INSURANCE (AMENDMENT) BILL

Order for Second Reading read.

3.15 p.m.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In the light of experience gained from the operation of the Insurance Act, which came into force on 1st January, 1967, certain amendments to the Act seem necessary and desirable for: -

(a) additional provisions to ensure that insurance companies conduct their business strictly in accordance with sound insurance principles;

(b) powers to the Insurance Commissioner to deal expeditiously with insurance companies that become insolvent or are likely to become insolvent; and

(c) more effective control and supervision of insurers and Lloyd's agents and brokers.

The main objectives of the Bill are those contained in clauses 6 and 10.

Clause 6 empowers the Commissioner to cancel the registration of an insurer under certain circumstances which include the failure of the insurer to effect satisfactory reinsurance arrangements, non-compliance with the Commissioner's order to make good any deficiency in its insurance fund, and failure to maintain a surplus of assets over liabilities of $1 million in respect of life business or general business, or $1 1/2 million in respect of both classes. The present Act gives the Commissioner the authority to register an insurance company, but it does not empower him to cancel the registration other than on the ground that the insurer itself, on account that it has ceased to carry on business, applies for cancellation.

Clause 10 empowers the Commissioner to issue such directions as he considers necessary to an insurer if he is satisfied that the affairs of the insurer are being conducted in a manner likely to be detrimental to the public interest or the interests of the policy owners or prejudicial to the interests of the insurer. Among the directions which the Commissioner may give include immediate suspension of business, taking all steps to avert future insolvency, making of reinsurance arrangements as the Commissioner specifies, removal of unsuitable persons from positions of authority in the insurance company, and prevention of unscrupulous and unfit persons being appointed as agents by the insurer.

The other salient clauses are as follows: -

Clause 2 will prevent firms and companies, particularly those carrying on business as insurance agents and brokers, from having misleading names containing the word "insurance" or any of its derivatives indicating the carrying on of business as an insurer, and thereby deceiving the public.

Clause 3 enables the Commissioner to impose conditions on registration of an insurer, and clause 4 enables the Commissioner to add to, vary or revoke the conditions, or impose new conditions.

Clause 5 provides for the annual renewal of registration by insurers and the payment of prescribed fees. This will place insurance companies on the same footing as banks and other financial institutions which are at present required to pay annual licence fees.

Clause 8 relates to agents and brokers for Lloyd's underwriters carrying on general insurance business in Singapore. It is intended to ensure that the intermediaries placing business with Lloyd's underwriters are financially sound. The provision requires persons who carry on business in Singapore as insurance agents for Lloyd's to have a surplus of assets over liabilities of not less than $100,000, and in the case of insurance brokers who place business at Lloyd's to furnish a certificate of solvency and effect a professional indemnity cover of not less than $500,000. This will bring insurance agents and brokers for Lloyd's in line with insurance companies which are required to have, inter alia, a surplus of assets over liabilities of not less than $1 million in order to be eligible to apply for registration to carry on life business or general business, or $1 1/2 million for both classes; a deposit of $300,000 with the Accountant-General for one class of business; and to satisfy the Commissioner that they will be able to conduct the business in accordance with sound insurance principles.

Clause 8 also provides for the payment by insurance agents and brokers for Lloyd's of such annual fees as may be prescribed.

Clause 12 will facilitate payment even where the policies exceed $10,000, provided that such payment does not exceed nine-tenths of the policy monies or $10,000 whichever is the lesser. At present insurers cannot make any cash payment where the policies exceed $10,000 without production of probate or letters of administration. The provision will save the dependants of the deceased unnecessary hardship and expedite payment of a claim where the value of the life policy exceeds $10,000.

The proposed amendments in this Amendment Bill are of a more urgent nature and will serve until a more comprehensive review of the Insurance Act, which will take some time to complete.

Mr Speaker, Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. -.[Mr Hon Sui Sen].

Bill considered in Committee; reported without amendment; read a Third time and passed.