Ex-NTUC CEO Tan Kin Lian urges to keep Income Insurance under local control

by  Tan Kin Lian (CEO of NTUC Income, 1977 to 2007)

There is an uproar over the plan by the majority shareholder to sell 51% of Income Insurance to a foreign entity. The control over this social enterprise will pass to foreign hands.

The policyholders of Income are worried that their premiums in the health and motor insurance will increase and they have to face the prospect of a lower return on their life insurance, which they have paid premiums for decades.

These policyholders number more than 1 million people and are mostly workers and the common people of Singapore.

Many public figures have also spoken against the abandonment of the social mission. Some have described this move as a betrayal of trust.

The majority shareholder said that the sale of the controlling stake to a foreign entity is necessary for Income to receive a large capital injection to improve its market position.

This reasoning did not convince many detractors. The new controlling shareholder did not undertake to inject the additional capital and is not familiar with the Singapore market.

I wish to add my perspective, based on my knowledge as CEO of NTUC Income for 30 years up to 1977.

It is possible for Income to continue its social mission of serving the workers and common people without the additional capital injection.

Already, Income had a leading market share in health insurance and motor insurance, and these sectors do not require additional capital backing. The existing capital is adequate.

Additional capital will be required to expand the sale of life insurance products that provides guaranteed benefits, which were the mainstay for Income. These products now require higher capital backing under new solvency regulations introduced by MAS in recent years.

There is an option for Income to focus on life insurance products that have less guarantees and require less capital backing. These are the investment linked products.

Income already has marketed these products for the past two decades. They can be marketed more actively, instead of the capital intensive guaranteed products.

As a business strategy, Income should rebuild its own sales force, rather than rely on bank distribution or independent financial advisers.

Income's strength lies in its own network through the trade unions and access to the local community. It can offer cheaper insurance products through lower sales and operating expenses.

Income can return to its roots and return to the strategies that made it strong in the past.

Income has the option to remain a social enterprise that is locally controlled. This option is the best for the past policyholders and for the future policyholders.

I hope that the majority shareholder keep Income under local control.