BCP 6th Edition Ebook (Version 1.1)

Basic Insurance
CONCEPTS &
PRINCIPLES
6TH EDITION
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BASIC INSURANCE CONCEPTS
& PRINCIPLES
Sixth Edition – July 2020
© 2020 by Singapore College of Insurance Limited. All rights reserved.
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used in this Study Guide are fictitious and have no relationship to any persons living or dead.
First Edition published in 2002.

Second Edition published in 2007.
Third Edition published in 2010.
Third Edition reprinted in April 2012.
Fourth Edition published in April 2013.
Fifth Edition published in October 2016.
PREFACE
Since 12 June 2002, the Singapore College of Insurance (SCI) has introduced a
modular approach to the Certification in General Insurance (CGI). The new CGI
qualification framework comprises three modules, namely Basic Insurance
Concepts & Principles (BCP), Personal General Insurance (PGI), and Commercial
General Insurance (ComGl).
The Personal General Insurance Certification, which comprises BCP and PGI, is
applicable to insurance practitioners, who provide advice and / or sell personal
general insurance products, to possess the requisite basic technical knowledge
to be able to perform their jobs competently.
Likewise, the Commercial General Insurance Certification, which comprises

BCP and ComGI, is applicable to insurance practitioners, who provide advice
and/or sell commercial general insurance products, to possess the requisite
basic technical knowledge to be able to perform their jobs competently.
A candidate who has passed the BCP, PGI and ComGI examinations is eligible
to use the designation Cert SCI (General Insurance). These three modules will
give the candidate a good head start towards the SCI Diploma / Advanced
Diploma in General Insurance and Risk Management (DGIRM / ADGIRM)
qualifications.
In particular, this BCP module provides a fundamental understanding of the

structure of the Singapore insurance market, insurance concepts and principles,
law of agency and contract, insurance documents, claims, reinsurance, as well
as ethics and professionalism.
Candidates are strongly encouraged to study using the e-book of this Study
Guide as the electronic version will come with a mock examination trial, without
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an additional fee. The introduction of the e-Book is to ensure that candidates
will always be able to study from the latest version, without having to read
through the Supplementary Notes. This is to leverage on the advances in
technology and the ubiquitous use of mobile devices today, to provide
candidates with greater flexibility and convenience to study, even while on the
move. Candidates who opt for the hard copy Study Guides will have to check
regularly on the SCI Website and print their own updates, before they sit for
their examinations. Our aim is also to help to save the environment.
While every effort has been made to ensure that the Study Guide materials are
accurate and up-to-date at the time of publishing, some information may
become outdated before the latest version is released. Hence candidates are
advised to check the “Version Control Record” found at the end of this Study
Guide to ensure that they have the correct version of the Study Guide. For
examination purposes, the Singapore College of Insurance adopts the policy of
testing only those concepts and topics that are found in the latest version of the
Study Guide.
July 2020
ii Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

ACKNOWLEDGEMENT
In writing the First Edition of this Study Guide, the Singapore College of
Insurance is indebted to the Training and Education Committee of General
Insurance Association of Singapore, headed by Mrs Violet Chia and comprising
Mr Ronald Cheng, Ms Helen Fong, Mr Quek Keng Seng and Mr Abdullah Rajib.
In particular, we want to thank Mr Abdullah Rajib for providing us with very
detailed comments and helping us through the amendments. Our special
thanks also go to the rest of the Committee members for taking their time to
review our drafts. We are also grateful to Mr Stanley Jeremiah for reviewing
one of the chapters. We would also like to express our gratitude to the general
insurance companies for extending us samples of their insurance documents.
For the Second Edition, we are grateful to Mr Richard Tan for his valuable
feedback and comments. For the Third Edition, we would like to thank Mr Perry
Tan for helping us to review Chapters 1 and 4 of this Study Guide.
For the Fourth Edition of this Study Guide, we wish to thank Mr Jeffrey Yeo for
his review on Chapter 1, and also Mr Perry Tan for his review on Chapters 2 to
8.
We would also like to thank Mr Stephen Tai for allowing us to adapt his write-
up on Risk Surveyors, as well as Ms Wee Choo Neo for giving us her permission
to adapt her write-up on Reinsurance Brokers.
The Fifth Edition of this Study Guide was updated in house at SCI.
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As for this Sixth Edition of this Study Guide, the contents were updated in house
at SCI. We wish to thank Mr Ed Gooda for reviewing all the chapters of this
Study Guide.
Karine Kam
Chief Executive
Singapore College of Insurance
July 2020
iv Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

Table of Contents
Preface i
Acknowledgement iii
Chapter 1 Structure Of The Insurance Market 1

Chapter Outline
Learning Points
1. Introduction
2. Structure Of The Singapore Insurance Market
3. The Intermediaries
4. The Sellers
5. Distribution Channels
6. Direct Marketing
7. Insurance Trade Associations
8. Other Insurance Bodies
9. Rating Agencies
10. Insurance Regulation & Instruments Issued By MAS
11. Nomination Of Beneficiaries For Personal Accident
& Health Insurance Policies
12. Deposit Insurance And Policy Owners’ Protection
Scheme Act 2011
13. Premium Payment Framework
Appendix 1A – Key Differences Between General
Insurance Agent & Insurance Broker
Appendix 1B – Premium Payment Framework
Chapter 2 Risks & Insurance 31

Chapter Outline
Learning Points
1.
2.
Introduction
Types Of Risks
Contents
3. Characteristics Of Insurable Risks
4. Perils & Hazards
5. Methods Of Handling Risks
6. Attitude Towards Risks
7. Benefits Of Insurance
8. Classification Of General Insurance Products
9. Individual & Group Insurance
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Basic Insurance Concepts & Principles
Chapter 3 Principles Of Insurance 55

Chapter Outline
Learning Points
1. Introduction
2. Insurable Interest
3. Utmost Good Faith
4. Principle Of Indemnity
5. Subrogation
6. Contribution
7. Proximate Cause
Chapter 4 Law Of Contract And Agency 83

Chapter Outline
Learning Points
1. Introduction
2. Contracts
3. Elements Of A Valid Contract
4. Vitiating Factors
5. Law Of Agency
6. Creation Of An Agency
7. Duties & Rights Of An Agent
8. Agents’ Authority
9. Termination Of Agency
Chapter 5 Insurance Documents 99

Chapter Outline
Learning Points
1. Introduction
Contents
2. Proposal Form
3. Cover Note
4. Certificate Of Insurance
5. Insurance Policy
6. Endorsements
7. Renewal Notice Or Expiry Notice
8. Renewal Certificate
9. Claim Form
Appendix 5A – Sample Proposal Form For Motor Insurance
Appendix 5B – Sample Proposal Form For Public Liability
Insurance
Appendix 5C – Sample Certificate Of Insurance (Motor
Insurance)
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Table of Contents
Appendix 5D – Sample Certificate Of Insurance (Work Injury

Compensation Insurance)
Appendix 5E – Sample Personal Accident Insurance Policy
Document
Appendix 5F – Sample Travel Insurance Policy
Chapter 6 Claims 151

Chapter Outline
Learning Points
1. Introduction
2. General Claims Procedures
3. Onus Of Proof
4. Duties Of The Insured After A Loss
5. Use Of Loss Adjusters & Other Claims Professionals
6. Average & Other Claims Conditions
7. Insurance Fraud
8. Claim Settlement Options
9. Reinstatement Of Sum Insured
10. Rights Of The Insurer After A Claim
11. Claim Disputes
Appendix 6A – Sample Property/Liability Claim Form
Chapter 7 Reinsurance And Co-Insurance 173

Chapter Outline
Learning Points
1. Introduction
2. Objectives Of Reinsurance
3.
4.
5.
6.
Methods Of Reinsurance
Co-Insurance
Settlement Of Claims Under Co-Insurance
Comparison Between Reinsurance & Co-Insurance
Contents
Chapter 8 Ethics, Professionalism, Data Protection And 187
Cyber Hygiene
Chapter Outline
Learning Points
1. What Is Ethics?
2. Ethics Is Not Compliance
3. Why Ethics Is Important To The Insurance Industry
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4. General Ethical Principles

5. Courage
6. Benefits Of Ethical Behaviour
7. Unethical Acts
8. Professionalism
9. Requirements For A Profession
10. Responsibilities Of Professionals
11. The Singapore General Insurance Code Of Practice
12. Code Of Practice For Agents
13. Personal Data Protection And Cyber Hygiene
Appendix 8A - The Singapore General Insurance Code Of
Practice
Appendix 8B – Data Loss Protection Guidelines For Insurance
Agent
Appendix 8C – FAQ On Data Loss Protection Guidelines
VERSION CONTROL RECORD

Contents
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Table of Contents
Contents
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1. Structure Of The Insurance Market
CHAPTER 1
STRUCTURE OF THE INSURANCE MARKET
CHAPTER OUTLINE
1. Introduction
2. Structure Of The Singapore Insurance Market
3. The Intermediaries
4. The Sellers
5. Distribution Channels
6. Direct Marketing
7. Insurance Trade Associations
8. Other Insurance Bodies
9. Rating Agencies
10. Insurance Regulation & Instruments Issued By MAS
11. Nomination Of Beneficiaries For Personal Accident & Health Insurance Policies
12. Deposit Insurance And Policy Owners’ Protection Scheme Act 2011
13. Premium Payment Framework
Appendix 1A – Key Differences Between General Insurance Agent & Insurance Broker
Appendix 1B – Premium Payment Framework
LEARNING POINTS
After studying this chapter, you should be able to:
 understand the structure of the Singapore general insurance and reinsurance
markets
 know who are the buyers, intermediaries and sellers in the general insurance and
reinsurance markets
 know what is Direct Purchase Insurance (DPI)
 understand which are the major insurance trade associations and other relevant
bodies in the Singapore insurance industry, including their main roles and objectives
 understand the role of rating agencies
 understand the role of the Monetary Authority of Singapore (MAS) in insurance
regulation
 list the classification of instruments issued by MAS and understand their differences
 know the two options available to policyholders under the nomination of beneficiaries
for Personal Accident Insurance and Health Insurance policies
 describe the purpose of the Policy Owners’ Protection Scheme relating to general
insurance policies
 understand the Premium Payment Framework jointly issued by the General Insurance
Association of Singapore (GIA) and Singapore Insurance Brokers’ Association (SIBA)
 recognise the key differences between an insurance agent and a general insurance
broker
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1. INTRODUCTION
1.1 Like any other market, the insurance market comprises:
 buyers;
 sellers; and
 intermediaries (or middlemen).
1.2 Buyers are those who need insurance, e.g. the general public, government and
commercial enterprises. In fact, the direct insurers and captive insurers
themselves are buyers, when they seek reinsurance from the reinsurers.
1.3 Sellers comprise the insurance companies and reinsurance companies.
1.4 Intermediaries refer to insurance agents and brokers, including reinsurance

brokers. Under Section 1A of the Insurance Act (Cap. 142), “insurance
intermediary” “means a person who, as an agent for one or more insurers or as
an agent for insureds or intending insureds, arranges contracts of insurance in
Singapore, and includes an insurance agent or an insurance broker.”
2. STRUCTURE OF THE SINGAPORE INSURANCE MARKET
2.1 The structure of the general insurance and reinsurance markets in Singapore is
shown below in Table 1.1 and Table 1.2 respectively.
Table 1.1: Structure Of General Insurance Market In Singapore

Buyers (Insured) Intermediaries Sellers
 Individuals  Agents (Including  Direct Insurers
 Commercial Enterprises Trade Specific  Captive Insurers
 Government Agents)  Co-operatives
 Brokers  Marine Mutuals
 Lloyd’s Service
Companies
Table 1.2: Structure Of Reinsurance Market In Singapore

Buyers (Insured) Intermediaries Sellers
 Insurance Companies  Reinsurance  Reinsurance
 Captive Insurance Brokers Companies
Companies
3. THE INTERMEDIARIES
3.1 The role of an intermediary is to bring buyers and sellers together. An

intermediary is a party who is authorised by a second party, called the
“principal”, to bring that principal into a contractual relationship with another
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person, called a “third party”.
3.2 In Singapore, the main types of intermediaries in the general insurance and
reinsurance sectors are as follows:
 Insurance Agents (including Trade Specific Agents); Insurance
Agent
 Insurance Brokers; and

 Reinsurance Brokers.
A. Insurance Agents
3.3 Generally, an insurance agent is a person who is or has been carrying on

insurance business in Singapore as an agent for one or more insurers, and
includes an agent of a foreign insurer carrying on insurance business in
Singapore under a foreign insurer scheme under Part IIA of the Insurance Act
(Cap.142). Agents are remunerated by the insurers in the form of commission
(usually as a percentage of the premium in respect of the policy sold, which may
include profit-sharing commission, depending on business volume and
profitability) as specified in their Agency Agreements.
A1. Classification of Agent Types
(a) Individual agents (either as cash or credit agents). Cash agents refer to
agents who have no credit terms with their principals, while credit agents
must have agreed with their principals on the credit period and have it
stated in their Agency Agreement.
Effective January 2020, the General Insurance Agents’ Registration

Regulations (GIARR) were amended with the requirement for credit agents
to maintain principal’s accounts being removed. All premium payments
other than cash must be made payable only to the Agent’s Principal and
cheque payments must be handed by the Agent to the Agent’s Principal
promptly.
As mentioned above, it is no longer required for credit agents to maintain

a principal’s account with each principal. However, credit agents who had
principal’s accounts under the GIARR before 2020 can continue this
arrangement with the agreement of their principals.
(b) Corporate agents (generally known as agencies), namely sole

proprietorships, partnerships, limited liability partnerships and companies
registered with The Accounting and Corporate Regulatory Authority
(ACRA), as well as societies registered with the Registry of Societies, and
co-operative societies registered with the Registry of Co-operative
Societies.
(c) Trade Specific Agents (TSAs). TSAs are engaged in a business of which
insurance is not their core business, and they usually sell only one type of

insurance product (e.g. travel agents selling Travel Insurance) in the

course of their core business activities.
3.4 The various types of TSAs engaging in insurance sales and/or advisory services
are listed below:
 credit card providers;
 electrical and electronic retailers;
 freight forwarders;
 foreign domestic worker agencies;
 foreign worker agencies;
 mobile device dealers;
 motor dealers; and
 travel agencies.
A2. Nominee Agents
3.5 A nominee agent means a nominee who acts for an agent and such agent is
registered with the Agents’ Registration Board (ARB) in accordance with the
mandatory requirements of the Notice No.: MAS 211.
3.6 The requirement for corporate agents to transact through its nominees will be
codified in the revised GIARR effective January 2020. An Agent (other than an
Agent who is an individual) must only solicit general insurance business or
engage in general insurance selling or advisory activities through its Nominee
Agents.
B. Insurance Brokers
3.7 A person who carries on business as any type of insurance broker in Singapore
is required to be registered with the Monetary Authority of Singapore (MAS) as
that type of insurance broker, unless he is exempted from registration under
Section 35ZN of the Insurance Act (Cap. 142).
3.8 An insurance broker is one who advises his clients (insurance buyers) on their
insurance needs, negotiates and arranges insurance on their behalf with the
insurers, exercising professional care and skill in so doing. An insurance broker
is usually appointed by a corporate client through an official letter of
appointment.
3.9 Unlike an agent, a broker is free to place his business with any number of
general insurers. The broker’s duty is to provide the client with independent
expert advice on a wide range of insurance matters. These include identifying
the best type of cover to meet the client’s insurance needs and providing
assistance when an insured makes a claim.
3.10 The broker has to exercise due care and diligence in understanding and

satisfying the insurance requirements of the client and take all reasonable steps
to act fairly in the interest of the client. Although insurance buyers may deal with
insurers directly, the vast majority of commercial businesses (i.e insurance
covers bought by companies) are usually transacted through licensed brokers.
3.11 The complexity of many commercial risks and the large premiums involved
often render a broker’s service invaluable to the insured. As mentioned earlier,
insurance agents are remunerated by the insurers in the form of commission.
On the other hand, brokers receive brokerage from the insurers with whom the
brokers place their clients’ insurance business. Some brokers also charge fees
for professional advice and service rendered to their clients.
3.12 As required under Section 35Y of the Insurance Act (Cap. 142), an insurance
broking company, apart from meeting the minimum prescribed paid-up share
capital requirement, must have in force a Professional Indemnity Insurance
policy under which a person is indemnified in respect of the liabilities arising
out of or in the course of his business as an insurance broker. Details are
specified in the Insurance (Intermediaries) Regulations.
B1. Classification Of Insurance Brokers
3.13 Currently, insurance brokers in Singapore are generally classified under the
following categories:
 direct insurance broker, to carry on general business and long-term accident
and health policies;
 general reinsurance broker, to carry on general reinsurance broking business;
 life reinsurance broker, to carry on life reinsurance business; or
 insurance broker, to carry on any combination of the above.
3.14 Key differences between a general insurance agent and a broker are highlighted
in Appendix 1A of this chapter.
C. Lloyd’s Brokers
3.15 Lloyd’s (for more information on Lloyd’s, refer to the later section of this
chapter) underwriters do not generally deal directly with policyholders.
Insurance business is generally brought in by brokers that have been accredited
(by Lloyd’s) to place insurance risks at Lloyd's. Hence, if a policyholder wishes
to insure its risks at Lloyd’s, the risks must be placed through a Lloyd’s broker,
which will have to satisfy the Committee of Lloyd’s as to its experience, integrity
and financial standing in the insurance market. A Lloyd’s broker may also place
business with other insurance companies in the insurance market.
D. Reinsurance Brokers
3.16 Reinsurance brokers are intermediaries and consultants to insurance companies

