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Commentary
Singapore is better served by an Income Insurance that puts people before profits, not profits before people, says former NTUC Income CEO Tan Suee Chieh on the Allianz deal.
Allianz plans to buy a majority stake in Singapore’s Income Insurance. (File photos: NTUC, Reuters/Gonzalo Fuentes)
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27 Jul 2024 06:00AM (Updated: 27 Jul 2024 12:05PM)
SINGAPORE: Selling 51 per cent of Income Insurance to German insurer Allianz just two years after corporatisation is an unexpected shock to many of those who value its social mission of serving the people of Singapore.
It is at variance with the narrative of 2022, when NTUC Income the insurance co-operative became Income Insurance the corporation.
There is no investment to improve Income Insurance’s capabilities, regional or technological – something emphasised in 2022, along with assurances that the shift in corporate structure would not fundamentally change the mission and values of NTUC Income but would better position it for future challenges and opportunities.
Instead, the deal appears to be a mechanism for NTUC Enterprise and other shareholders to cash out with substantial gains. NTUC Enterprise cashing out was not discussed or did not feature directly in the 2022 narrative.
The understanding at that time was that NTUC Enterprise would remain a majority shareholder in NTUC Income. And this understanding was communicated to me in writing by the Independent Directors of NTUC Income (copied to the Board of NTUC Income and NTUC Enterprise chairman Lim Boon Heng) in early 2022.
This understanding was breached in less than two years after Income Insurance was corporatised. With these as a backdrop, it is hard to regard any further commitments made seriously.
Income Insurance’s roots
Previously known as NTUC Income Insurance Co-operative, Insurance Income was founded in 1970 to provide essential, affordable insurance to underserved workers.
A co-operative is a membership-based enterprise that operates on the principles of self-help and mutual assistance.
It started with S$1.2 million, but grew to become a leading composite insurer. At the end of 2008, it had assets of about S$20 billion.
According to its website, it has 2 million policyholders.
In 2022, NTUC Income became a corporate entity, citing increasing challenges in the insurance sector. It said the move would allow it to achieve more flexibility and gain access to growth options to compete with other companies.
As a co-operative, it could only tap on capital from institutional members – all of which had to be co-operatives and trade unions. After becoming a corporate entity, it can receive capital from other types of institutional investors, such as Allianz.
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CONTRASTING ETHOS AND CULTURE
The prospect of a foreign entity owning a majority stake in Income Insurance is unsettling, considering the deep emotional ties Singaporeans have with NTUC Income and its spirit and values as a co-operative.
Income Insurance will be subject to the rigours of a shareholder profit-driven organisation, eventually losing its identity, its fundamental DNA as a social enterprise and its “People before Profits” philosophy.
While Allianz intends for Income Insurance to continue participating in national insurance programmes and uphold a commitment of S$100 million over 10 years to social and sustainability causes, they are not substitutes for a co-operative culture and DNA.
Allianz CEO Oliver Baete threw the differences into sharp relief, in a Business Times interview on Jul 22, using terms focused on shareholder value, such as wanting to “build a resoundingly profitable business” and worrying about “things that look great from a volume perspective and not so great from a value perspective”.
These statements are diametrically opposed to the values of NTUC Income from its inception in 1970 until 2017 (when I left the NTUC Group). We aimed to reach as many Singaporeans as possible to maximise social impact, motivated by making a difference in their lives, not by shareholder profits.
A STANDALONE SOCIAL ENTERPRISE MODEL CAN BE VIABLE
It is not necessary for socially motivated businesses to expand internationally, or in this case, be part of a multinational group. There had been a desire within NTUC Enterprise and NTUC Income during my time to expand for reasons of scale and talent acquisition.
The fact of the matter was NTUC Income’s cost efficiency was superior to that of multinationals operating in Singapore. There are many successful single-country co-operatives around the world that are smaller or of comparable size with NTUC Income.
Having been CEO of Prudential and NTUC Income, I can tell you there are no special advantages in belonging to a multinational or in having excess scale, in terms of serving customers better or faster and for achieving more competitive pricing.
I accept Income Insurance carries certain types of savings plans which consume a relatively high level of capital to underwrite. These products normally carry guarantees and are often opaque or complicated. These products tend to serve the needs of distributors rather than the needs of customers. In this segment, customers are better served by mutual funds or ETFs.
It can choose to withdraw from these product lines, especially when the “value for money” to customers metric is low relative to other forms of savings, relieving the insurer of heavy capital requirements.
If Income Insurance remains an independent social enterprise, there has to be a fundamental review of its product suites, if capital requirements are such a concern.
Allianz’s asset management capability is formidable, like so many others, and they are available for a fee. There is no need to sell Income Insurance to them to obtain access, nor to deliver good value or service, to grow and develop or to be more relevant or resilient.
We have many excellent role models of outstanding icons in Singapore. Income Insurance can be one without being part of a foreign international group.
Singapore has the talented people to run it as a social enterprise, especially if NTUC gives a clear context to maximise value for customers, as in decades past.
WHAT SINGAPOREANS NEED FROM INSURANCE COMPANIES
It is my considered view that Singapore does not need more listed, profit-motivated companies in the financial services industry. We need a diversity of business models to create a more resilient society. We need more businesses focused on customer value rather than shareholder profits.
Income Insurance should focus on health, term, and personal insurance products that are transparent, offer value for money, and have fair and efficient claim settlements. These include Income Shield health insurance, term insurance, personal accident, travel and motor insurance.
It can be a force for good in price moderation for these essential products, and a standard bearer in customer experience, transparency and fairness in claims settlement.
Culturally, many heartlanders find it easier dealing with Income Insurance than with any of the international financial company. This is because of confidence, trust and emotional resonance.
The sale of Income Insurance to Allianz raises significant concerns about its future.
In my opinion, it is critical to maintain the social mission and values that have guided it since its inception. We must ensure that the interests of all stakeholders, including minority and early investors, are protected and that commitments and assurances made during the injection of NTUC Enterprise’s capital into NTUC Income between 2015 and 2020 and corporatisation in 2022 are honoured.
More importantly, Income Insurance must remain dedicated to serving the people of Singapore and not the shareholders of Allianz Europe BV, putting people before profits – not the other way round.
Tan Suee Chieh is the former CEO of Prudential Singapore (1994-1999) and NTUC Income (2007-2013), and former Group CEO of NTUC Enterprise (2013-2017).