes aim to improve retail investor protection while increasing accessibility to more investment products.