(insurers) and reinsurance companies (reinsurers). They advise insurers and

reinsurers on the risk transfer aspects of their insurance or reinsurance

business. Reinsurance brokers also help their clients in the design and
structuring of reinsurance placed with reinsurers. The process of providing
reinsurance solutions usually involves a wide range of activities, from analysing
the clients’ insurance portfolios to seeking out reinsurance markets, that are able
to provide the desired capacity or protection at competitive pricing and
attractive terms.
4. THE SELLERS
Marine
Reinsurers Captive
Insurers Mutuals
Direct Lloyd’s of
London Co-operatives
Insurers
4.1 The sellers of insurance are:

 Direct Insurers
 Reinsurers
 Lloyd’s of London
 Captive Insurers
 Co-operatives
 Marine Mutuals
A. Direct Insurers
4.2 These are insurance companies that exist primarily to provide insurance
protection to insurance buyers in Singapore.
4.3 Both domestic and foreign direct insurers do business in Singapore. Most
foreign insurers are British, European or American companies. Several Asian
insurers also operate in this country. All insurance companies operating in
Singapore must be licensed under the Insurance Act (Cap. 142) and are
regulated and supervised by the MAS. All insurance companies are classified
according to the class of insurance business that they underwrite – general or
life insurance. Some insurance companies underwrite and sell both general and
life insurance products, and they are known as composite insurers.
B. Reinsurers
4.4 These are companies who act as insurers to direct insurers. They are licensed
in Singapore and are restricted to carrying out life reinsurance and/or general
reinsurance business in Singapore. They are not permitted to write direct
business and are only allowed to assume all, or part of the insurance or
reinsurance risks written by another insurer. They do not deal with the general
public; instead, they liaise with the direct insurers directly or through

reinsurance intermediaries (reinsurance brokers).
4.5 Under the Insurance (Authorised Reinsurers) Regulations of the Insurance Act
(Cap. 142), overseas reinsurers may apply for authorisation in respect of life
and/or general reinsurance business. Once authorised, they are allowed to
solicit business and collect premiums from insurers in Singapore.
4.6 The insurer that transfers the risks is known as the ceding company, the cedant
or the reinsured. Reinsurers also transfer some of their risks to other reinsurers.
This process of risk transfer is known as retrocession. The assuming reinsurer
is called the retrocessionaire, while the ceding reinsurer is called the
retrocedent.
C. Lloyd’s Of London
4.7 Lloyd’s is not a single insurance company. Instead, it is a specialist insurance

market formed in 1686 and governed by an Act of Parliament in England (called
the Lloyd’s Act 1871). Lloyd’s does not write insurance business, but merely
provides the infrastructure, including the premises and facilities for its
“underwriting” members to conduct insurance business.
C1. How Does Lloyd’s Operate?
4.8 The insurance business at Lloyd’s is transacted by thousands of underwriting

members, also known as names. Until 1994, only individual members were
admitted as underwriting members with unlimited liability. This meant that all
members were personally liable for their share of the risks accepted to the full
extent of their personal wealth. From January 1994, corporate capital was
introduced, so that the resources of corporate investors, such as investment
institutions, specialist investors, international insurance companies, would help
to strengthen the capital base of Lloyd’s. Unlike individual underwriting
members, corporate members have limited liability in respect of the business
written. The majority of the underwriting capacity at Lloyd’s today is provided
by these corporate members.
4.9 The underwriting members are grouped into syndicates, with each syndicate
comprising a few to several hundred members, specialising in a particular class
or classes of business. The risks underwritten at Lloyd’s can broadly be grouped
into the main classes of insurance business, including accident & health,
aviation, casualty, energy, marine, motor, property, and reinsurance.
4.10 The underwriting syndicates are in turn managed by managing agents, which
are companies set up to manage one or more syndicates, on behalf of the
members (or capital providers). The managing agent employs the underwriting
staff and handles the day-to-day running of a syndicate’s infrastructure and
operations.

D. Captive Insurers
4.11 Captive insurers are licensed in Singapore to insure principally the risks of their
parents and related companies as defined under Section 6 of the Companies Act
(Cap. 50). Normally, they are subsidiaries of, or wholly owned by large
multinational corporations, whereby the parent and the related companies will
first purchase insurance covers from their own captive insurers, who then
transfer part of the risks to the reinsurers.
E. Co-operatives
4.12 A co-operative can also be set up to provide the insurance needs of its members.
All policyholders of the insurance co-operative are the members and co-owners
of the company. Interests of the co-operative’s policyholders are placed
foremost, instead of maximising profits for shareholders. A portion of the
company’s operating profits is, from time to time, distributed to its
policyholders in the form of policy dividends.
4.13 In Singapore, there is currently one such insurance co-operative, namely NTUC
Income Insurance Co-operative Limited, which is also a composite insurer,
transacting both life and general insurance business.
F. Marine Mutuals
4.14 It is common for shipowners or other maritime operators to come together to

form an insurance mutual that provides various types of insurance, including
purchasing reinsurance protection, to cover the risks of the group. These
insurance mutuals are sometimes referred to as marine mutuals. These mutuals
are typically called “Clubs”; for example, Protection and Indemnity Clubs (P&I
Clubs), Hull Clubs and War Risks Clubs. These Clubs are differentiated by the
types of cover that they provide. P&I Clubs are essentially associations of
shipowners that agree to insure each other for third-party liabilities on an
indemnity basis.
5. DISTRIBUTION CHANNELS
5.1 Apart from using intermediaries, such as agents and brokers, insurers are using
alternative distribution channels to market their products, as a means to balance
the needs of different groups of consumers against the cost of distributing their
products and services.
A. Bancassurance
5.2 Banks, including finance companies, with their huge database of customers, sell
insurance through a network of branches. Almost all of the local banks in
Singapore own or have partnership agreements with insurance companies.
5.3 Bancassurance is the term used to describe the partnership or relationship

between a bank and an insurance company, whereby the insurance company

uses the bank sales channel in order to distribute insurance products, most of
which are personal lines.
B. Online Internet Portals
5.4 In recent years, Singapore has seen the entry of direct-to-consumer insurance
companies, such as Direct Asia Insurance selling products such as individual
motor, motorcycle and travel insurances. Its business model entails direct
underwriting via an online platform, supported by a fully staffed call or contact
centre (operating 24 hours, every day of the week) and a full-fledged claims
department.
5.5 Other alternative distribution channels used by some insurers for certain
personal lines are credit card providers, leading retailers (particularly those
selling electrical and electronic items, and mobile devices), post offices, self-
service terminals, such as AXS Stations and iNETS Kiosks, and mobile phone
apps.
C. Web Aggregators
5.6 A web aggregator is intended as a way to leverage on technology to make it

easier for consumers to compare products. Web aggregators compile and
provide information about insurance policies of various insurance companies
on a website. Web aggregators are different from other distribution channels,
as they are designed to be a self-help tool for the customers.
5.7 There are also web aggregators for general insurance products, such as
“Gobear”. For example, personal lines, such as Health Insurance, Travel
Insurance and Private Motor Car Insurance are usually displayed and promoted
by the web aggregators. These web aggregators tend to be personal insurance
comparison sites designed to make it easier for customers to shop for and
compare selected insurers’ quotes and terms for Motor, Travel, Health
Insurance, etc. Certain web aggregators work directly with the major insurers
and intermediaries in Singapore, so that products can be easily bought at one
place.
6. DIRECT MARKETING
6.1 Through the use of technology and online platforms, insurers can sell their
products directly to consumers instead of distributing through agents or
brokers.
6.2 Intending insureds self-declare the required information in the simplified online
proposal forms. Insurance product quotations and policy wordings are made
available online. Payment of premiums is instant, made easy through online
payment via credit cards.

6.3 Insurers also periodically send out promotional product brochures (direct
mailers) to existing policyholders without servicing agents. Telemarketers from
call centres owned or appointed by insurers also call customers to advise and
market personal insurance products, as well as help to file claims on behalf of
clients.
7. INSURANCE TRADE ASSOCIATIONS
7.1 In Singapore, the main insurance trade associations are:

 General Insurance Association of Singapore (GIA);
 Life Insurance Association of Singapore (LIA);
 Singapore Insurance Brokers’ Association (SIBA);
 Singapore Reinsurers’ Association (SRA);
 Reinsurance Brokers’ Association (Singapore) (RBAS);
 Loss Adjusters’ Association (Singapore) (LAAS);
 Association of Financial Advisers (Singapore) [AFA(S)];
 Insurance and Financial Practitioners Association of Singapore (IFPAS);
 Association Of Singapore Insurance Agents (ASIA); and the
 Insurance Law Association, Singapore (ILAS).
7.2 Associations act as forums for members to discuss and exchange views on
matters of common interest, and to make representations to the relevant
authorities, where necessary. A brief description of a few of these associations
and their objectives is given below:
A. General Insurance Association Of Singapore (GIA)
7.3 The General Insurance Association of Singapore (GIA) represents general

insurance companies in Singapore. The GIA's role is to be active in the business
community representing the interests of its member companies, as well as to
help to identify emerging trends and respond to issues affecting the general
insurance industry. It seeks to promote the overall growth and development of
the general insurance sector in Singapore.
7.4 The GIA acts as the regulatory body for general insurance agents in Singapore
through the ARB. As specified in the Notice No: MAS 211, ARB is defined as the
board set up by the GIA to register any general insurance agent acting for one
or more licensed insurers carrying on general business.
7.5 The ARB acts as a sanctioning body for agents and nominee agents who fail to
comply with CPD requirements or breach the regulations or other misconduct
under its purview. It is also the standard-setting body for providing best
practices and guidelines to the Ordinary Members of the GIA on agency
management.

7.6 ARB is also the Industry Information Repository Body (maintain such IT
infrastructure platform as GIA may consider necessary to serve as a database to
store and process information relating to Agents and Nominee Agents) and
Auditing Body i.e. it shall conduct ad-hoc audits on the Agents to assist insurers
in confirming the compliance of their Agents to the mandatory requirements of
the Insurance Act , the MAS Notice, and the GIARR.
7.7 In addition, the GIA has been involved in many projects and events on consumer
education, creating industry awareness and developing talent in the industry.
B. Life Insurance Association Of Singapore (LIA)
7.8 The Life Insurance Association of Singapore (LIA) is a trade association

comprising of life insurance product providers and life reinsurance providers
based in Singapore and licensed by the MAS.
C. Singapore Insurance Brokers’ Association (SIBA)
7.9 The Singapore Insurance Brokers’ Association (SIBA) is a trade association

comprising international and Singapore insurance brokers. It sets minimum
standards of education and experience, and also ensures that insurance brokers
undertake ongoing development and training, to maintain and enhance their
capabilities and professionalism.
D. Singapore Reinsurers’ Association (SRA)
7.10 The Singapore Reinsurers’ Association (SRA) is a trade association comprising

all major non-life reinsurance companies being Ordinary members, and several
major reinsurance broking firms and regional reinsurers being Associate
members.
7.11 The key objectives of the Singapore Reinsurers’ Association (SRA) are:
 to represent members in matters affecting their business interests;
 to facilitate dialogue and encourage healthy market competition;
 to promote professional excellence through education and training;
 to foster strong social bonds within the industry and beyond; and
 to advance the reinsurance industry in Singapore and its diverse career
opportunities
E. Reinsurance Brokers’ Association (Singapore) (RBAS)
7.12 The Reinsurance Brokers’ Association (Singapore) (RBAS) represents the

professional body for reinsurance brokers licensed in Singapore.
7.13 RBAS requires its membership to conform to its rules and regulations regarding
accounting, compliance, contract certainty, ethics, professional indemnity
coverage and code of conduct.

8. OTHER INSURANCE BODIES
8.1 Apart from the market associations, there are other insurance bodies that exist
in Singapore. These include:
 Financial Industry Disputes Resolution Centre Ltd (FIDReC)
 Singapore College Of Insurance (SCI)
 Singapore Insurance Institute (SII)
A. Financial Industry Disputes Resolution Centre Ltd (FIDReC)
8.2 The Financial Industry Disputes Resolution Centre Ltd (FIDReC) is an

independent and impartial institution specialising in the resolution of disputes
between financial institutions and consumers.
8.3 FIDReC provides an affordable and accessible one-stop avenue for consumers
to resolve their disputes with financial institutions. It also streamlines the
dispute resolution processes across the entire financial sector of Singapore.
FIDReC’s services are available to all consumers who are individuals or sole
proprietors. It does not handle complaints on commercial decisions, pricing
policies, as well as complaints on other policies, such as interest
rates and fees.
B. Singapore College of Insurance (SCI)
8.4 The Singapore College of Insurance (SCI) is a not-for-profit professional training

and education body set up in 1974, as part of Singapore's efforts to develop as
a financial hub. Since its inception, the SCI has remained focused in its efforts
to upgrade the technical expertise of insurance and financial services
practitioners, and to provide them with professional advancement
opportunities, through its series of practice-oriented programmes and
internationally accredited qualifications. Since the late 1970s, the SCI has also
played the role of an industry examination body to conduct regulatory
examinations for those wishing to join the financial advisory, life and general
insurance industries. The SCI also publishes a wide range of life and general
insurance and financial planning textbooks to address the education and
training needs of the industry. In recent years, the SCI has also expanded its role
to include talent development programmes that have succeeded in attracting
and placing numerous fresh tertiary talent into the various functions in the
industry.
C. Singapore Insurance Institute (SII)
8.5 The Singapore Insurance Institute (SII) is a professional membership body for
professionals in insurance and financial services. The SII organises talks,
discussion groups and other activities and events to upgrade the
professionalism of its members, as well as social and sports activities to
promote interactions among its members. All SII members are required to
observe a Code of Conduct. SII may exercise its disciplinary powers to

reprimand, suspend or cancel the membership of members who violate the

Code.
9. RATING AGENCIES
9.1 Rating agencies play an increasingly important role in the capital markets today,
by providing an independent assessment and opinion on the overall financial
capacity or credit worthiness of financial institutions that issue a broad range of
capital market instruments, such as debt obligations, securities, etc. These
ratings typically categorise the financial institutions into different bands
represented by letter grades (e.g. AAA, AA, A, BBB, BB, etc.) that reflect the
rating agency’s opinion on the relative credit worthiness of institution, in terms
of likelihood of default, credit stability, ability or willingness to meet its financial
obligations, etc.
9.2 In the case of insurance ratings, the rating will typically reflect an independent
assessment of the insurer’s financial strength and ability to meet its ongoing
insurance policy and contract obligations. Such ratings may help an insurance
or reinsurance buyer or broker to make an informed decision on their choice of
insurance or reinsurance carrier.
10. INSURANCE REGULATION & INSTRUMENTS ISSUED BY MAS
10.1 The insurance industry in Singapore belongs to a larger financial sector that is
made up of a large and diversified group of local and foreign financial
institutions offering a wide range of financial products and services. These
include trade financing, foreign exchange, derivatives products, capital market
activities, loan syndication, mergers and acquisitions, asset management,
securities trading, and financial advisory services.
10.2 The Insurance Department, under the Financial Supervision Group of the MAS,
supervises and regulates insurance companies, and has as its primary objective
the protection of policyholders' interests. The Department adopts a risk-focused
approach in the prudential and market conduct supervision of insurance
companies. In its standards setting role, the Department works closely with the
industry associations to promote the adoption of best practices by the industry.
A. Classification Of Instruments Issued By MAS
10.3 The sections below show the classification of instruments adopted by the MAS.
 Acts
 Subsidiary Legislation
 Directions
 Directives
 Notices
 Guidelines

 Codes
 Practice Notes
 Circulars
 Policy Statements
A1. Acts
10.4 The Acts contain statutory laws under the purview of the MAS passed by
Parliament. These have the force of law and are published in the Government
Gazette. Examples are the Banking Act (Cap. 19), Deposit Insurance And Policy
Owners’ Protection Schemes Act (Cap. 77B), Financial Advisers Act (Cap. 110)
and Insurance Act (Cap. 142) among others.
A2. Subsidiary Legislation (Which Includes Regulations, Orders, Declarations &

Notifications)
10.5 Subsidiary legislation is issued under the authority of the relevant Acts and
typically provides greater detail of the provisions of an Act, and spells out in
greater detail the requirements that financial institutions or other specified
persons (for example, financial adviser representatives) have to adhere to.
Subsidiary legislation has the force of law and may specify that a contravention
is a criminal offence. They are also published in the Government Gazette.
Examples are the Insurance (Lloyd’s Asia Scheme) Regulations, Insurance
(Actuaries) Regulations, and Insurance (Nomination of Beneficiaries)
Regulations 2009.
A3. Directions
10.6 In addition, the MAS is empowered to issue Directions, which detail specific
instructions to financial institutions or other specified persons to ensure
compliance. These Directions have legal effect; meaning that the MAS can
specify whether a contravention of a direction is a criminal offence.
10.7 Directions consist of the following:

 Directives - primarily impose legally binding requirements on an individual
financial institution or a specified person; and
 Notices - primarily impose legally binding requirements on a specified class
of financial institutions or persons. An example is the Notice No.: MAS 211
on Minimum And Best Practice Training And Competency Standards For
Direct General Insurers.
A4. Guidelines
10.8 Guidelines set out principles or “best practice standards” that govern the
conduct of specified institutions or persons. While contravention of guidelines
is not a criminal offence and does not attract civil penalties, specified institutions
or persons are encouraged to observe the spirit of these guidelines. The degree

of observance with guidelines by an institution or a person may have an impact

on the MAS overall risk assessment of that institution or person. Examples are
the Technology Risk Management Guidelines for Financial Institutions, and the
Guidelines on Standards of Conduct for Insurance Brokers.
A5. Codes
10.9 Codes set out a system of rules governing the conduct of certain specified
activities. Codes are non-statutory and do not have the force of law. However, a
breach of a Code may attract certain non-statutory sanctions like private
reprimand or public censure. An example is the Code of Conduct for Credit
Rating Agencies. A failure to abide by a Code does not in itself amount to a
criminal offence but may have certain consequences.
A6. Practice Notes
10.10 Practice Notes are meant to guide specified institutions or persons on

administrative procedures relating to, among others, licensing, reporting and
compliance matters. Contravention of a practice note is not a criminal offence,
unless a procedure stated in the practice note is also required by an Act or
regulation.
A7. Circulars
10.11 Circulars are documents which are sent to specified persons for their
information or are published on the MAS Website for public information.
Circulars have no legal effect.
A8. Policy Statements
10.12 Policy statements outline broadly the major policies of the MAS.
10.13 Details of these instruments relating to the financial services industry can be
obtained from the MAS Website at: http://www.mas.gov.sg/
11. NOMINATION OF BENEFICIARIES FOR PERSONAL ACCIDENT & HEALTH

INSURANCE POLICIES
11.1 The insurance nomination law, Insurance (Nomination of Beneficiaries)

Regulations 2009, under the Insurance Act (Cap. 142) came into effect on 1
September 2009. This law gives policy owners two options when nominating
beneficiaries under their policies for Life Insurance, Personal Accident (PA)
Insurance, as well as Health Insurance (such as Critical Illness Insurance or
Dread Disease Insurance, where there is coverage of death benefit). They can
choose to make a revocable nomination or a trust nomination, to ensure that
the death proceeds under such policies are distributed to their beneficiaries in
accordance with their wishes made during their lifetime.

