SINGAPORE - Depositors and insurance policy owners will enjoy enhanced protection from Monday (April 1) if their bank, finance company or insurance company fails.
Changes to the Deposit Insurance (DI) and Policy Owners' Protection (PPF) Schemes, which are administered by the Singapore Deposit Insurance Corporation (SDIC), announced on Thursday (March 28), will protect bank deposits up to $75,000 per depositor and extend protection to personal assets used for commercial purposes.
The increase in deposit insurance coverage to $75,000 from next Monday will ensure that more than nine out of 10 depositors will have their savings fully protected if a bank or finance company fails. The existing limit of $50,000 per depositor was set in 2011.
A key enhancement to the PPF Scheme clarifies the scope of its coverage for general insurance policies, particularly at a time when the gig economy - where people are engaged in short-term contracts or freelance work - is on the rise and more people are using their own cars or homes to generate income.
With the latest revisions, motor and property insurance policies bought by an individual will be covered even if the car or property is used for commercial purposes.
There will also be caps, on a per policy basis, for own property damage motor claims ($50,000) under personal motor insurance policies and property damage claims under personal property insurance ($300,000).
The caps will fully cover more than 99 per cent of the claims based on those made over the past three years.
SDIC chief executive Denise Wong said: "The latest enhancements are necessary to keep the DI and PPF Schemes relevant to the changing needs of consumers and to provide adequate protection to depositors and policy owners in the unfortunate event that a scheme member fails."
If an insurer defaults, the SDIC will be required to pay out all outstanding claims as of the date of default.
The Monetary Authority of Singapore (MAS) will then decide on the next step forward for the failed insurer.
This could be a transfer of all or part of the failed insurance business to another insurer, running off existing insurance policies until expiry or terminating existing policies and returning a value to policy owners.
In the enhanced PPF Scheme, the MAS also has the flexibility to transfer or terminate the failed insurer's business if it is less cost effective to continue a run-off.
The SDIC was established in 2006 to administer the DI Scheme, which protects the core savings of small depositors in the event of a failure of retail banks and finance companies. The scheme protects deposits in savings, current and fixed deposit accounts that are held with full banks and finance companies.
It was appointed in 2011 to administer the PPF Scheme to protect policy owners of life insurance policies and certain general insurance policies in the event of failure of a life or general insurer.