In Wealth management, one of the major expenditure is on insurance policies to protect your downside. In the recent case for AXA, they are considering to sell of their Singapore’s business unit, this lead to some people questioning what will happen to their insurance policies when they sell away their business.
Why do they want to sell away their business?
Before we explore what will happen to our insurance policies after the companies sell that business away, we need to explore why would they even want to sell that business unit away if it is profitable.
It could be any of the following reasons:
- Business strategy has changed
- Raise funds to divest for peripheral operations (This is AXA’s cited reason)
- Concentrate on other business lines
- Focusing on other geographical markets
- Being offered a good price / Cashing out on business
The list goes on. Insurance companies also acts like normal businesses and they will probably consider the sale of that business unit when an opportunity arises.
Is this the first time it happened?
It happened various times in the past and I believe this will happen again in the future.
In 2003, John Hancock was bought over by Manulife.
Under going discussion since 2019, AVIVA is considering to sell it’s Singapore/Vietnam business unit.
Under going discussion in 2020, AXA is considering to sell Singapore’s business unit. (Special note: AXA mentioned they will not be selling their Singapore’s business unit in 28 Dec 2017)
You can see that there is a fair amount of transaction that took place in Singapore shores as well.
What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?
I think that’s the key to the topic today. I have contacted the Life Insurance Association of Singapore (LIA) to confirm above. This is their response. I will bold the information that is relevant to consumers.
All insurers are licensed and are regulated by the Monetary Authority of Singapore via the Insurance Act, and its subsidiary legislation, and regulations. Due to the long term nature of life insurance policies, there are provisions* in the Insurance Act which the licensed insurer has to comply with, in an event of a voluntary transfer of business or re-structure of business or business failure, to safeguard the interests of policyholders. Refer to *Part IIIAA on Transfer of Business and Shares, Restructuring of Licensed Insurer and Winding Up.
Business Transfer (Buy-Over)
Depending on the deal agreed between the two parties, the buying insurer will generally become responsible for all policies of the selling insurer. For the individual policyholder, his policy’s terms and benefits will be unchanged, and will continue to be honored by the buying insurer.
In short, suppose you hold a policy issued by Insurer A. Insurer A is sold to Insurer B, Insurer B will become your insurance company. Your policy, now under B, will be untouched and will be made good by B.
Your policy will still be in-force and be taken care of the new insurer. The next question will then be who will be taking care of your insurance policy from then on?
No one will care about your money as much as you do.
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Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.