11.2 With a revocable nomination in accordance with Section 49M of the Insurance
Act (Cap. 142), the policy owner continues to retain full ownership of the policy.
He retains the right to change, add or remove nominated beneficiaries at any
time without the consent of the nominated beneficiaries. The policy owner will
receive living benefits, and only death benefits will be paid to the nominated
beneficiaries.
11.3 With a trust nomination, also known as irrevocable nomination, in accordance

with Section 49L of the Insurance Act (Cap. 142), the policy owner relinquishes
all rights to the policy. This means that, while he is still obliged to pay the
premiums due, all policy benefits (whether living and/or death) belong to the
nominated beneficiaries. The policy owner can regain his rights to own the
policy benefits only with the written consent of all nominated beneficiaries. Only
a spouse or child of the policy owner is eligible to become a nominated
beneficiary in this respect. An advantage of such a nomination is that the policy
proceeds are protected from the creditors in the event of bankruptcy.
12. DEPOSIT INSURANCE AND POLICY OWNERS’ PROTECTION SCHEME ACT 2011
12.1 The Policy Owners’ Protection Scheme, created by the Deposit Insurance and
Policy Owner’ Protection Act 2011, that came into effect on 1 May 2011, is an
additional safety net that protects the interests of policy owners or policyholders
in the event that an insurer fails. The scheme encompasses a Policyholders’
Protection Fund (PPF), administered by Singapore Deposit Insurance
Corporation Limited (SDIC). SDIC is a company limited by guarantee under the
Companies Act (Cap. 50). The board of directors is accountable to the Minister
in charge of the MAS.
12.2 All insurance companies are regulated entities in Singapore. The scheme
provides added assurance that there is compensation available for policy
owners, to reduce the financial impact on individuals in the event that an insurer
default.
12.3 The scheme relating to general insurance provides 100% coverage for the types
of general insurance policies covered under the scheme. However, there are
also caps, on a per policy basis, for own property damage motor claims
(S$50,000) under personal motor insurance policies and property damage
claims under personal property insurance (S$300,000). Coverage is automatic,
and there is no charge to any policyholder. Levies are paid by the insurers.
12.4 All compulsory insurance policies under the Motor Vehicles (Third-Party Risks
and Compensation) Act (Cap. 189) and Work Injury Compensation Act 2019 (No.
27 of 2019), and Singapore policies of specified lines issued by registered
general insurers that are scheme members are covered under the scheme. A
Singapore policy insures risks arising in Singapore, or where the insured is a
Singapore resident, or has a permanent establishment in Singapore.

12.5 All insurers registered by the MAS that carry out direct general business (other
than captive or specialist insurers) are PPF Scheme Members. Details of the
scheme and its Members are available on the SDIC Website at:
http://www.sdic.org.sg
13. PREMIUM PAYMENT FRAMEWORK
13.1 The Premium Payment Framework is a code, jointly issued by the General
Insurance Association of Singapore (GIA) and the Singapore Insurance Brokers
Association (SIBA), that came into effect on 1 September 2016. Its purpose is to
establish rules for premium payment management in general insurance. This
single set of code will jointly apply to insurers and intermediaries.
13.2 The objectives of the Premium Payment Framework are to:

 improve efficiency in the collection of premiums for general insurance
policies; and
 minimise the possibility of disputes between insurers and policyholders.
13.3 To facilitate the collection of premiums from policyholders, three types of

premium payment warranties are incorporated into policies issued by insurers
who are members of GIA:
 Payment Before Cover Warranty;
 Premium Payment Warranty; and
 Premium Instalment Payment Warranty.
A. Payment Before Cover Warranty
13.4 The Payment Before Cover Warranty applies to the following:

 Personal Lines policies; or
 Bonds.
13.5 A Personal Lines policy or a Bond shall not be in force, unless the premium is
paid to the insurer or intermediary on or before the date of inception of the
policy or Bond.
13.6 In the event that the total premium due is not paid to the insurer or the
intermediary on or before the inception date or the renewal date of the policy or
Bond, then no benefits whatsoever shall be payable by the insurer. Any payment
received thereafter shall be of no effect whatsoever, as the cover has not
attached.
B. Premium Payment Warranty
13.7 The Premium Payment Warranty applies to policies issued for ALL classes of
general insurance relating to commercial lines transacted by insurers or

intermediaries.
13.8 Under the warranty, if the period of insurance is more than 60 days, the
policyholder is required to pay the premium due under the policy in full, within
60 days from the date of inception of the policy. If this warranty is not complied
with, then the policy is automatically terminated from the expiry of the 60-day
period, and the insurer will be entitled to a pro-rata premium for the 60-day
period that the insurer has been on risk. If the period of insurance is less than
60 days, then the insured is required to pay the premium due under the policy
in full, within the period of insurance.
13.9 Under the Premium Payment Framework, commercial lines refer to commercial
general insurance, but it excludes the following types of policies:
 Marine Cargo  Bonds
 Marine Hull  Trade Credit
 Marine Liabilities  Political Risk
 Aviation  Global/Regional Programmes
C. Premium Instalment Payment Warranty
13.10 The Premium Instalment Payment Warranty also applies to policies issued for
all classes of general insurance relating to commercial lines business transacted
by insurers or intermediaries.
13.11 Under this warranty, insurers are at liberty to schedule payments provided that:
 the first instalment must be paid within 60 days from the commencement
of the policy; and
 the remaining instalments shall be paid by the subsequent due dates.
13.12 There are also provisions (similar to that in the Premium Payment Warranty) in
that the automatic termination of the policy applies, and that the insurers are
entitled to the pro rata premium if the premiums are not paid within the
respective premium due dates.
13.13 As for other practices relating to the Premium Payment Framework applicable
to commercial lines, please refer to Appendix 1B, where the complete Premium
Payment Framework can be found.
D. Re-marketing After Cancellation Due To Breach Of Premium Payment Warranty
13.14 To avoid an abuse of the system by cancelling covers and placing through other
intermediaries or with other insurers, all intermediaries and insurers (for direct
accounts) shall insert declarations in the quotation slips and insurance policies
to the effect that policies applied for have not been in whole or in part terminated
by another insurer due to non-payment of premiums in the last 12 months.
13.15 If the policyholder declares a breach of Premium Payment Warranty in the last

12 months, confirmation must have been first received from the insurer of the
previous policy that time on risk premiums have been paid before cover incepts.
E. Suspension And/Or Reinstatement Of Cover If Payment After Breach
13.16 When premium, including the time on risk premium, is paid by the policyholder
after the period or date allowed under the Premium Payment Warranty, insurers
will suspend cover from the date of breach to the date of payment.
13.17 Insurers may reinstate cover from the date of receipt of full payment to the
original expiry date. Alternatively, insurers can allow the policy to lapse and
issue a fresh replacement policy.

APPENDIX 1A
Key Differences Between A General Insurance Agent & An Insurance Broker
Type Insurance Agent Insurance Broker

Registration/ Registered under the Agents’ Licensed under the Insurance Act
Licensing Registration Board (ARB) of the (Cap. 142) administered by the
Regime General Insurance Association of Monetary Authority of Singapore
Singapore (GIA) – also applicable (MAS).
to any nominee agent.
Representation Up to three principals (insurers) Any number of insurers –

– normally representing the normally representing the
insurer. insured.
Appointment Agency Agreement with the Letter of Appointment by the

insurer as specified under insured.
Section 35M of the Insurance Act
(Cap. 142).
Remuneration Commission. Brokerage or Fee.
Professional None. Yes, for an insurance broking

Indemnity company in accordance with
Insurance Section 35Y of the Insurance Act
Requirement (Cap. 142) and the Insurance
(Intermediaries) Regulations.
Minimum Paid- Agency Company: S$25,000 Insurance Broking Company:

up Share (Corporate Agent) S$300,000
Capital

APPENDIX 1B
Premium Payment Framework

[1 September 2016]
1. Objective of the framework
To establish rules for premium payment management in general insurance.
2. Definitions
For ease of reference and clarity, the definitions of some important terms used
in this paper are given below.
Personal Lines Policies issued to any individual.
Commercial Policies issued for all classes of general insurance for businesses
Lines and commercial establishment (with the exception of marine
cargo policies, marine hull policies, marine liabilities policies,
aviation policies, bonds, trade credit policies, political risk policies
and global/regional programmes).
Intermediaries Refers to general insurance agents and insurance brokers as

stipulated in the Insurance Act (Cap 142).
Global/Regional Refers to insurance programmes

Programmes (a) Emanating from Singapore and covering multiple
countries (including Singapore) for each programme; or
(b) Where a Singapore insurer issues local policies as part of
an insurance programme emanating from a country other than
Singapore.
All Workmen’s Compensation and Motor insurance policies are
excluded from this definition, unless the terms of cover and
issuance of these policies fall within the control of the
Global/Regional Programme.
Marine Cargo Means a policy of insurance

Policy (a) upon goods, merchandise or property of any description
whatever on board vessels; or
(b) against transit risks (whether is by sea, inland water or air, or
partly one and partly another) including risks incidental to the
transit insured from the commencement of the transit to the
ultimate destination covered by the insurance.
Marine Hull Means a policy of insurance upon vessels or the machinery,

Policy tackle, furniture or equipment of vessels.
Marine Means a policy of insurance

Liabilities Policy
(a) against damage arising out of or in connection with the use of
vessels or aircraft, including third-party risks; or

(b)against risks incidental to the construction, repair or docking of

vessels, including third-party risks.
3. Code of Practice for Premium Payment

All existing guidelines issued by the General Insurance Association of
Singapore (GIA) and the Singapore Insurance Brokers Association (SIBA) to
their members will now be codified under this Premium Payment Framework.
This single set of code will jointly apply to insurers and intermediaries.
4. Premium Payment Warranty

To facilitate the collection of premiums from policyholders, 3 types of premium
payment warranty will be incorporated into policies issued:
4.1 Payment Before Cover Warranty
4.2 Premium Payment Warranty
4.3 Premium Instalment Payment Warranty
4.1 Payment Before Cover Warranty

The Payment Before Cover Warranty will apply to the following:
(a) all Personal Lines policies; or
(b) all Bonds
The Payment Before Cover Warranty will apply for Bonds as banks or other
principal organisations would generally require irrevocable demand bonds and
would want to ensure that the Bonds do not carry any written qualification that
allows it to be terminated during its currency.
A Personal Lines policy or a Bond shall not be in force unless premium is paid to
the insurer or intermediary on or before the date of inception of the policy or
Bond.
4.1.1 Recommended Endorsement Wordings for Payment Before Cover Warranty

(1) The premium due must be paid to the Insurer (or the intermediary through
whom this Policy or Bond was effected) on or before the inception date (“the
inception date”) or the renewal date of the coverage. Payment shall be
deemed to have been effected to the Insurer or the intermediary when one of
the following acts takes place:
(a) Cash or honoured cheque for the premium is handed over to the Insurer
or the intermediary;
(b) A credit or debit card transaction for the premium is approved by the
issuing bank;
(c) A payment through an electronic medium including the internet is
approved by the relevant party;
(d) A credit in favour of the Insurer or the intermediary is made through an
electronic medium including the internet.
(2) In the event that the total premium due is not paid to the Insurer (or the
intermediary through whom this Policy or Bond was effected) on or before

the inception date or the renewal date, then the insurance shall not attach
and no benefits whatsoever shall be payable by the Insurer. Any payment
received thereafter shall be of no effect whatsoever as cover has not attached.
(3) In respect of insurance coverage with Free Look provision, the policyholder
may return the original policy document to the Insurer or intermediary within
the Free Look period if the policyholder decides to cancel the cover during
the Free Look period. In such an event, the policyholder will receive a full
refund of the premium paid to the Insurer provided that no claim has been
made under the insurance and the cover shall be treated as if never put in
place. Free Look provision does not apply to Bond.
4.1.2 Should there be extenuating circumstances resulting in non-payment of

premiums, and thereby a breach of the Warranty, insurers should consider the
circumstances on a case-by-case basis and review the cover within a reasonable
time to ensure a fair outcome.
4.2 Premium Payment Warranty

The Premium Payment Warranty will apply to policies issued for ALL classes of
general insurance relating to Commercial Lines transacted by insurers or
intermediaries.
Under the warranty, if the period of insurance is more than 60 days, the
policyholder is required to pay the premium due under the policy in full within 60
days from the date of inception of the policy. If this warranty is not complied with,
then the policy is automatically terminated from the expiry of the 60-day period
and the insurer will be entitled to a pro-rata premium for the 60-day period they
have been on risk. If the period of insurance is less than 60 days, then the insured
is required to pay the premium due under the policy in full within the period of
insurance.
4.2.1 Recommended Endorsement Wording for Premium Payment Warranty

(1) Notwithstanding anything herein contained but subject to clause 2 hereof,
it is hereby agreed and declared that if the period of insurance is 60 days
or more, any premium due must be paid and actually received in full by
the Insurer (or the intermediary through whom this Policy was effected)
within 60 days of the inception date of the coverage under the Policy,
Renewal Certificate or Cover Note.
(2) In the event that any premium due is not paid and actually received in full
by the Insurer (or the intermediary through whom this Policy was effected)
within the 60-day period referred to above, then:
(a) the cover under the Policy, Renewal Certificate or Cover Note is
automatically terminated immediately after the expiry of the said 60-
day period;
(b) the automatic termination of the cover shall be without prejudice to
any liability incurred within the said 60-day period; and

(c) the Insurer shall be entitled to a pro-rata time on risk premium subject
to a minimum of S$25.00.
(3) If the period of insurance is less than 60 days, any premium due must be
paid and actually received in full by the Insurer (or the intermediary through
whom this Policy was effected) within the period of insurance.
4.2.2 To bring about greater policyholder awareness and to enhance transparency,

the tax invoices issued by insurers and/or debit notes issued by
intermediaries must incorporate an Important Notice to highlight the
application of the Premium Payment Warranty. If premiums are not received,
the insurers (for direct accounts) or the intermediaries must also send a
reminder to the policyholders at least 2 weeks before the expiry of the Premium
Payment Warranty period.
4.3 Premium Instalment Payment Warranty

The Premium Instalment Payment Warranty will apply to policies issued for ALL
classes of general insurance relating to Commercial Lines business transacted by
insurers or intermediaries.
Insurers are at liberty to schedule payments provided:

• The 1st instalment must be paid within 60 days from the commencement of
the policy; and
• The remaining instalments shall be paid by the subsequent due dates.
4.3.1 Recommended Endorsement Wordings for Premium Instalment Payment

Warranty
(1) Notwithstanding anything herein contained but subject to clauses 2 and 3
hereof, it is hereby agreed and declared that:
(i) the 1st instalment due must be paid and actually received in full by the
Insurer (or the intermediary through whom this Policy was effected)
within 60 days of the inception date of the coverage under the Policy,
Renewal Certificate or Cover Note;
AND
(ii) the 2nd and subsequent instalments, if any, of the total premium due, in
such amounts as specified by the Insurer for each instalment, must
be paid and actually received in full by the Insurer (or the
intermediary through whom this Policy was effected) on or before the
respective due dates as specified by the Insurer.
(2) In the event that the 1st instalment is not paid and actually received in full
by the Insurer (or the intermediary through whom this Policy was effected)
within the 60-day period referred to above, then:
automatically terminated immediately after the expiry of the said 60-day
period;

(b) the automatic termination of the cover shall be without prejudice to any
liability incurred within the said 60-day period; and
(c) the Insurer shall be entitled to a pro-rata time on risk premium.
(3) In the event that the 2nd or any subsequent instalment of the total premium
due is not paid and actually received in full by the Insurer (or the
intermediary through whom this Policy was effected) on or before the
respective due dates as specified by the Insurer, then:
automatically terminated immediately after the respective due date in
respect of which the instalment has not been paid; and
(b) the automatic termination of the cover shall be without prejudice to
any liability incurred within the period before the respective due
date in respect of which the instalment has not been paid.
4.3.2 Illustration of Instalment Payment Plan
1ST INSTALMENT MUST BE The remaining instalments

PAID (up to insurers to schedule)
60 days Rest of policy periods
Date of Inception
5. Terms of Settlement Between Intermediaries And Insurers

Terms of settlement refer to the handing over of payments received by the
intermediaries from the policyholders to the insurers.
(i) Agents
The settlement terms of both Cash Agents and Credit Agents will be governed by
their respective Agency Agreements and the General Insurance Agents
Registration Regulations (GIARR).
(ii) Brokers
Regardless of the types of policy, settlement terms of all Brokers are required to
comply with the Insurance Broking Premium Accounts requirements established
in the Insurance (Intermediaries) Regulations. Pursuant to Regulation 7 (14) of the
Insurance (Intermediaries) Regulation, Brokers must pay all premiums received
from the policyholder by the 90th day from the date of commencement of cover.
The following illustration will help put settlement requirement for Brokers in
perspective.

