NTUC Income co-op to convert to a company amid stiffer competition in insurance industry

NTUC Income said the planned corporatisation will give it more flexibility to raise funds for its expansion here and in the region. ST PHOTO: NG SOR LUAN

SINGAPORE - Singapore's second-largest health insurer NTUC Income plans to convert its legal structure from a co-operative to a company governed by the Companies Act, to give it a firmer footing amid increased competition in the industry.

Income said the planned corporatisation will give it more flexibility to raise funds for its expansion here and in the region, and enable it to offer more competitive products to customers.

Current policyholders will continue to have the same coverage, benefits and terms after the proposed exercise, and no action is required from them in the process, the co-op said on Thursday (Jan 6).

National University of Singapore business professor Lawrence Loh said the move will allow Income to enter the fray of the largest players. He noted that the big three in the insurance scene here are Great Eastern, Prudential Singapore and AIA Singapore.

“The bigger size and scope will allow Income to cut its costs even more, thus lowering the premiums – to begin with, there are already pressures on the price levels of each offeror,” he said.

Income chief executive Andrew Yeo said Income will continue to cater to underserved customer segments such as the elderly, people with special needs, and migrant and gig workers.

"Income was initially set up to plug a social need to provide insurance for workers.... We continue to be steadfast on this purpose even as we embark on the corporatisation exercise," he added.

"More significantly, we will be even more responsive to changing customer needs via insurance solutions that speak to today's digital-first lifestyles and customers," he added.

Co-ops are membership-based enterprises that operate on the principles of self-help and mutual assistance. The members are also owners of the co-ops.

Currently, only trade unions and other co-ops can invest in Income as institutional members. The insurer was established in 1970 and is the only insurance co-op in Singapore.

Income has close to 700,000 IncomeShield policyholders, and ranks fourth in new business premiums from its health insurance business. The insurer serves more than two million policyholders in total. 

Income will transfer its existing insurance business and assets to the new company, Income Insurance Limited, and the co-op will then be liquidated. The proposed process will not change Income's organisational structure.

Mr Yeo told a media briefing that NTUC Enterprise will remain the majority shareholder of the new company, which will continue to be part of its network of organisations.

Income will organise an extraordinary general meeting to seek members’ approval for the proposed transfer and liquidation of the co-op. 

Existing institutional and ordinary members of Income who hold co-op shares will receive an equivalent number of shares in Income Insurance Limited, on a one-for-one basis, and their co-op shares will be cancelled.

Shareholders of the new company will have one vote per share. Under the new company, there will also no longer be a statutory cap on dividends and the new shares will not be capped at par value of $10 per share.

Income’s over 500,000 ordinary members will also receive a personal accident policy with a sum assured of $52,000 for three years.

Income added that employee roles, benefits and contracts will remain the same. Unionised employees will continue to be represented by the Singapore Insurance Employees' Union.

The exercise is expected to be completed in the second half of this year, subject to regulatory approvals and other customary closing conditions.

Income's plan to become a company comes amid significant shifts in its operating environment.

These include a mature domestic market, evolving regulatory expectations, and stiffer competition from insurers and tech players catering to digitally savvy consumers' demand for more diverse and targeted products.

Income chairman Ronald Ong said corporatisation will allow Income to scale its business quicker locally and regionally and invest in growth channels and markets, as well as digital capabilities to better compete with other insurers.

Income chief executive Andrew Yeo (left) and Income chairman Ronald Ong. PHOTO: NTUC INCOME

The home-grown insurer also recently ventured into Indonesia, Malaysia and Vietnam through partnerships with other insurers, brokers and insurtech players.

The partnerships are built on the insurance-as-a-service model, in which insurers deliver personalised insurance products to the customer in a simplified way while taking into account when and how they require them.

Mr Yeo added that the process will create more options for Income through the likes of mergers and acquisitions, joint ventures and initial public offerings.

Income on Thursday also pledged $100 million over 10 years to support causes that champion the low-income, including education for youth and children in need, the elderly and the environment.

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