Is My Policy Affected By An Insurance Company Being Bought Over? (and other related questions)

Updated: Sep 29

A lil hullaboo was caused last year over Aviva's sale to SingLife - and a even bigger hullaboo was caused recently when a Financial Consultant posted the article in question onto Insurance Discussion SG (a Facebook Group) with a caption insinuating that consumers would suffer due to the acquisition.


When questioned on the rationale, the post mysteriously disappeared along with the stream of comments that included both gentle and harsher demands for elaboration, and even a threat to be reported to MAS. Life is rough. But yes, as suspected for a while now: AXA Singapore has made it's position clear to the rest of the country that they're looking to sell.


This was the article in reference.


History of (Insurance Company) Buyovers in Singapore


To be clear whether or not your policy is affected by an insurance company being bought over, we must first look at the history of such incidences in Singapore.


Chan KH of myIFA wrote a really good article about that here, 2 years ago.


Some slightly more prominent examples of such an incidence in Singapore include, but not limited to the following: 1) John Hancock - purchased by Manulife Singapore in 2003.

2) Asia Life - purchased by Tokio Marine and renamed Tokio Marine Life in 2007.

3) Aviva - purchased by Singlife in 2020. Probably going to be renamed something as well.


You can even include some of the minor acquisitions such as AXA acquiring (Wing on Life), or Prudential acquiring UOB Life. These were the slightly smaller acquisitions that almost went by entirely unnoticed by the general public.


In that sense, we've established that such incidences have a long history of occurence in Singapore, and that at least authorities governing have experience with such history.


This should be largely reassuring to current policyholders of AXA.


You see, the primary reason why people tend to worry about such acquisitions are because they fear certain things like:


a) The company dissolving entirely.

b) Their policies not producing the same results due to it being bought over, or having no assets there.


Chan's article utilized the participating fund structure to show consumers why this is the case, but rather than using the par fund as a source of assurance (assets)...


...I thought I'd try to address the source of fear (liability) instead.


What is CAR?


Financial Institutions (FIs) (e.g. bank/insurer/etc) available capital expressed as a percentage of it's risk-weighted credit exposures. (investopedia)


In English, it just means whether or not an insurance company you chose has a lot of assets to sell in the event of bankruptcy or something, so that nobody loses money.


These two points tell you two things:


Firstly, MAS has specific requirements that ensure that there is enough money for policyholders as a whole.


For people who have asked, what if your insurance company collapses and will my policy lapse: these are the kind of stringent requirements in place to ensure that doesn't happen.


That doesn't mean it's a guarantee but it's a tremendous amount of highly standard effort to ensure some measure of safety. Should the sale not have been successful, or if the reason for sale was the decline of business, measures have been ongoing to ensure that existing clients continue to enjoy Financial Benefits.


Secondly, contingency plans have to sent and approved by MAS in the event of such issue - meaning that regulations are put in place to ensure proper financial strength that reflects well on the country and leaves policyholders negatively unaffected. I don't speculate on AXA Singapore's business (and absolutely in no way am I inviting legal trouble) but AXA has had a rough couple of years in the insurance industry when it comes to manpower.


This much, I doubt anyone will force me to take down or ask me to prove. So it wouldn't be much of a stretch if some people thought that AXA Singapore would welcome being bought over due to such reasons.


Being bought over is not an uncommon option when a company faces financial trouble, after all - again, not insinuating that AXA is facing said trouble, but it would be a reasonable course of action and the purpose of the buyover would be to maintain benefits for its policyholders as approved by MAS.


S0...Is Your Policy Affected By A Buyover?


The short answer is 'doubtful', especially in relation to Financial Benefits. But there should still be some considerations.

Before continuing this part, please do bear in mind that when I use the word 'RISK' - I am using the Professional Term, not the English word we are used to.


This means that the risk can result in a positive or negative result.


Some articles that would clarify this point are a) High Risk IS High Reward - Here's Why (And other useful and factual takeaways.)


b) Dating My Girlfriend Taught Me the Sheer Severity of Forex Risk (The story of how I lose 5.2% every year.)


These articles can demonstrate a lot clearer how risk looks like to an investor/policyholder.


Two Risks you can consider for starters:


a) It could result in eventual higher pricing or lower pricing for subsequent products. [FInancial Risk]


In mergers and acquisitions overseas, its not uncommon for a wealthier firm to buyout a smaller firm for positional advantages or niche advantages.


Similarly, for startup culture, many startups hope to be bought over by much larger companies since they offer a less intimidating, more familiar and often occupy a space that larger companies didn't up to point of purchase.


Unfortunately, this also does tend to change up the culture of that company once it has been bought. Assets and liabilities are acquired, people are laid off or hired in excess...and this tends to bring the price of the product up or down very sharply while issues are being sorted or optimized.


Additionally, you also want to see which policies your buyover company had already left room for change/non-guaranteed areas - and keep an eye on those areas in the next few years.


Obviously, the company was bought over to improve on these areas, but they could easily decline as well: and there wouldn't be room to exit early if you weren't keeping your eye on the ball.


b) It could result in poorer or better overall service. [Service Risk]


It's not uncommon for company takeovers to see a lower standard of service for existing consumers, or even a total disregard for them. When CEO Ron Johnson took over the Department Store chain JC Penney, he completely changed the model of operations for sales. ...of course, it also failed after enormous backlash and he was subsequently fired, but you get the point. It could happen. On the flip side, the acquisition/merger could also result in a higher overall Financial Value - the boughtover company would have more resources for better service provided by the larger company, while the larger company would have a much better position to reach out to new consumers (as an example).


Conclusion


All in all, I was not the one who was asked to prove whether was a negative effect on policyholders, but this seemed like it might be fun to address.


Unfortunately, it took quite a lot of research (the MAS document is 900 pages and I obviously skimmed through) so it may not have come out quite right. Regardless of whether an insurance company is being bought over or not, Policyholders need to hold their consultants and company accountable for issues - at the very least, continually ensure that the value of their product is being delivered in the manner that was promised.


They should continue to determine the capacity of which they want to be served (level of service) and work with their consultants to achieve this, or find alternatives.


It is also good for policyholders to question the efficacy of the company when there are such buyovers involved. It is better than standing still.


Money Maverick


1,017 views0 comments