5.1 An Illustration of the Settlement Requirements For Intermediaries and

Policyholders
Scenario 1
Insurer A: Financial Closing Date - 31 May 2015
Bill date – 27 May 2015
May Jun July
27/5 – Billing
Date 30/6 – Premium
Payment Due Date for
insured
1/5 – May statement of 30/7 – Premium
Commencement date account will reflect Payment by
of policy transaction Intermediary to
Insurer
Scenario 2
Insurer B: Financial Closing Date - 25 May 2015
Bill date – 27 May 2015
May Jun July
25/5 –
Financial
Closing Date June statement of
account will reflect
1/5 – transaction 30/7 – Premium
Commencement date 27/5 – Payment by
of policy Billing Date Intermediary to
30/6 – Premium
Insurer
Payment Due Date for
insured
6. Recommended Practice Applicable to Commercial Lines Business
6.1 New or Renewal Policy or Endorsement

The following will be adopted for New or Renewal policies or Endorsements where
the insurers have yet to receive a complete set of the required information:
(i) Intermediaries have to present their closings to insurers on or prior to the
inception date.
(ii) In the event that intermediaries issue hold covered instructions to insurers, the
following shall apply:
(A) In respect of new business

(i) Where the risk has been bound and the insurers have yet to receive a
complete set of the required information, the insurers will proceed to

issue the policy based on essential information received from the

intermediaries (“the New Policy”).
(ii) Insurers are to issue tax invoices and policy documents within 30 days
after the inception date of the New Policy.
(iii) Upon subsequent receipt of the required information, the insurers shall
be entitled to issue endorsements to extend or amend the cover of the
New Policy and issue tax invoices for these endorsements accordingly.
(B) In respect of renewal business

(i) The insurers will proceed to renew based on the essential information
received from the intermediaries or expiring sums
insured/wageroll/limits (“the Renewal Policy”).
(ii) Insurers are to issue tax invoices and policy documents within 30 days
after the inception date.
(iii) Upon subsequent receipt of further information, the insurers shall be
entitled to issue endorsements to extend or amend the cover of the
Renewal Policy and issue tax invoices for these endorsements
accordingly.
(C) Collection of Premium

(i) Intermediaries will be given 60 days from inception date of the New
Policy, Renewal Policy or their respective endorsements, to collect the
premium from their policyholders.
6.2 Overdue Premiums

If the intermediaries are unable to collect the premium from their policyholders
within 60 days from inception of the New Policy, Renewal Policy or the applicable
endorsement:
(i) The policy or endorsement will automatically terminate effective from the
61st day of cover.
(ii) The intermediaries must notify the policyholders immediately by fax, email
and/or mail, of the cessation of cover, copied to the insurers.
(iii) Whether the liability or claims is incurred or not by the insurers within the
60-day period, the policyholders are liable to pay time on risk premiums.
(iv) Intermediaries are required to notify the insurers of the policyholders who
have breached the Premium Payment Warranty within 5 working days of
the breach.
(v) If the intermediaries notify the insurers within 5 working days of the breach,
the intermediaries will not be liable for the collection of the time on risk
premiums.
(vi) If the intermediaries do not notify the insurers within 5 working days of the
breach, then the intermediaries will be liable for the collection of the time
on risk premiums.
6.3 Re-marketing after cancellation due to breach of Premium Payment Warranty

To avoid an abuse of the system by cancelling covers and placing through other
intermediaries or with other insurers, all intermediaries and insurers (for direct
accounts) shall insert the following declarations in the quotation slips and
insurance policies to the effect that policies applied for have not been in whole or

in part terminated by another insurer due to non-payment of premiums in the last

12 months.
If they declare a breach of premium payment warranty in the last 12 months,

confirmation must have been first received from the insurer of the previous policy
that time on risk premiums have been paid before cover incepts.
6.3.1 Recommended Wordings for Declaration in Quotation Slip
Quotation Slip
Condition Precedent
1. The validity of this Quotation is subject to the condition precedent that:
(a) for the risk quoted, the proposed policyholder has never had any insurance
terminated in the last twelve (12) months due solely or in part to a breach
of any premium payment condition; or
(b) if the proposed policyholder has declared that it has breached any premium
payment condition in respect of a previous policy taken up with another
insurer in the last twelve (12) months:
(i) the proposed policyholder has fully paid all outstanding premium for time
on risk calculated by the previous insurer based on the customary short
period rate in respect of the previous policy; and
(ii) a copy of the written confirmation from the previous insurer to this effect
is first provided by the proposed policyholder to the Insurer before cover
incepts.
6.3.2 Recommended Endorsement Wordings for Policy
Insurance Policy
Condition Precedent
1. The validity of this Policy is subject to the condition precedent that:
(a) for the risk insured, the named policyholder has never had any insurance
terminated in the last twelve (12) months due solely or in part to a breach
of any premium payment condition; or
(b) if the named policyholder has declared that it has breached any premium
payment condition in respect of a previous policy taken up with another
insurer in the last twelve (12) months:
(i) the named policyholder has fully paid all outstanding premium for time
on risk calculated by the previous insurer based on the customary short
period rate in respect of the previous policy; and
(ii) a copy of the written confirmation from the previous insurer to this effect
is first provided by the named policyholder to the Insurer before cover
incepts.
6.4 Suspension and/or Reinstatement of Cover if Payment After Breach

When premium (including without limitation, the time on risk premium) is paid by
the policyholder after the period or date allowed under the Premium Payment
Warranty, cover must be suspended from the date of breach to date of payment.

Cover may be reinstated from the date of receipt of full payment to the original
expiry date. This would serve to encourage the policyholder to remain with the
same insurer.
Alternatively, the insurer can allow the policy to lapse and issue a fresh
replacement policy.
Source: General Insurance Association of Singapore


2. Risks & Insurance
CHAPTER 2
RISKS & INSURANCE
CHAPTER OUTLINE
1. Introduction
2. Types Of Risks
3. Characteristics Of Insurable Risks
4. Perils & Hazards
5. Methods Of Handling Risks
6. Attitude Towards Risks
7. Benefits Of Insurance
8. Classification Of General Insurance Products
9. Individual & Group Insurance
LEARNING POINTS
 understand the concepts of risk and chance
 define what insurance is and understand how insurance works
 know the concept of risk pooling
 identify the differences between insurance and gambling
 differentiate the various types of risks
 know the characteristics of insurable risks
 know the difference between a valued contract, a contract of indemnity and a benefit
contract
 understand the meanings of peril and hazard, and distinguish the differences
between the two concepts
 understand the difference between a moral hazard and a physical hazard
 be aware of the various methods of handling risks
 understand how attitudes towards risks will affect an individual’s decision in
selecting the methods to handle risks
 appreciate the benefits of insurance
 know the major classes of general insurance and the risks that they cover
 compare the differences between Individual Insurance and Group Insurance
 state the characteristics of a Group Insurance policy
 compare the differences between a compulsory and a voluntary plan
 list the advantages of a compulsory plan
 list the advantages of a voluntary plan

1. INTRODUCTION
1.1 To understand the need for insurance, one has to first understand the concept
of risk, since insurance serves as a risk transfer mechanism for individuals and
organisations. A risk transfer mechanism is a means by which an individual or
commercial organisation will pass on (transfer) the risk that it faces to another
party. An example of such a mechanism is insurance in which the insurer
promises to pay for, repair, replace or reinstate, such as a damaged property,
in the event of a peril (e.g. fire) occurring during the period of insurance,
provided that the peril is covered within the terms of the insurance policy. We
shall look at the definition of “peril” in a later part of this chapter.
A. Risk & Chance
1.2 To most people, risk implies some form of uncertainty about an outcome in a
given situation, and the outcome is normally unfavourable. In contrast, chance
implies some doubt about the outcome in a given situation, and the outcome is
normally favourable. For example, we may say the risk of an accident, and the
chance of passing an examination. In reality, we may use the word “chance”
rather loosely to include both unfavourable and favourable outcomes, but we
will not use “risk” to refer to a favourable outcome.
1.3 In simple terms, risk may be defined as the possibility of loss. In the context of
general insurance, it refers to the possibility of loss to which one’s property or
business is exposed. Loss in this context encompasses injury, damage, liability
to third parties, expenses and other losses capable of being measured in
monetary terms. Risk is the potential that a chosen action or activity (including
the choice of inaction) will lead to a loss (an undesirable outcome). Potential
losses themselves may also be called "risks". Hence, risk can then be defined
as the possibility or potential to lose as a result of an occurrence or event.
1.4 For example, some risks associated with owning a car are:
 accidental injuries to the driver, passengers and/or other road users (cyclists,
motorists and pedestrians);
 accidental damage to the car itself, a car belonging to someone else and/or
the property of others; and
 theft of the car and/or its fitted accessories.
1.5 To protect the owner of the car against the financial effects of any loss arising
out of the risks of owning a car, he can effect a comprehensive Motor Insurance
policy with an insurance company. An unknown loss (the risk of injury, loss or
damage) is then transferred to the insurer by paying a fixed premium. For
example, in the event of damage to the owner’s car, the insurance company will
pay for the cost of repairs if all other terms and conditions of the policy are fully
met.

B. What Is Insurance?
1.6 Insurance is an equitable transfer of the risk of a loss, from one entity to another
in exchange for a premium payment. It is a form of risk management primarily
used to hedge against the risk of a contingent, uncertain loss.
1.7 An insurer or insurance carrier is a company selling the insurance. The insured
or policyholder is the person or entity buying the insurance policy. The amount
of money to be charged for a certain amount of insurance coverage is called
the premium.
1.8 The transaction involves the insured assuming a guaranteed and known
relatively small loss in the form of payment to the insurer, in exchange for the
insurer's promise to compensate (indemnify) the insured in case of a financial
(personal) loss. The insured receives an official document called the insurance
policy (being evidence of the insurance contract between the insured and the
insurer) which details the terms, exclusions, conditions and circumstances
under which the insured will be financially compensated.
C. How Does Insurance Work?
1.9 Insurance works by spreading the result of a financial loss among many
persons, so that the cost to any one person is small. An insurer accepts the risk
of financial loss of a large number of people. However, in all probability, only a
small percentage of these people will actually suffer an insured financial loss
during the period that the insurance is in force. This enables the insurer to use
the premiums paid by a very large number of people who buy insurance covers,
to pay the claims of a relatively small number of people in the same risk pool.
This concept is known as risk pooling, as explained later in this chapter.
1.10 Risk pooling makes it possible for insurers to sell protection against financial
losses. This protection is described in the insurance policy, which is a written
contractual agreement explaining the benefits payable by the insurer, provided
that a particular loss covered by an insured peril occurs. Some insurers sell
policies that protect people against the financial losses that occur, when the
property is damaged, or their legal liability to compensate third parties because
of their acts of negligence. Life and health insurers sell policies that protect
people against financial losses that result from personal risks, such as
premature death or ill health. General insurers, on the other hand, sell policies
that are non-life, e.g. Property and Casualty Insurance, as well as
Marine Insurance.
D. Insurance & Gambling
1.11 Before we proceed further, it is useful to distinguish insurance from gambling,

because you may occasionally hear a remark, such as “The insurance company
is betting that my house will not burn down, and I am betting that it will”,
implying that insurance operates under the same principle as gambling.
1.12 It is true that, in both gambling and insurance, money changes hands on the
basis of chance events. You pay a premium to insure against losses to your

house caused by fire and other insured perils. If no insured loss occurs, the
insurance company keeps the premium, and you receive no money. On the
other hand, if an insured peril occurs, the insurance company pays for the loss
covered by the policy.
1.13 Similarly, if you bet S$200 with Andy that Team A will win its football game
against Team B, money will change hands on the basis of what is, to you and
Andy, a matter of chance.
1.14 In spite of the similarity of these insurance and gambling transactions, there are
two fundamental differences between them.
1.15 First, gambling creates a new speculative risk that has not existed before, i.e.
one can either make a profit or loss from the bet; while insurance is a technique
for handling an already existing pure risk (speculative risk and pure risk are
explained later in this chapter). Therefore, if you bet S$200 on the football game,
a new speculative risk is created, but if you pay S$200 to an insurer for Fire
Insurance, the risk of fire is already present and is transferred to the insurer by
a contract, i.e. the insurance contract as evidenced by a policy document.
1.16 The second difference between insurance and gambling is that gambling is
socially unproductive, since the winner’s gain comes at the expense of a loser.
In contrast, insurance is socially productive, since neither the insurer nor the
insured is placed in a position, where the gain of the winner comes at the
expense of a loser.
1.17 Also, both the insurer and the insured have a common interest in the prevention
of a loss. Both parties will win if the loss does not occur. Moreover, the
gambling transaction never restores the loser to his former financial position.
On the other hand, insurance financially restores the insured, in whole or in
part, if a loss covered by the policy occurs.
1.18 In addition, in gambling, the parties involved are aware of when the event will
take place, i.e. they will know when a football game will take place. In insurance,
both the insured and the insurer will not know if and when a fire will occur.
2. TYPES OF RISKS
2.1 Now that we are clear what insurance is, and how it is different from gambling,
let us proceed to the types of risks that can be insured, since not all risks are
insurable.
2.2 To understand which risks are insurable and which are not, we must first take a
look at the various types of risks. These are described below:
 Pure Risk and Speculative Risk; Pure Risk –
Insurable
Speculative Risk – Not
Insurable
 Fundamental Risk and Particular Risk; and

 Financial Risk and Non-Financial Risk.
A “pure” risk does not include the possibility of gain.

A. Pure Risk
2.3 A pure risk involves the possibility of a loss only or at best a “no gain” situation.
2.4 A very good example of a pure risk is the risk of collision. If you own a car, it
may be damaged in a collision or it may not be. A collision will cause you a
financial loss, but the lack of a collision will not result in any gain to you.
B. Speculative Risk
2.5 In contrast to a pure risk, a speculative risk is one that involves the possibility
of either a loss or gain.
2.6 Examples of speculative risks are:

 investing in stocks and shares;
 betting on a motorcycle or horse race;
 investing in real estate; or
 venturing into a food or wine business.
2.7 In all of these situations, both profits and losses are possible.
2.8 Normally, insurers will not insure speculative risks, because they are generally
created by the persons involved. On the other hand, the car owner does not
create the risk by buying a car. The risk of financial loss as a result of a collision
exists for anyone who owns a car and that risk can be insured.
2.9 As such, speculative risks are not insurable, whereas pure risks are.
C. Fundamental Risk
2.10 A fundamental risk is one which affects the entire economy or large numbers
of persons or groups within the economy, arising out of social, economic,
political or natural causes. Hence, it is widespread in its effect.
INFLATION
2.11 Examples of fundamental risks are:

 war or nuclear incident;
 epidemic, drought or famine; and
 unemployment, high inflation rate or economic recession.
2.12 Each of the above examples arises from causes outside the control of any one
individual, and the effects are widespread. As such, the consequences are
normally better addressed via governmental or international relief, rather than
commercial insurance (although an individual property owner may insure, for
example, against earthquake, flood or thunderstorm).

D. Particular Risk
2.13 In contrast to a fundamental risk, a particular risk is one that affects only a single
or relatively few individuals, not the entire economy.
2.14 Examples of particular risks include being:

 robbed while at an alley or in a lift;
 bitten by a stray dog or monkey;
 assaulted when walking in a dark lane; and
 involved in a traffic accident.
E. Financial Risk
2.15 For a risk to be insurable, the outcome must be capable of measurement in

monetary terms. Only such risks are insurable as opposed to non-financial risks.
2.16 Examples of financial risks are described below:

 Loss of or damage to the hull and machinery of a vessel: The financial value
of the risk is the cost of repairing or replacing the different portions of the
vessel.
 Damage to fixed glass in a shop front: This risk is measurable since the cost
of each piece of glass is known.
 Loss of money through robbery while in transit between the business
premises and the bank: The financial value of the risk is the amount of money
which has been stolen.
2.17 One exception to this rule arises when insuring human lives. It is impossible to
place a value on one’s own life or on the life of a spouse. Hence, an agreed
financial amount is determined at the time of effecting the insurance.
F. Non-Financial Risk
2.18 These are risks in which the outcome is not measurable in monetary terms. No
accurate value can be placed on the outcome. Such risks usually involve
personal decisions, which can produce happy or unhappy emotions, but
primarily, they are not concerned with financial implications.
2.19 Examples of non-financial risks are:

 choosing a life partner; and
 selecting the right school for one’s child.
2.20 Each of the above examples (some, of course, are more important than others)
will involve a degree of uncertainty or risk, and the result may be satisfactory
or disappointing. However, such non-financial risks are uninsurable.

