Speeches
 Published Date: 20 October 2008

Explanatory Brief: Insurance (Amendment) Bill 2008



1   The Minister for Trade & Industry and Deputy Chairman of the Monetary Authority of Singapore (MAS), Mr Lim Hng Kiang, today moved the Insurance (Amendment) Bill 2008 ("the Bill") for first reading in Parliament.  The Bill will be read a second time at the next available Parliamentary sitting.

OVERVIEW

2   The Bill seeks to incorporate into the Insurance Act (“IA”) a framework for nomination of beneficiaries in respect of insurance policy proceeds.  This framework will give policy owners clear, simple and economical means to decide on how the proceeds from their insurance policies should be distributed.  The Bill also aims to clarify the insurable interest requirement relating to life insurance policies.

NOMINATION OF BENEFICIARIES FRAMEWORK

3   Currently, the IA does not contain provisions for the nomination of beneficiaries.  Policy owners and insurers have thus had to rely on other statutes (in particular the Conveyancing and Law of Property Act and Intestate Succession Act) as well as on common law.  This has caused some confusion. 

4   In view of the above, the IA will be amended to introduce a new framework for the nomination of beneficiaries in respect of insurance policy proceeds.  The key features of the nomination framework are:

  • Policy owners will have a choice of whether or not to make nominations.  If they choose to nominate, they then have the option of making either a revocable or an irrevocable (trust) nomination.
  • With a revocable nomination, the policy owner will be able to unilaterally change his nomination at any time.  Any legal entity may be nominated as the beneficiary.  The policy proceeds under such a nomination will be paid to the policy owner while he is still alive, and to his beneficiaries thereafter.
  • An irrevocable nomination will create a statutory trust in favour of the beneficiaries.  This means the policy owner will lose all rights and control over the policy concerned.  In exchange, the policy proceeds will be protected from his creditors.  Only the policy owner’s spouse and/or children can be nominated as the beneficiaries in an irrevocable nomination.  All policy proceeds under such a nomination will be paid to the beneficiaries.
  • Only (i) life and (ii) accident and health policies with death benefits will be eligible for nomination.  
  • The nominations framework will apply to all insurers and policy owners.  However, it will not apply retrospectively, meaning that policies with existing nominations will continue to be subject to the legislation in-force at the time the nomination was made.    

INSURABLE INTEREST REQUIREMENT

5   The IA will be amended to allow insurance policies to be issued to trusts where insurable interest would have been recognised between two parties within the trust structure if not for the existence of the trust.