Q: What happens to the insurance coverage for my life, health costs, house or car policies?
Former president of the Singapore Insurance Institute Stanley Jeremiah says that if an insurance company goes bankrupt, it may not be able to fully pay future claims. If you make a claim, that claim will be dealt with together with claims from other policyholders.
Q: Can I get back the cash value of my policies?
There is no guarantee of getting the full cash value back. Cash value is different from coverage. It is the amount you receive when you surrender the policy and is part of an insurer's obligation to you.
Insurers in Singapore are required to maintain separate insurance funds for all policies issued here. These funds are segregated from the insurer's parent company and are held specifically for the purpose of meeting its obligations to policyholders.
When an insurance firm is wound up, MAS will therefore have recourse to these funds and assets in Singapore. A fairly complex process of distributing the funds to all those entitled to recover them will follow after determining the total assets against total liabilities.
There is some risk that the assets may not be enough to meet all demands to redeem policies for their cash value. But both MAS and AIA Singapore have said that AIA currently has enough capital and assets to meet all obligations to policyholders.
Q: If I have invested in an AIA investment-linked insurance product (ILP) or unit trust, can I get my investments back?
Yes. Alpha Financial Advisers' chief executive Arthur Lim says that fund managers don't own the assets but rather manage them for the customers, so the assets still belong to the unit holders. However, the value of the unit trusts may have fallen along with financial markets.
But he also warned that one possible scenario (in a bankruptcy) is that all assets invested in AIA ILPs and unit trusts may be temporarily frozen and any redemption allowed only later.