3. CHARACTERISTICS OF INSURABLE RISKS
3.1 Not every risk is insurable. A risk must usually meet certain requirements in
order to be insurable.
A. Large Number Of Insureds There must be a lot of people sharing risk of loss, in
order for the law of large numbers to work.
3.2 Firstly, there must be a large number of persons available for insurance having
a similar potential for loss. The law of large numbers works only when there are
sufficient numbers of potential insureds who have a similar chance for loss, to
make the chance of loss predictable.
B. Accidental Loss
3.3 Secondly, the loss must be accidental in nature. This means that it must
generally be fortuitous, unexpected, unforeseeable, and not intentionally or
wilfully caused by the insured. For example, the risk of a person being killed in
an accident is unpredictable and is beyond the control of that person. Hence,
insurance companies can offer Personal Accident Insurance policies to provide
protection against financial losses caused by such accidents.
C. Definite Loss
3.4 Thirdly, the potential loss must be definite in terms of time and amount. An
insurer must be able to know when the loss took place, and how much the claim
will be. The insurer’s risk exposures are generally restricted to the period of
cover granted to the insured. Therefore, the insurer will be liable to pay only for
losses that have occurred, or which have been made during that period of
insurance.
3.5 The amount of claim to be paid depends on the type of insurance contracts
issued. Basically, there are three types of insurance contracts, namely contracts
of indemnity, valued contracts and benefit contracts.
C1. Contracts Of Indemnity
3.6 General insurance contracts are generally contracts of indemnity, i.e. in

accordance with the principle of indemnity, the amount payable to an insured
after a loss is based on the amount of the loss actually suffered by him. The
insurer calculates the amount to be paid after an occurrence of a loss covered
by the policy.
3.7 For example, a fire insurer will indemnify the insured based on the actual
property damage and loss caused by the insured perils. The insurer will pay
only the actual loss incurred, even if the sum insured exceeds the total value of
the entire property.
C2. Valued Contracts
3.8 In a valued contract, the insured and the insurer agree to a specific value for the
property, before the insurer issues the policy. If the property is lost or destroyed,

the insured will collect the amount that has been agreed upon at the policy
inception.
3.9 Valued policies are commonly issued for items, such as paintings, sculptures,
antiques and items of jewellery, where it is difficult to determine the property’s
value after having been damaged or destroyed.
3.10 In agreeing upon the value of an item or group of items to be insured under a
valued contract, the insurer may ask to see the original sales receipt, or may
want to have the property appraised by a professional valuer.
3.11 A further example of a valued contract is a Marine Insurance policy, as it is

generally issued on an agreed value basis.
C3. Benefit Contracts
3.12 These are the contracts that pay a sum of money in the event of a contingency,
irrespective of whether the insured suffers a financial loss, e.g. in the event of
insured’s accidental death or by natural causes, permanent disability or
sickness, etc. However, the benefits defined in such policies are not related to
the extent of financial loss resulting from the loss of life or health of the insured.
3.13 Examples of benefit contracts are Personal Accident Insurance (covering

accidental death and permanent total disablement), Critical Illness Insurance,
Hospital Income Insurance, and most Life Insurance policies, such as Term,
Endowment, Whole Life Insurance, etc.
D. Financial Burden
3.14 The fourth requirement is that the loss must be large enough to create a
financial burden for the individual involved. It is common for people to lose
things like umbrellas, key pouches and sunglasses, but such losses are very
unlikely to cause much financial burden to the owners. These types of losses
are not normally insured, as it would probably cost more to administer the
insurance programme than it was to simply buy new umbrellas and key
pouches.
3.15 On the other hand, some types of losses could cause financial hardships to most
people. For example, a fire gutted a row of residential housing. The resulting
home loss would be significant to the residents.
E. Affordable Insurance
3.16 The fifth requirement for a risk to be insurable is that the insurance must be
affordable. This requirement does not relate to the insured’s budget, but rather
in relation to the value of the item insured – meaning the cost of the insurance
should generally be a small fraction of that item’s value.
3.17 Consider this illustration: Brady wants to buy insurance for an antique painting
that is valued at S$5,000, and the premium for this coverage is S$4,500 a year.
It will not be viable for him to purchase the insurance, because the cost of

insurance (i.e. the premium) is almost as much as the value of the painting; the
loss of which is uncertain. There is little transfer of risk in this situation.
3.18 Hence, for insurers to offer insurance coverage at an affordable level, it is

necessary to have a sufficiently large pool of similar risks to be insured, in order
for the law of large numbers to operate properly. Often however, insurers face
“anti-selection” or “adverse selection” in that those who seek to purchase
insurance for their risks tend to be those risks, where the probability of loss is
higher than average. As an example, those people who choose to insure their
homes against the risk of flood are more than likely to be those whose homes
lie in flood-prone areas. As a result, insurers may be faced with a portfolio of
risks that present a higher than average flood exposure, and will have to take
suitable measures to address such higher probabilities of loss, i.e. by charging
higher rates for flood extension, or by limiting the coverage provided.
F. Particular Risk
3.19 The sixth requirement is that the loss must not routinely happen to a large
number of insureds at the same time, i.e. catastrophic or fundamental risks are
not insurable. Catastrophic losses can result in a massive and rapid
accumulation of losses that can threaten the financial solvency of an insurance
company. Examples are property damage caused by war and nuclear risks. In
such cases, governments often accept responsibility for these risks. It is not
accurate, however, to say that all fundamental risks cannot be insured, but
insurers are very selective in the risks of this type that they are prepared to
insure. Fundamental risks arising out of some natural causes, such as
earthquake, hurricane, typhoon and flood, may be insurable, depending on the
geographical location of the property, which is to be insured against these risks.
G. Pure Risk
3.20 Finally, the risk to be insured must be a pure risk as opposed to a speculative
risk, as explained earlier.
4. PERILS & HAZARDS
4.1 The terms, perils and hazards, should not be confused with the concept of risk
as discussed earlier.
A. Perils
4.2 A peril is defined as an event or occurrence which causes injury, loss or

damage. If a house burns down because of a fire, the peril or cause of loss is
the fire. If a person’s car is damaged in a collision with another car, the collision
is the peril or cause of loss. Some common perils that cause property damage
or loss are fire, lightning, windstorm, flood, earthquake, theft and burglary.
B. Hazards
4.3 A hazard is a condition that creates or increases the chance (risk) of loss. On
first impression, the distinction between the two may not be that obvious.

4.4 We will use the examples given in the above section to help you to distinguish
the difference between peril and hazard.
The fire that damaged the house. Peril

The house was constructed of wood. Hazard
The collision that damaged the car. Peril
The driver of the car was drunk. Hazard
4.5 Hazards can be sub-divided into moral hazards or physical hazards.
B1. Moral Hazards
4.6 Moral hazards arise from the attitude and conduct or behaviour of people. This
is a situation, whereby people, through carelessness or by their own
irresponsible actions, can increase the possibility of a loss.
4.7 The following examples demonstrate possible moral hazards.

 Charlie feels that insurance protects him, so he leaves his car unlocked
whenever he goes fishing.
 A petrol station has an employee who frequently smokes, while working in
the compound.
4.8 A moral hazard can also involve a situation in which a person engineers a loss
on purpose, in order to make a fraudulent claim against an insurance company.
4.9 Examples are described below:

 Davy is having some serious business difficulties. So, he plans to burn down
his office (an act of arson), in order to make a claim on the Fire Insurance
policy.
 Eddy “conveniently” leaves his insured gold chain in a train station, so that
someone will take it. He can then file for his loss and claim a new one from
the insurer.
B2. Physical Hazards
4.10 A physical hazard arises from the condition, occupancy, or use of the property
itself, i.e. it relates to the measurable dimension and physical characteristics of
the risk.

 Security protection at a jewellery shop: the better the security system, the
lower will be the physical hazard level, as it may prevent or minimise a loss.
 The construction of the property: the higher the standard of construction, the
lower will be the physical hazard for fire and similar risks, as the building will
be more resistant to damage.

5. METHODS OF HANDLING RISKS
5.1 Risks are an inevitable part of human life. We have to learn how to handle them.
There are four major methods as
follows:
▪ avoidance;
▪ control;
▪ retention; and
▪ transfer.
A. Avoidance
5.2 This simply means avoiding the risk.

 Avoid car collision by never driving a car.
 Eliminate air accident by not travelling in an aircraft.
5.4 The major advantage of avoidance is that the chance of loss is reduced to zero.
However, it may not be possible or practical to avoid risks. For example, it is
impossible to avoid the losses resulting from natural catastrophes, such as
earthquake and thunderstorm. It is certainly not practical for a regional sales
manager of a company to avoid exposure to air accidents, by choosing not to
travel by air, to negotiate business deals.
B. Control
5.5 Fortunately, risk avoidance is not the only method of managing a risk. You can
also control the risk to some extent, by reducing both the frequency (loss
prevention) and severity (damage reduction) of losses.
5.6 Examples of:

 Loss prevention – The strict enforcement of safety rules in construction sites
forbids workers from smoking in an area where flammable materials are
stored.
 Loss reduction – An office has installed a fire sprinkler system, so that a fire
can be promptly put out, or placing flammable materials in a separate
confined area, etc.
C. Retention
5.7 In some cases, people simply retain the risk, i.e. if any loss occurs, they will pay
for it themselves. Sometimes, people retain only a portion of risk – the portion
that remains after other means of managing the risk have been employed.
5.8 If people are aware of a risk and decide to retain it (or a portion of it), they do
so intentionally, and this is called active retention. For example, a motorist may
wish to retain the risks of minor accidents to his car, by buying an insurance

policy with a deductible (usually known as an excess in Motor Insurance) in

exchange for a reduced premium; or a retail shop may deliberately retain the
risks of petty theft and shoplifting, by not insuring these risks.
5.9 On the other hand, if people are not aware of a risk, they may retain it
unintentionally and they may be surprised if a loss occurs – this is called passive
retention. Risks can be passively retained because of indifference, ignorance or
laziness. For example, a golfer does not know that he runs the risk of lightning
strikes while playing golf in bad weather.
5.10 Self-insurance is a form of retention measure by which part or all of a given loss
exposure is retained by the firm and self-funded when losses occur. This can
happen when an organisation decides that it is faced with high-frequency, but
low-severity losses. This will mean that the losses are fairly predictable. In such
a case, a fund can be created out of which losses will eventually be met. These
organisations decide to self-insure, because they feel that they are financially
capable to carry such losses, and because the cost to them is lower than
commercial premium rates, since they save on the insurers’ administration
costs and profits.
D. Transfer
5.11 The final method of managing risk is to transfer it, and the most common
method of transferring risk is insurance. By purchasing an insurance policy, the
insured transfers certain risks to the insurer. If a loss covered by the insurance
policy occurs, the insurer, rather than the insured, pays it.
5.12 The basic principle of insurance is that the losses of the few are met by the
contributions of many. Insurance operates under the law of large numbers.
5.13 An insurance company gathers together relatively small contributions (in the
form of premiums) from the insureds who want to transfer similar types of risks
to the insurer and put these premiums into a pool (the concept of risk pooling
as mentioned earlier). The insurer will then compensate the losses of the few
out of this pool. Each insured pays an equitable premium proportionate to the
risk which he introduces to the pool. In operating the pool, insurers benefit from
the law of large numbers, whereby the greater the number of persons insured
against a peril, the more the actual loss experience will tend towards the
expected loss experience. Risk and uncertainty will diminish, as the number of
insured persons gradually increases. Thus, the larger the group insured, the
more predictable will be the loss experience for the group as a whole. This then
enables the insurer to calculate its likely losses, and thus, to charge a fixed
premium, which is sufficient to meet losses and costs of operating and
managing the pool, as well as to provide an element of profit for the insurer.
5.14 Non-insurance transfer refers to methods other than insurance by which a risk
and its potential financial consequences can be transferred to another party.
Non-insurance transfers are common in the building-construction business.
Exposure to loss through contractual liability is of special importance to the
contractor. The law generally recognises the right of two parties to agree in
writing that one party will assume some liability that otherwise will fall on the

other. This is done by inserting a “hold-harmless” clause in a contract by which

one party assumes legal liability on behalf of another party. The practice of
including “hold-harmless agreements”, in construction contracts, is widely
prevalent and accepted.
6. ATTITUDE TOWARDS RISKS
6.1 In the earlier section, we have explored the different methods of

handling risks. Although risks may be handled by different methods, the
decision on which method that an individual adopts, to some extent, depends
on the individual’s attitude towards risks.
6.2 An individual must recognise that risks exist, before he is able to handle them
adequately. Every day, we face risks of one kind or another, regardless of the
type and nature. Whether or not people are aware of them, they exist. However,
some of us may fail to recognise the existence of risks. Others may simply
refuse to acknowledge their existence.
6.3 People have different attitudes towards risks because they view risks differently.
People who are risk seeking or risk takers may choose to voluntarily assume
risk. For example, a risk taker may choose to take on a hazardous occupation
without insurance. He may prefer to retain the occupational risk, rather than to
transfer the risk to others.
6.4 On the other hand, there are people who are risk averse. This group of people
prefers not to venture out of their armchair, as they are afraid of taking risks
and may insure any risk in sight. They highly value getting the risk off their
hands, so they will rather have the security of the policy coverage. Hence, they
are willing to pay to avoid a risky situation.
6.5 In short, each individual’s response to risky situations is different owing to

different perceptions and attitudes towards risks. These differences will affect
the individual’s decision in selecting the method(s) to handle risks.
7. BENEFITS OF INSURANCE
7.1 Insurance brings many benefits to an individual and to society as a whole. It

enables the risks of financial losses to be transferred from the insureds to the
insurers as mentioned earlier. A number of other benefits are outlined in the
sections below:
A. Provides Financial Stability
7.2 In a very obvious and personal way, insurance makes life better. Imagine the
financial consequences that people can face without insurance. Let us say,
Freddy met with an accident on his way to work this morning and damaged his
car extensively. Could he pay a hefty repair bill right now? Or if Gary’s
apartment should burn down today, could he easily come up with the
thousands of dollars that he would need to rebuild, and buy new furniture and
personal effects? It would be tough, if not impossible. It could even be
disastrous.

7.3 With insurance, even when losses occur, people can look at the bright side and
get their money back for these losses. So, even if unfortunate events occur, their
finances will not be drained, and they and their family’s financial stability will
not be undermined. They will be able to keep their present lifestyle and their
future plans, such as buying a better car or home, can remain intact.
7.4 While insurance cannot totally eliminate risks, it will help to mitigate the
financial impact or alleviate hardship on the insured if an unfortunate event or
incident occurs during the period of insurance covered by the terms of the
policy.
B. Provides Peace Of Mind
7.5 People can benefit from insurance even if they do not claim from it. By knowing
that insurance exists to meet the financial consequences of certain risks
provides peace of mind for an individual. Anxiety is also reduced if an insured
knows that insurance is available to indemnify him when a loss occurs.
7.6 The indemnity function of insurance also relieves businesses from the worry
and anxiety that they may have on how to meet the cost of risk. Insurance is,
thus, a positive stimulus to their activities, and allows them to get on with their
own business in the knowledge that they are financially protected against many
forms of risk. The entrepreneurs will be more willing to put money into a
business venture, as they know that they can transfer some of the risks of being
in business to an insurer, and that they will not lose everything, if they fall victim
to some risks. As such, with more businessmen willing to invest in business
ventures, more jobs are created, there are higher exports and a general increase
in wealth for the economy. POLICY
C. Stimulates Business Enterprise
7.7 In the course of their normal operations, business enterprises encounter a wide
array of risks, such as a fire occurring in their premises; loss of a shipment of
goods at sea; injuries suffered by employees in the course of their work; or
potential lawsuits from consumers owing to a product defect. In the absence of
insurance to protect them against such business risks, businesses would
otherwise have to set aside large sums of money as a contingency, should such
potential risks materialise. Hence, instead of having to set aside these
contingency funds, businesses need to provide only a budget for a known cost
– the premiums for the various types of insurance policies. As such, insurance
serves to provide businesses with some level of financial security and certainty,
as they can free up their available funds, which can then be deployed to more
productive business investments. In this respect, insurance serves an important
economic function in helping to stimulate business enterprise.
D. Encourages Loss Control
7.8 Insurers have an interest in reducing the frequency and severity of losses, not
only to enhance their own profitability, but also to contribute to a general
reduction in the economic waste following a loss. They employ risk surveyors
whose primary function is to make visits to premises to be insured for the

purpose of assessing the degree of risks that they pose for insurance purposes.
They can, from their experience, often suggest ways in which the likelihood of
some risks occurring may be reduced. In the course of their work, they may be
able to spot some hazards that can pose potential dangers to the lives of
employees. In this way, the insured can be advised on how to reduce these
hazards, thereby saving the insured costs from paying for any injuries arising
from such hazards.
E. Encourages Investments
7.9 Insurers have, at their disposal, large amounts of money. This arises from the
fact that, under normal circumstances, there is a time gap between the receipt
of a premium and the payment of a claim. The insurers can invest a part of these
sums of money in a wide range of financial instruments. By having a spread of
investments, the insurance industry helps national and international
governments in their borrowing. It also helps industry and commerce, by
making various forms of loans available and by purchasing shares which are
offered on the open market. Insurers make up part of what are termed as
institutional investors; the others include banks, finance companies, building
societies, and the Central Provident Fund Board.
INSURANCE MORTGAGE
POLICY
F. Enhances Provision Of Credit Facilities
7.10 Bankers and other financial institutions require the security of insurance in
financing properties and overseas trade. For example, Fire Insurance makes it
possible for mortgages on property to be granted, without fear of loss of
property by fire. In this case, insurance enhances a borrower’s credit, because
it guarantees the value of the borrower’s collateral, or gives greater assurance
that the loan will be repaid in the event of an insured peril occurring during the
period of insurance.
8. CLASSIFICATION OF GENERAL INSURANCE PRODUCTS
8.1 General Insurance products can broadly be classified as:

 Personal General Insurance; and
 Commercial General Insurance.
8.2 The difference between them is that individuals purchase Personal General
Insurance products to protect themselves against risks that they face in non-
commercial situations, as well as to meet statutory requirements, such as
purchasing Private Motor Insurance and Foreign Domestic Worker Insurance.
Examples of other Personal General Insurance products are Houseowner’s
Insurance, Critical Illness Insurance, Personal Liability Insurance, Personal
Accident Insurance, etc.
8.3 On the other hand, Commercial General Insurance products are purchased by
business enterprises to protect themselves against risks that arise in the course
of their business activities, such as Business Interruption Insurance,
Professional Indemnity Insurance, Commercial All Risks Insurance, Industrial
All Risks Insurance, Marine Hull Insurance, Aviation Insurance, etc.

8.4 Table 2.1 below illustrates the major classes of general insurance under each
line of business and the major risks covered.
Table 2.1: Classes Of General Insurance
Personal Lines
Personal lines provide insurance cover for various risks faced by individuals and
families. Examples include:
Private Motor Car Insures the risks associated with the ownership of
Insurance private motor cars
Private Motorcycle Insures the risks associated with the ownership of
Insurance private motorcycles
Houseowner’s Insures the structure of the building of private
Insurance homes
Householder’s Insures the household contents of private homes
Insurance
Packaged Insures private home buildings and household
Household contents, but also provides other benefits as well
Insurance
Valuable Articles Insures the insured’s antiques, paintings,
Insurance sculptures, ceramics, clocks, and any such items
of high monetary value
Personal Accident Insures the risks of accidents resulting in
Insurance accidental death, permanent disablement or
bodily injuries
Travel Insurance Insures the risks associated with travelling for
business and/or leisure
Personal Liability Provides coverage for legal liability to third
Insurance parties
Foreign Domestic Insures the risks commonly associated with hiring
Worker Insurance a foreign domestic worker
Golfer’s Insurance Provides comprehensive insurance coverage for
golfers
Electrical Covers accidental damage to or theft of the
Protection insured’s electrical equipment (such as a camera,
Insurance notebook or mobile phone)
Pet Insurance Covers the insured’s veterinary bill and surgical
treatment costs incurred arising from injuries,
illnesses, emergencies, specified genetic
condition relating to the insured’s pets
Personal Mobility Covers a user of a mobility device, such as a
Device Insurance bicycle, electric scooter, hoverboard, rollerblade

or unicycle, against accidental death, permanent

disability, medical expenses against injuries, and
third-party liability arising from an accident while
riding, mounting or dismounting from such an
insured mobility device
Financial Lines
Financial lines provide insurance cover for various risks faced, which will result in a
monetary loss, rather than a physical loss of or damage to the property. Examples
include:
Card Protection Covers unauthorised or fraudulent use of the

Insurance financial card by someone other than the
cardholder
Extended Warranty Covers the cost of the insured’s product repair or
Insurance replacement for a set number of years beyond the
manufacturer’s own warranty period
Identity Theft Covers monetary loss suffered as a result of
Insurance identity fraud
Business Insures against loss of profit, overheads, wages
Interruption/ and extra expenses incurred to minimise
Consequential Loss disruption and restore normal business condition
Insurance owing to interruption as a result of fire and other
extraneous perils
Professional Insures professionals such as lawyers and doctors
Indemnity Insurance against professional negligence
Directors’ and Insures against wrongful acts committed by the
Officers’ Liability company’s directors or officers
Insurance
Libel and Slander Insures the damages and costs associated with
Insurance libel and slander
Errors and Omissions Insures against errors and omissions liability
Insurance
Covers a variety of risks resulting from the use of
Cyber Risk Insurance technology within the business, such as electronic
fraud and identity theft, computer virus and
hacking, and breach of data, among others
Contingency Provides coverage for financial loss resulting from
Insurance cancellation, abandonment, postponement,
interruption, curtailment or relocation of any type
of indoor or outdoor event, such as a musical
concert or trade show
Fidelity Guarantee Covers employee’s defalcation, forgery or
Insurance fraudulent acts

Crime Insurance Offers a wider coverage alternative compared to

the traditional Fidelity Guarantee Insurance
Credit Insurance Provides credit risks protection
Insurance Bond Provides guarantee for one party’s financial

protection against a contractor failing to perform in
accordance with the terms and conditions of a
contract
Health
Health Insurances are purchased to provide benefits following the diagnosis of a critical
illness, or to provide cover such as fixed benefits and/or medical expenses incurred by
the insured arising out of hospitalisation and/or surgery. Examples include:
Hospital Cash Provides daily cash benefit for hospitalisation

(Income)
Insurance
Critical Provides cash benefit upon the diagnosis of a
Illness/Dread specified critical illness/dread disease
Disease Insurance
Hospital & Provides inpatient and outpatient benefits as a
Surgical Insurance result of being hospitalised and/ or undergoing
surgical operations
Property
Property Insurances provide cover for the risks of damage to tangible or physical
property, such as buildings, contents and fixtures & fittings. Examples include:
Fire Insurance Insures property destroyed or damaged by fire,

lightning and other extended extraneous perils,
such as explosion, earthquake, flood, typhoon,
windstorm, riot and strike
Theft/Burglary Insures the business against theft on a full value or
Insurance first loss basis
Electronic Provides a comprehensive cover for damage to
Equipment electronic equipment, such as computers
Insurance
Glass Insurance Insures all kinds of fixed glass against breakage
within the business premises
Commercial All Insures items such as machinery and equipment
Risks Insurance against unforeseen and sudden damage, subject to
exclusions

Industrial All Provides a combination of Material Damage (on all

Risks Insurance risks basis) coverage and Business Interruption
Insurance, covering buildings, plants, machinery,
stocks and others
Terrorism Insures property against physical loss or damage
Insurance caused by act of terrorism or sabotage as defined
in the policy
Contractors’ All Covers all insurable loss or damage involved in a
Risks (CAR) construction project
Insurance
Erection All Risks Covers the risks in the installation and erection of
(EAR) Insurance ready-built engineering projects, such as power
plants
Boiler and Covers the risks from using boilers and pressure
Pressure Vessel plants
Insurance
Machinery Covers machinery from unforeseen and sudden
Breakdown damage caused by breakdown
Insurance
Money/Cash In Covers loss of money and cash belonging to the
Transit Insurance business
Commercial Motor
Commercial Motor Insurances provide cover for the risks faced by businesses arising
from the ownership or use of motor vehicles, including legal liability arising from the
use of such vehicles and damage to the vehicles. Examples include:
Commercial Insures the risks associated with the corporate

Motor Insurance ownership of motor vehicles and commercial
vehicles, such as buses, coaches, lorries, taxis,
tractors, trucks and vans
Motor Trade Insures the risks of businesses that deal primarily
Insurance with motor vehicles, such as car dealers and car
repairers
Liability
Liability Insurances provide cover for the legal liability to pay damages, compensation,
legal expenses and costs awarded against the insured in favour of another party in
respect of death, bodily injury, or loss of or damage to property. Examples include:
Work Injury Insures the employer’s obligations to their eligible

Compensation employees under the Work Injury Compensation
Insurance Act 2019 (No. 27 of 2019) against certain
occupational diseases or accidents arising out of
and in the course of employment

Public Liability Insures a business’ legal liability to third parties for

Insurance injury or property damage
Products Liability Insures against liability arising from defective
Insurance products
Carriers and Insures the insured’s liability for loss of or damage
Bailees Liability to property held in their custody and control
Insurance
Commercial Covers a wide range of legal liability under
General Liability common law and contract
Insurance
Innkeeper’s Insures the legal liability of innkeepers arising
Liability Insurance from loss of guests’ property
Marine & Aviation
Marine Insurance covers the loss and damage of ships, cargo and goods in transit.
Aviation Insurance covers damage to the aircraft and liability arising from the use of the
aircraft. Examples include:
Marine Cargo Insures cargo during transit

Insurance
Marine Hull Insures the physical loss or damage to a vessel or
Insurance ship
Aviation Insures the physical damage of aircraft and the

Insurance insured’s legal liability arising from the use of such
aircraft
9. INDIVIDUAL & GROUP INSURANCE
9.1 General Insurance products can be sold on an individual or group basis. Group
Insurance provides coverage on each of the individual member of the group,
while only the individual who applies for the coverage is covered under
Individual Insurance. Table 2.2 shows the differences between them.
Table 2.2: Differences Between Individual Insurance & Group Insurance
Individual Insurance Group Insurance

Only the individual who applies for Only members who belong to the
the coverage is covered. group and are actively at work are
covered.
Each individual insured gets a policy Usually only one master contract
contract. (group policy) is issued to the
employer or an affiliated organisation.
The number of insureds is more than
one.

Individual Insurance Group Insurance

An individual insured has the right to Insured members may or may not
select the amount of coverage that he have the right to decide on the
wants. amount of coverage that they want. In
the employer-paid plan/compulsory
plan, the amount of coverage is
determined by the employer.
For Accident and Health Insurance, Group as a whole is evaluated
individual’s health and financial status depending on the gender and age
are evaluated. distribution of the group, group size,
occupation mix, and past claims
experience.
Coverage continues until the The individual insured’s coverage
individual or insurer chooses to stops when he leaves the group (such
terminate it. as upon leaving the employment of
the employer). However, the plan
continues for the remaining members.
Cost of coverage is higher owing to Cost of coverage is lower owing to
individual underwriting and higher group underwriting and lower
administrative costs. administrative costs.
Individuals need only be insurable in Members under a group must satisfy

order to be granted insurance the eligibility requirements as stated
coverage. in the group policy, before they are
granted the coverage.
A. Group Insurance
9.2 As mentioned, Group Insurance provides coverage to many people under one
master policy. The requirement is that several people must first be members of
a group, before they become eligible to purchase the insurance. The group
must have been formed for some purposes, other than to obtain insurance,
such as companies, membership clubs, professional associations, trade unions
and uniform groups.
9.3 The characteristics of Group Insurance include:

a) Master Contract – Group Insurance is issued under a single contract called
the “master contract” (group policy) which is kept by the policy owner
(policyholder). Unlike individual insurance, when an insured member of the
contract dies or leaves the group, only this member’s coverage is
terminated, provided that the total group size does not fall below a
minimum as stipulated by the insurer. The plan itself will still carry on,
because it belongs to the holder of the master contract.
b) Minimal Underwriting Requirements – This applies more to Group

Accident and Health Insurance, where it is generally made available to the
participating employees (in active employment) with simpler medical
underwriting, if the group size is large. Usually, the underwriter may either

require the employee to complete a health declaration form, or waive all

underwriting, and rely on the pre-existing condition exclusion clause in the
group policy to avoid anti-selection risks.
c) Experience Rating – It is usually underwritten based on the past claims

experiences of the group to be insured. Such a practice is called experience
rating. Some insurers also offer experience refund, i.e. amount returned by
an insurer to a group policyholder, when the claims experience of a
particular group (or class to which the group belongs) has been more
favourable than anticipated.
d) Cost Effective – It provides low-cost protection owing to savings in

administrative costs, in view that only one group policy document is issued.
e) Plan Continuation – The plan is usually renewable by the employer on a

yearly basis. As such, at the end of each policy period, the corporate client
will need to review the plan to assess the adequacy and
comprehensiveness of the coverage. The intermediary will have to advise
his client on this aspect.
f) Eligibility Requirements – Group policies usually define eligible employees

as those employees in a specified class or those in specified classes. For
example, most group policies state that an employee must work full-time,
in order to be eligible for coverage. Thus, part-time workers may be
excluded from the class of eligible employees.
9.4 In addition, some group policies have an “Actively At Work” clause which
requires an employee to be actively at work on the day that the insurance
coverage takes effect, in order to be eligible for the cover. For such a group
policy, an “Actively At Work” clause will require an employee who can report
for work at the place assigned by the employer and can perform all the regular
duties of his employment, as expected by the employer. This includes periods
when the employee is on leave, but not on medical grounds. If the employee is
not actively at work on the eligibility date of insurance cover, he will be eligible
only when he returns to active service at work and in good health.
9.5 Some employers may also include a probationary period (typically one to six
months), which defines how long a new employee must wait, before becoming
eligible to enrol in the group insurance plan. Such an arrangement will avoid
the administrative work involved with new employees resigning shortly after
joining the company. It also helps to reduce the overall premium payable for
the group policy.
9.6 An employer or organisation seeking a quotation for a Group Insurance plan

must complete a Group Insurance Fact-Finding (GIFF) Form for submission to
the insurer. The GIFF does not apply to a Group Travel Insurance proposal.
B. Compulsory & Voluntary Plans
9.7 Group Insurance policies can be issued on a compulsory or voluntary basis. For
a compulsory (non-contributory) plan, all the eligible employees must be

covered under the plan, and the premiums have to be paid by the employer. On
the other hand, a voluntary (contributory) plan does not require full
participation from the employees who are expected to pay part of the
premiums. However, the insurer will normally require a minimum number of
employees or percentage of participation in the plan. The advantages of both
types of plans are described below:
(a) Advantages Of Compulsory (Non-Contributory) Plan
(i) There is ease of administration, since there is no payroll deduction to
monitor.
(ii) There is lower cost owing to less administrative work involved and the
greater pooling effect of risks as a result of many lives insured.
(iii) The employer retains greater control in the benefit structures and
coverage provisions.
(b) Advantages Of Voluntary (Contributory) Plan

(i) Employer
 Participating employees assume part of the costs of the benefits
provided under the plan.
 It generates interest and appreciation from the participating
employees in the plan.
(ii) Employees
It gives the participating employees some control over the plan. They
can obtain coverage at a lower premium rate than buying it
individually.


3. Principles Of Insurance
CHAPTER 3
PRINCIPLES OF INSURANCE
CHAPTER OUTLINE
1. Introduction
2. Insurable Interest
3. Utmost Good Faith
4. Principle Of Indemnity
5. Subrogation
6. Contribution
7. Proximate Cause
LEARNING POINTS
 know the concept and essentials of insurable interest
 understand when insurable interest must exist and how it is being determined under
the various classes of insurance
 understand the concept of utmost good faith and the meaning of material facts
 be familiar with the duty of disclosure at each stage of the insurance contract, as well
as the duty of disclosure by the insured and the insurer
 know what misrepresentation is and understand the various types of
misrepresentation
 differentiate between non-disclosure and misrepresentation
 be aware of the consequences of breach of utmost good faith by both the insurer and
insured, and the remedies available to them
 know the principle of indemnity
 understand the various methods of providing an indemnity
 know the classes of insurance for which the principle of indemnity can be applied
 determine the indemnity for each of the main classes of insurance
 understand how indemnity may be modified, i.e. factors that limit or increase the
amount of indemnity
 know what under-insurance is and how an average clause works
 know the concepts of:
- excess or deductible
- franchise
 explain subrogation, as well as its application and operation
 know the sources of subrogation rights
 understand how subrogation rights may be modified
 understand the concept of contribution and determine when contribution arises
 know how contribution may be modified
 define proximate cause and describe its application in insurance
 know how perils are classified in a policy

1. INTRODUCTION
1.1 In the previous chapter, we have introduced you to the concept of risks and
insurance, as well as the benefits of insurance. In this chapter, we will explain a
number of legal principles of insurance and concepts that are applicable to all
general insurance contracts.
1.2 A number of legal principles apply to insurance contracts. These legal principles
basically arise in Common Law 1, but at times are confirmed or even modified
by statute or policy conditions.
1.3 The six essential principles that you need to know are described
below:
Insurable Interest − concerning the right to insure

Utmost Good − concerning the duty to disclose
Faith material information
Indemnity − concerning the exact amount of
compensation
Subrogation − concerning rights of recovery
Contribution − concerning double (or dual) insurance
Proximate Cause − concerning the dominant cause of the
loss
2. INSURABLE INTEREST
A. Concept
2.1 Insurable interest is the legal right to insure. It means that the person effecting
the insurance has some legally recognised relationship to the subject matter of
insurance. The first of such a relationship recognised at law is that of the owner.
If you own a house or car, you will have an insurable interest in it because, if it
is damaged or lost in any way, you will suffer to the extent of that damage or
loss. Similarly, you have an insurable interest in an article which you have
borrowed, because you may be liable to replace it if it is stolen or destroyed,
e.g. a bicycle, digital camera, mobile phone or notebook. If you lend any of them
to someone else, it will still be yours to insure, so that both parties will have an
insurable interest in it.
Insurable Interest:
Legal right to insure
1
Common Law is sometimes called “unwritten law” as opposed to Statute Law, which is contained in specific
legislation or Acts of Parliament. Common Law has developed over many centuries and consists of the
generally accepted rules and requirements that a civilised society will consider as automatic. It is given
substance in countless decisions made in trial cases by judges over many years, forming a series of
precedents, which are sometimes termed “Case Law”. Common Law may be modified or even abolished
in certain areas by statute, and may also be modified by the mutual agreement of the parties to a contract.
56 Copyright reserved by Singapore College of Insurance Limited [Version 1.1]

2.2 Examples of people who have an insurable interest in articles in their

possession of which they are not the owners include:
 Warehouseman  Shoe Repairers

 Laundry Owners  Pawn Brokers
 Watch Repairers  Audio-Visual Device Repairers
 Hotel Proprietors or Innkeepers  Bicycle Repairers
2.3 According to Section 57(1)(b) of the Insurance Act (Cap. 142), you have an
insurable interest in your own life and in the life of your spouse, and vice versa.
You also have an insurable interest in the lives of your children who are still
minors (under the age of 18 years) and of anyone on whom you are wholly or
partly dependent. Insurable interest for life insurance must be present at the
time the insurance is effected. However, you DO NOT have any insurable
interest in the lives of any others such as:
Insurable Interest
 relatives;
 friends; and
 fiancée.  
Own Life Spouse’s Life Relatives, Friends &
Fiancées
2.4 However, it is possible for you to insure the life of someone who owes you
money, a business partner or a key employee.
2.5 Insurable interest is a basic requirement of any contract of insurance. Without

insurable interest, there will be no valid contract of insurance, since the
policyholder will not be actually at risk with the insured event or peril. In other
words, the insurance contract will be void if there is no insurable interest.
Insurance without insurable interest will be a mere wager and, as such,
unenforceable in the eyes of the law.
2.6 This is best expressed by Lord Justice Brett in Castellain v. Preston (1883) as
follows:
“What is it that is insured in a fire policy? Not the bricks and materials
used in the building the house, but the interest of the insured in the
subject matter of insurance.”
B. Essentials Of Insurable Interest
2.7 There are four essentials of insurable interest as described below:

 There must be some property rights, ownership, interest or potential liability
capable of being insured.
 That property must be the subject matter of the insurance.
 The insured must stand in a relationship, recognised by law, with the subject
matter of the insurance.
 The proposer must benefit from the continued existence of the subject
matter of the insurance contract or be prejudiced by its loss.

C. Existence Of Insurable Interest
2.8 Different classes of insurance contracts require insurable interest to exist at

different times for the contracts to be valid.
C1. Life Insurance Contracts
2.9 Section 57 of the Insurance Act (Cap. 142) requires all Life Insurance policies to
have insurable interest at the time that the policies are effected. This is to ensure
that the policies are not purchased to gamble on the lives of particular
individuals and other events. There is no need for the insurable interest to exist
throughout the term of the Life Insurance policy or in the event of a claim. A
Life Insurance policy can be assigned to a third party who then becomes entitled
to the proceeds of a claim, even though he has no insurable interest in the life
insured. Also, in accordance with Sections 49L and 49M of the Insurance Act
(Cap. 142), a Life Insurance policy owner can make nomination of appropriate
beneficiaries to receive the death proceeds from the policy.
C2. Marine Insurance Contracts
2.10 For Marine Insurance policies, the proof of existence of insurable interest is not
necessary at the time when the insurance is effected. However, insurable
interest is required at the time of the loss as specified in Section 6 of the Marine
Insurance Act (Cap. 387). Any Marine Insurance policy without insurable
interest existing at the time of the loss is deemed to be void. This is particularly
important in Marine Cargo Insurance, where the person holding the policy at
the time the cargo is lost needs to show his interest only at that time, not when
the voyage commences. This follows from the customs of maritime trading that
the cargo may change ownership during transit.
C3. Non-Life & Non-Marine Contracts
2.11 Property and Liability Insurance contracts fall under this category. For this
group of insurance contracts, insurable interest must exist at the time that the
policy is issued and at the time of the loss.
D. How Insurable Interest Is Determined
2.12 Let us look at how insurable interest is determined under the various classes of
insurance.
D1. Life Insurance
2.13 A person has an insurable interest in his own life. Hence, as long as a policy is
taken on the person’s own life, insurable interest is said to exist. For third-party
policies, there is a need to ensure that the relationship between the policy
owner (policyholder) and the life insured (insured person) falls under one of the
following categories:
 husband and wife, and vice versa;
 parent and minor child;

 guardian and ward;

 partner and partner in a business partnership;
 employer and employee (including keyman or keyperson);
 creditor and debtor, such as mortgagee (lender) and mortgagor (borrower).
2.14 Note that evidence of insurability is required in the latter two types of
relationships.
D2. Property Insurance
2.15 Insurable interest for this class of insurance normally arises out of ownership,
where the insured is the owner of the subject matter of insurance. This means
to say that, as long as an insured is the owner of the subject matter, insurable
interest is said to exist.
2.16 In the event that the insured is not the full owner, then there is a need to ensure
that the insured falls under one of the following categories:
 Part or Joint Owners;
 Agents;
 Bailees; or
 Tenants.
(a) Part Or Joint Owners - A person who is a part or joint owner in property
has an insurable interest up to the limit of his financial interest. However,
a part or joint owner can insure the property or its full value, as he is
considered a trustee for any money that may be paid in the event of a
claim and which may exceed his actual interest.
(b) Agents - Where a principal has an insurable interest, his agent can insure
on his behalf.
(c) Bailees - Where someone holds property on a temporary basis on behalf

of the legal owner, he is a bailee. He has an insurable interest in the
property, since he may be liable to replace it if it is damaged or stolen.
Examples of bailees include hoteliers, innkeepers, laundry owners, shoe
repairers, and motor workshop owners.
(d) Tenants - When someone is a tenant of a property, he is not the owner of

it, but has an insurable interest in it. This is because the tenant may be
liable for the cost of repairs in the event of damage to the property.
2.17 Do take note that bailees’ and tenants’ interests are in respect of possible
liabilities only. Do also note that while shareholders own a limited liability
company, they do not have insurable interest in the company’s property as it is
the company that owns such assets.

D3. Liability Insurance
2.18 A person has insurable interest to the extent of any potential legal liability from
negligence, which may be incurred to pay damages to another (e.g. for damage
to third party property, injuries to third parties, defamation, etc.) awarded by a
court of law and other costs. Legal liability can arise under contract, statute, or
at Common Law.
2.19 A statute is a specific law passed by parliament and is mandatory to all, e.g. an
employer under the Work Injury Compensation Act 2019 (No. 27 of 2019) is
liable to pay compensation for any personal injury by accident or certain
occupational disease suffered by an employee, while arising out of and in the
course of his employment with the employer.
2.20 Liability at Common Law usually involves some element of fault, perhaps the
most obvious example being the “tort” of negligence. Liability under contract
refers to what is known as “liability assumed under contract”, whereby one
party agrees to assume another’s liability for negligence, and to hold such other
person harmless for liability to third parties.
2.21 Thus, the key to determining whether insurable interest exists is to determine
whether there is a chance of the insured event happening to the insured, e.g. a
Professional Indemnity Insurance application from an investment consultant for
cover against giving incorrect advice to the client resulting in a financial loss to
the client can be accepted, as there is a chance of such an event occurring,
resulting in him being sued by the client.
D4. Pecuniary Insurance
2.22 Pecuniary Insurance policies are financial involvements not within the
categories as described above. “Pecuniary” means relating to money, and
Pecuniary Insurance covers businesses against purely financial losses (e.g.
from fraud, legal expenses or business interruption) rather than physical
damage to property. They include the loss of profits following a fire
(Consequential Loss Insurance or Business Interruption Insurance) and financial
loss resulting from the acts of dishonest staff members (Fidelity Guarantee
Insurance or Crime Insurance). For Pecuniary Insurance, it is quite easy to
determine whether the insured event applied for is insurable. For example, the
outbreak of a fire in a factory can cause much damage to the factory, while it is
not usable. Hence, an application for a Consequential Loss Insurance policy
against loss of profits from fire is an insurable risk, as the factory owner or
operator will be clearly prejudiced by the loss of profits.
POLICY
3. UTMOST GOOD FAITH
A. Concept
3.1 The duty of utmost good faith (uberrima fides) is central to the buying and
selling of insurance. Insurance contracts are thus described as contracts
uberrimae fidei (of the utmost good faith). This means, in simple terms, that the

insurer undertaking the risk and the person applying for insurance both have a
duty to deal honestly and openly with each other in the negotiations which lead
up to the formation of the insurance contract. This duty may also continue while
the contract is in force. If one party is in breach of this duty, the other party
usually has the right to avoid the insurance contract entirely. In other words, a
breach of utmost good faith renders the insurance contract voidable.
3.2 The doctrine of utmost good faith imposes two duties on the parties to the
insurance contract, namely:
 a duty not to misrepresent any matter relating to the insurance, i.e. a duty to
tell the truth; and
 a duty to disclose all material facts relating to the contract, i.e. a duty not to
conceal anything which is relevant.
3.3 This means to say that the parties to a contract must volunteer to disclose
accurately, truly, and fully all facts material to the risk being proposed, whether
requested or not.
3.4 In addition to one party not misleading the other party, and answering
questions truthfully, he must not conceal anything which is relevant. As a
general rule, if there is any doubt as to whether or not a situation constitutes a
material fact, it should be declared to the insurer.
3.5 This is different from the doctrine of caveat emptor (let the buyer beware) that
applies to other types of contracts, such as sales of goods. For many contracts
for the purchase of a product, each party can examine the item which is the
subject matter. For example, in the case of buying an electronic sound system,
it can be examined and switched on to check that it works properly. However,
this is not so easy with an insurance contract which is only “tested” at the time
of a loss.
3.6 The nature of the subject matter of the insurance contract and the
circumstances surrounding it are facts known mainly to the insured. The
insurers are not generally aware of these facts, unless the insured tells them.
The proposer can at least examine a specimen copy of the policy (or the actual
policy purchased within the free-look period in the case of Life Insurance or
Personal Accident Insurance) before accepting its terms. However, the insurer
is at a disadvantage as he cannot examine all material aspects of the proposed
insurance. Hence, the law requires the proposer to disclose the main material
facts to the insurance contract, and any non-disclosure of material facts by the
proposer will render the policy voidable.
3.7 In the case of Rozanes v. Bowen in 1928, Lord Justice Scrutton summed up the
duty of disclosure as follows:
“As the underwriter knows nothing and the man who comes to him to
ask him to insure knows everything, it is the duty of the insured … to
make a full disclosure to the underwriter without being asked of all the
material circumstances.”

3.8 As disclosure of material facts is very important in insurance, we shall look at

the meaning of the term “material facts” before proceeding to discuss the
duties of disclosure of the insurer and the proposer, as well as the
consequences of non-disclosure.
B. Material Facts
3.9 A material fact is usually defined as one which will influence the judgement of
a prudent underwriter whether or not to accept a risk and, if accepted, at what
premium and on what terms and conditions.
3.10 Examples of facts which will be considered as material facts for each class of
insurance are described below:
Material Facts Relevant Class

of Insurance
- that a factory has stocks of flammable materials Fire Insurance
- that a shop has previous burglaries Theft Insurance
- that an operator of a fleet of motor vehicles Motor Insurance
employs young drivers
- that a boiler is not well maintained Engineering
Insurance
- that the proposer has been refused insurance in the All types of
past insurance
3.11 However, the law accepts that some facts do not need to be disclosed. Examples
of such facts include:
Types Of Facts Reasons Why It Need Not Be

Disclosed
- that smoke detectors, sprinklers, - It reduces fire and burglary risks.
alarms and security fittings are
installed in the building
- that jewellery is attractive to - It is common knowledge.
thieves
- where a blank space on a - The insurer is deemed to have
completed proposal form is not waived the need for disclosure.
followed up
- facts of the law - Everyone is expected to know the
law.
- facts disclosed in a report of a risk - The insurer is aware of the relevant
surveyor appointed by the insurer information.
C. Duty Of Disclosure
3.12 The duty of disclosure arises from the beginning of negotiations until the time
that the insurance contract takes effect (i.e. the inception of the policy) and at

other specific times after inception. The duty arises both at Common Law and
under the terms of the policy.
3.13 Let us take a look at the duty of disclosure at each stage of the insurance
contract.
C1. At Inception
3.14 At Common Law, the duty of disclosure starts at the beginning of negotiations
and ends at the formation of the insurance contract. Sometimes, a policy
wording will extend this duty, so that it is continuous throughout the period of
insurance of the policy.
Duty of Disclosure:
C2. On Renewal - At Inception
- On Renewal
3.15 On the renewal of a policy, the duty of disclosure by the insured is revived for
short-term (such as general insurance, non-life policies) business. There is no
such duty of disclosure for long-term (such as life policies) business.
(a) Long-Term Business

Policies which fall under this category include Life Insurance policies
which are not usually renewable annually, but which are issued for a
specific number of years or for life. For such policies, if the insured wishes
to continue paying premiums, the insurer will be obliged to accept them.
Therefore, there is no duty of disclosure at so-called “renewal”, since no
new contract is formed.
(b) Short-Term Business

General Insurance, such as Fire, Theft, Liability, Marine and Aviation
Insurance, belongs to the category of short-term business. Such contracts
are renewable usually after 12 months. When the contract ends and
renewal terms are offered and accepted, a new contract is formed. The
duty of disclosure is revived and is applied as for new contract
negotiations.
C3. On Alteration
3.16 During the currency of a long-term or short-term insurance contract, it may be
necessary to change the terms of the policy. The insured may wish to increase
the sum insured or change the description of the property insured. In these
cases, the duty of disclosure is revived as a new contract is being formed. For
example, a landlord at the time of proposal has disclosed that the building is
rented out and is being used as an office. If, during the continuation of the
policy, the tenants vacate the building, and the landlord subsequently rents it
out to a person using it as a warehouse, then he must disclose this fact to the
insurer, as there is a change of material fact, which affects the risk situation.
C4. Insured’s Duty Of Disclosure
3.17 As we have seen earlier, the law imposes a greater duty of disclosure on the
insured, since the nature of the subject matter of the insurance contract, and
the circumstances surrounding it, are facts known mainly to the insured. The

insurer is not generally aware of these facts, unless the insured conveys them
to the insurer. Therefore, it is important that the insured must make full and
complete disclosure of all material facts relating to the insurance contract if he
wishes to ensure that, in the event of a loss covered by the terms of the policy,
his claim is paid by the insurer, without dispute.
C5. Insurer’s Duty Of Disclosure
3.18 The insurer also has a duty of disclosure to the insured. In order to fulfil this
duty, the insurer must also exercise utmost good faith by, for example:
 notifying the insured of a possible entitlement to a premium discount
resulting from a good previous insurance history, or having good preventive
measures;
 taking on only risks which the insurer is registered to accept, i.e. avoid
unenforceable contracts;
 ensuring that the statements made relating to the insurance are true, as
misleading an insured about the policy coverage is a breach of utmost good
faith.
D. Misrepresentation
3.19 Besides the failure to disclose material facts, the making of an untrue statement
may also result in the voiding of the policy. Such false statement which induces
the other party to enter the insurance contract is called “misrepresentation”.
3.20 For a fact to be considered a misrepresentation, it must:

 be one of fact rather than a statement of law, opinion or belief;
 be made by a party to the contract;
 be material, i.e. something which has influenced a reasonable person in
deciding whether to enter into the agreement;
 induce the contract, i.e. be something which the other party has relied upon
in deciding to enter into the agreement;
 cause some loss or disadvantage to the person who has relied upon it.
3.21 Misrepresentation can occur under a number of circumstances as shown below:

(a) Fraudulent Misrepresentation – A false statement is made with the
deliberate intention of misleading another, and putting him at a
disadvantage, e.g. a proposer for Theft Insurance says that the premises
are protected by a burglar alarm, when they are not.
(b) Innocent Misrepresentation – A statement made is false, but there is no

intention to mislead the other party to the contract, e.g. a proposer for
Motor Insurance declares that his second-hand car has not been modified
in any way, when it has already been done so by the first owner.

(c) Negligent Misrepresentation – A statement made is false, because the

person making it does not take sufficient care to check that it is correct,
e.g. a proposer for a Life Insurance policy states that his age as 25 years
old, when he is actually aged 35 years, thereby erroneously paying a lower
rate of premium.
E. Non-Disclosure & Misrepresentation
3.22 Where insurance is concerned, misrepresentation rarely occurs on its own as

an issue distinct from that of non-disclosure. In fact, the dividing line between
misrepresentation and non-disclosure is a very fine one. For example, a
proposer for Life Insurance may say that he is in good health, when he knows
that he is suffering from a serious illness. This will amount to both
misrepresentation (an untrue statement about the proposer’s state of health)
and non-disclosure (a failure to tell the insurer about a serious illness).
Therefore, if the insurer in this case wishes to avoid the insurance policy, it will
probably raise both defences. In practice, misrepresentation and non-disclosure
tend to be regarded as aspects of a general duty to act in utmost good faith.
F. Breach Of Utmost Good Faith
3.23 Both the insured and the insurer, as we have already seen, have to observe the
principle of utmost good faith. Let us look at what will happen if they breach
this principle.
F1. Breach By The Insured
3.24 A breach of utmost good faith may take the form of:
 misrepresentation which may be either innocent or fraudulent;
 non-disclosure which may be innocent or fraudulent. If fraudulent, it is
sometimes called concealment.
3.25 In each case, regardless of whether or not there is fraud, the insurer has the
right to void the contract “ab initio” (from the beginning). The effect is that the
contract is cancelled retrospectively, so that the insurer is not liable for any
claim arising between the time of making of the contract and the time of voiding
it.
3.26 If concealment or fraudulent misrepresentation is involved, the insurer may

also have the right to claim damages (for the tort of deceit) and can, in addition,
keep any premium paid by the insured.
3.27 If the insurer wishes, it may waive (give up) its right to any or all of these
remedies and allow the insurance contract to stand. The insurer must exercise
its option within a reasonable period of time after the discovery of the breach.
If it does not, it will be assumed that it has decided to waive its rights.
3.28 Take note that, in the event of a breach of utmost good faith, the insurer can
either void or affirm the entire contract. The insurer cannot, for instance, refuse
to pay a particular claim but, at the same time, affirm the contract and allow it
to stand. The insurer cannot accept liability for only a proportion of the loss.

Table 3.1 gives a summary of the remedies which the insurer has, when there
is a breach of utmost good faith.
Table 3.1: Remedies For Breach Of Utmost Good Faith

Innocent Fraudulent
Breach By Breach By The
The Insured Insured
Right to void the policy as a whole? YES YES
Right to keep the premium as well? NO YES
Right to claim damages as well? NO YES

Right to ignore the breach, and allow the
YES YES
policy to stand?
Right to refuse a particular claim, but allow
NO NO
the policy to stand?
F2. Breach By The Insurer
3.29 The insurer, like the insured, can be liable for a breach of the duty of utmost
good faith. If the insurer is in breach of its duty of utmost good faith, the insured
will be entitled to void the insurance contract.
3.30 For example, if an insurer is aware that an agent has fraudulently issued a Cover
Note for a Credit Insurance policy to his client, when the cover has not been
completed, the insured in this case can sue the insurer for failing to disclose
this fact to him and seek to void the contract.
4. PRINCIPLE OF INDEMNITY
A. Concept
4.1 The term “indemnity” means the protection of, or security against, damage or
loss. Therefore, when an insurance policy is said to be a contract of indemnity,
it is intended to provide financial compensation for a loss which the insured has
suffered and put him back in the same position that he has enjoyed immediately
before the loss.
4.2 The concept of indemnity thus implies that the object of insurance is to provide
the exact financial compensation for the insured. It also implies that the insured
should not be over-compensated and should not “make a profit” from his loss.
In other words, the principle of indemnity requires that the insured should be
fully compensated, but not over-compensated, for the loss.

B. Application Of Indemnity
4.3 The principle of indemnity can be applied to most classes of general insurance,
including:
 Property Insurance;
 Liability Insurance;
 Pecuniary Insurance; and
 Marine Insurance.
4.4 The reason for these insurance policies being considered as contracts of
indemnity is that they are intended to provide financial compensation for a loss
which the insured has suffered, and to put him back in the same position that
he enjoyed immediately before the loss.
4.5 Life Insurance and Personal Accident Insurance (covering accidental death and
permanent total disablement), on the other hand, are not contracts of
indemnity, as a financial value cannot be easily measured or placed on a
person’s life, or the effects of a bodily injury and, therefore, cannot provide
indemnity for a loss which the insured has suffered.
C. Measure Of Indemnity
4.6 The exact amount of compensation under a policy of indemnity is not known in
advance, but is fixed at the point of a claim, based on the actual amount of loss
suffered by the insured. The method by which the indemnity is measured varies
with the types of insurance involved and the nature of the subject matter
insured. Let us now take a look at how indemnity is determined for each of the
main classes of insurance.
C1. Property Insurance
4.7 Under a Property Insurance policy, the measure of indemnity is its value at the
date and place of loss. This is a very broad guideline. The actual basis of
settlement is dependent on the type of property insured, as you will see later.
(a) Buildings
Indemnity for loss of or damage to a building is calculated as the cost of
repair or reconstruction at the time of loss. An allowance is made for
improvements which may result from the repair or re-construction, e.g.
new roof and re-decoration.
(b) Machinery & Equipment

The measurement of indemnity is dependent on whether there is a ready
second-hand market for the item.
 When there is a ready second-hand market, the indemnity is the cost of
the second-hand item plus any additional transport and installation
costs.
 When there is no second-hand market, the indemnity is the cost of
repair or replacement less an allowance for wear and tear, if applicable.

(c) Stock
The measurement of indemnity for stock is usually dependent on
whether it is:
 manufacturers’ stock in trade; or
 wholesalers’ and retailers’ stock in trade.
(i) Manufacturers’ Stock In Trade – The stock in this case consists of
raw materials, work in progress and finished stock. The indemnity
value is the cost at the time and place of loss of replacing the goods
or returning them to the condition which they were in, immediately
before they were damaged.
(ii) Wholesalers’ & Retailers’ Stock In Trade – The indemnity here is the
cost of replacing the stock at the time of the loss, including the costs
of transport to the insured’s premises and handling costs.
One of the difficulties in measuring stock losses is that the stock may
not have a definite constant resale value. In addition, some stocks
may be obsolete. Items may be unfashionable or replaced by a more
sophisticated model and, therefore, difficult to sell. In these cases,
settlement must be made to maintain the insured’s financial position
and not to improve it.
To sum up, the insured, regardless of whether he is a
manufacturer, wholesaler or retailer, is not entitled to payment in
respect of any potential profit element on the sale of stock.
(d) Household Goods

In general, indemnity is based on the cost of replacing the items at the
time of loss, subject to a wear and tear deduction. However, a more
popular form of cover is available on a “new for old” basis (see later
section of this chapter for more information), where no deduction is made
for wear and tear.
C2. Liability Insurance
4.8 The indemnity under a Liability Insurance policy is the amount of damages
awarded by the court of law, in addition to the insured’s legal expenses and
claimant’s costs. However, in practice, most liability claims do not go to court.
They are usually settled by negotiation between the insurer and the third party
on the basis of what a court would award, if the case had come before it.
C3. Pecuniary Insurance
4.9 In the case of Pecuniary Insurance such as Money Insurance, the amount of
indemnity is the actual amount of loss incurred by the insured.
C4. Marine Insurance
4.10 Marine Insurance policies are generally issued on an agreed value basis (see
later section of this chapter). The amount of indemnity under this class of
insurance is computed using the formula in the Marine Insurance Act (Cap. 387).

D. Modifying Indemnity
4.11 Indemnity is not a rigid principle, as it can be modified by agreement between

the parties. This allows the insured to get either less or more than a strict
indemnity settlement. In fact, the insured does not always receive full
indemnity.
D1. Factors That Limit The Amount Of Indemnity
4.12 Factors that limit the amount of indemnity resulting in the insured receiving less
than the full indemnity include:
(a) The Sum Insured Or Limit Of Liability
The maximum amount recoverable under many policies is limited by the
sum insured or limit of indemnity (also known as limit of liability). In
policies which have a sum insured or indemnity limit, the insured cannot
recover more than this amount, even where the loss measured by the
indemnity principle is a higher figure. However, there can be exceptions,
where Liability Insurance is concerned. In Liability Insurance, the costs
and expenses incurred are either included in the limit of liability or payable
over and above the limit of liability.
(b) Other Policy Limits

Besides the sum insured or limit of indemnity, some policies also impose
separate limits for particular types of loss or property. For example, a
Householder’s Insurance policy will often restrict the cover on the
individual items covered under the policy to a certain percentage (e.g. 5%)
of the sum insured. For example, a picture insured under a Householder’s
Insurance policy may be valued at S$30,000, however, because it has been
indicated in the policy that the amount payable is 5% of the sum insured
(assumed to be S$100,000), in the event of a fire, only S$5,000 (5% of
S$100,000) will be paid for the picture. In other words, the policy owner
receives an amount which is less than a full indemnity.
(c) Under-Insurance & Average Clauses

The policy owner will also not receive a full indemnity if the sum insured
is not large enough to meet the loss. For example, if goods which are
insured for only S$50,000 are totally destroyed in a fire and cost S$75,000
to replace, the policy owner receives only two-thirds of the costs incurred.
In other words, the sum insured is always the maximum amount that will
be paid, no matter how much an indemnity will be.
If the sum insured is inadequate and the policy contains an average

clause, the amount of claim will be reduced. Example 3.1 shows how an
average clause works.

Example 3.1: How Average Works

Able Trading Company had a fire in its insured shop. The
Company claimed a loss of S$5,000 against its Fire
Insurance policy. The loss adjuster, who was instructed by
the insurer, was satisfied that the loss claimed was correct.
However, the loss adjuster reported that, in his opinion,
there was at least S$10,000 in stock, but only S$8,000 in
insurance cover. The loss adjuster, therefore, adjusted the
loss as follows:
Sum insured
x Loss
Value of goods at risk
S$8,000
x S$5,000 = S$4,000
S$10,000
If the policy was not subject to average, the insurer would
have to pay the full S$5,000. With average, the liability of
the insurer was limited to only S$4,000, as it had been
deprived of receiving a higher premium. In this way, the
Company (policy owner) receives an amount which was
less than what it was actually entitled to be indemnified
because of its under-insurance.
(d) Excess/Deductible
An excess is the first amount of each and every claim which is not covered
by the policy and is borne by the insured. A deductible is a sum of money
which the insurer may deduct from the settlement amount and before
paying a claim. The term excess is usually used in Motor and Household
Insurance policies. The term deductible is sometimes used in commercial
insurance, such as Industrial All Risks Insurance and Machinery
Breakdown Insurance, where the amount to be deducted by the insurer
before making a claim payment to the insured is sizeable. Both an excess
and a deductible are forms of ‘retention’ i.e. the maximum amount that
the insured must bear in relation to a claim.
The retention may be voluntary at the insured’s request, or compulsory

as imposed by the policy conditions. Either way, the amount of claim is
reduced by the amount of the excess or deductible as stated in the policy.
If the amount of claim is equal or less than the amount of excess or
deductible as imposed under the policy, nothing will be payable by the
insurer. The following diagram briefly illustrates how excess works:
How Excess Works
TOTAL
Insurer Pays
AMOUNT
EXCESS OF LOSS
AMOUNT
Insured Pays

(e) Franchise
A franchise is similar to an excess in that there is no liability for any loss
which is less than the franchise figure. However, once the franchise has
been exceeded, the loss is payable in full by the insurer. For example, if
the franchise is S$500 and the loss is S$300, nothing will be payable under
the policy; if the loss is S$600, the entire S$600 will be payable by the
insurer.
D2. Extensions That Increase The Amount Of Indemnity
4.13 Extensions can be added to a policy, so that the insured can recover more than
a strict indemnity. The examples are as follows:
(a) Reinstatement Clause
A reinstatement clause can be included in policies to take care of
the depreciation in the value of a property owing to wear and tear. In the
event of a claim, the insurer will pay an amount equivalent to the cost of
rebuilding or replacing a property to a condition “equitable to or
substantially the same as, but not better than or more extensive than, its
condition when new”. In other words, no deduction is made for wear and
tear. Therefore, the amount received by the policy owner is higher than
the actual amount of indemnity due to the policy
owner.
Old New
(b) “New For Old” Clause
A “New for old” cover is quite similar to that of the reinstatement cover.
It is often included in Householder’s Insurance policies or Personal All
Risks Insurance policies. With the inclusion of this clause, the insurer will
pay the full replacement cost “as new” for any of the insured items lost or
destroyed, with no deduction for wear and tear. This results in the policy
owner receiving an amount that is more than what he is actually entitled
to, according to the principle of indemnity.
(c) Agreed Value Clause

The agreed value cover is often used if a property to be insured is unique,
or of a type where there is limited market, e.g. “classic” cars. A policy that
incorporates the agreed value cover is called the valued policy. Under a
valued policy, the value of the subject matter of the insurance is agreed at
the start of the contract and the sum insured is fixed accordingly. In the
event of a total loss claim, the insurer must pay the agreed value as stated
in the policy, regardless of the actual value at the time of the loss, even if
it can prove that the value of the property has declined since the insurance
was effected. In other words, the policy owner may receive an amount
that is more than what he is actually entitled to, according to the principle
of indemnity.

5. SUBROGATION
5.1 Subrogation is the legal doctrine, whereby one person takes over the rights or
remedies of another against a third party. Subrogation is defined as the “right
of one person (the insurer) to take over the rights of another (the insured)”. It is
often described as “stepping into the shoes of another” and is applicable only
to contracts of indemnity. The basic premise is that where one person, i.e.
typically an insurer in this case, makes a payment on an obligation which, in
law, is the primary responsibility of another party, then the insurer making the
payment is subrogated to the claims of the insured to whom the insurer has
made the payment with respect to any claims or remedies which are exercisable
against the primarily responsible party.
5.2 Subrogation exists to make sure that an insured does not get more than an
indemnity, by claiming for the same loss or damage from both the insurance
policy and another source or sources. This is to say that subrogation will arise
only, where the insured has suffered a loss and has another means of
recovering for it, i.e. a claim on his own insurance policy and a legal right or
claim against some other persons for the same loss. If the insured chooses the
first option (a claim on his policy), then the alternative right, i.e. the claim
against another, will pass on to the insurer. The effect is to prevent the insured
from recovering twice for the same loss, so as to preserve the principle of
indemnity.
5.3 For example, let us suppose that a house has been damaged in a fire started by
the negligence of a plumber who has come to repair a pipe. The damage
amounts to S$10,000 and the house owner has a household policy which covers
fire damage. The house owner has two means of recovering this loss. Firstly,
he can claim under his own household policy. Secondly, he can make a claim
against the plumber based on negligence. Figure 3.1 illustrates the choices that
the house owner has.
Figure 3.1: Choices Of The House Owner
House Owner
S$10,000 fire damage
Claim under household policy? Negligence claim against plumber?
Household Insurer
Plumber
5.4 The easiest course is to claim against the household insurer. However, if the
house owner receives an indemnity from his insurer (in other words, the insurer
pays the claim), he will lose the right to recover from the plumber. This right is
now transferred to the household insurer, who can sue the plumber in the name
of the insured to recover the claim payment as shown in Figure 3.2.

Figure 3.2: Claim Against Household Insurer
House Owner
Damage S$10,000
Payment (S$10,000)
Loss Nil
======
S$10,000 Payment
Claim against the

plumber transfers
Household Insurer
to the insurer.
Loss - S$10,000 Plumber
5.5 In the above example, the insurer has indemnified the insured, and the insured
has not enforced his alternative rights to compensation. Thus, the insurer may
“step into his shoes” and pursue any right of action available to the insured to
reduce the loss insured against. However, if the house owner also receives
compensation from the plumber, then he will have to pass on the money to the
insurer. This is the second way in which subrogation can operate. Figure 3.3
illustrates how it works.
Figure 3.3: What Happens When A House Owner Receives

Compensation From Insurer And Another Party?
House Owner
Damage S$10,000
Payments (S$20,000)
Repayment S$10,000
Loss Nil
=======
Repayment
S$10,000 S$10,000 Payment
S$10,000
Insurer Payment
Household Insurer
Plumber
Payment S$10,000
Recovery (S$10,000) Loss S$10,000
Loss Nil
=======
5.6 There is yet another possible scenario to the above example, and that is, the
plumber has his own insurance to protect against claims of this sort. For
example, the plumber has a Public Liability Insurance policy which will
reimburse him for the loss that he has to pay to the house owner. In such a
case, the household insurer has the right of recovery against the Public Liability
insurer. Figure 3.4 illustrates how this works.

Figure 3.4: What Happens When There Is A Second Insurer Involved?
House Owner
Damage S$10,000
Payments (S$10,000)
Loss Nil
=======
Payment
S$10,000
Household Insurer
S$10,000 claim by way of Plumber
Payment S$10,000
subrogation Loss - Nil
Recovery (S$10,000)
Loss Nil
=======
Claim for indemnity under

Payment liability policy
S$10,000 Plumber’s Public
Liability Insurer
Loss - S$10,000
A. Operation Of Subrogation
5.7 The principle of subrogation can operate in two ways as you can see from the
example given earlier. First, the insured may have actually succeeded in
“recovering for the same loss twice”, i.e. collected a claim payment from his
insurer and recovered compensation from another source for the same loss.
Second, where the insured has not received compensation from another
source, the insurer who has indemnified the insured in respect of the loss may
then bring an action against the third party who is legally responsible for it. Let
us look at this latter case in detail.
A1. Where The Insurer Brings An Action Against The Third Party
5.8 The practices as described below apply when an insurer brings an action
against a third party.
(a) Action In The Name Of The Insured
The action against the third party must be brought in the name of the
insured, and legally, it is regarded as the insured’s own action, although
the insurer will ultimately get the benefit.
(b) One Action Only For The Whole Loss

The action must be for the whole loss and not just for the portion which
has been borne by the insurer. The reason is that, as a general rule, the
law allows one to sue a person only once for a wrongful act.
For example, if a motor car is damaged by the negligent action of another

motorist and the cost of repair is S$5,000, the car owner will be able to
claim for this loss, if he has a comprehensive Motor Insurance policy.
However, he may also need to hire another motor vehicle, while his car is

in the workshop for repair, and this cost (say, S$500) may not be covered
by his Motor Insurance policy. Therefore, the owner will have to claim this
back from the other negligent motorist. Since the insurer has the right to
sue in its name for the S$5,000 which it has paid, it is important that it
claims, in addition, for the S$500 hire charges on behalf of its insured, as
otherwise the right to recover this expense may be lost.
(c) Time When Subrogation Rights Arise

At Common Law, the insurers must indemnify the insured (i.e. pay the
claim) before they can exercise subrogation rights. However, this means
that the insurers do not have complete control from the date of loss, and
their liability to recover can be seriously prejudiced by delay, or by some
other actions taken by the insured.
For the above reason, insurers will always include an express subrogation
clause in non-marine policies. This will allow the insurers to begin
proceedings against a third party, before they have settled the insured’s
own claim. The clause will also give the insurers the right to control the
proceedings. The effect is that the insured will not be able to bring an
action against the third party himself (unless the insurers agree) and will
be in breach of his duty to the insurers, if he prejudices his rights in any
way (e.g. by waiving his rights against the third party, or entering into a
compromise with the third party).
(d) The Amount Of The Recovery

The operation of the principle of subrogation may depend on the
amount which is recovered.
(i) Recovery Equal To The Loss
In many cases, the amount of the recovery from the third party will
be the same as the loss suffered by the insured. For example, if the
insurers pay a loss of S$5,000 in full and then recover S$5,000 from
the third party, they will be entitled to keep the whole of the S$5,000
recovered. However, if they have paid only S$4,750, because the
policy is subject to an excess of S$250, then the insurers will be
allowed to retain only S$4,750 and must pass on the S$250 to the
insured.
(ii) Recovery Greater Than The Loss
If there is any surplus after the insurers have recovered their money,
the insured will be entitled to keep it. Take note that, once again, the
insurers are not entitled to recover more than what they have paid
out.
(iii) Recovery Less Than The Loss
In some cases, the recovery from the third party may be less than
the loss suffered. If the insurers have paid for the whole of the loss,
they will obviously be entitled to keep the whole sum which they
have recovered. However, if the insurers have not paid the whole of
the loss because the policy is subject to an excess, a difficult
question will then arise. Using the same example as illustrated
earlier, if the insurers recover S$4,000, it is not sure whether they
can retain the full amount or only S$3,750 (S$4,000 - S$250), since

there is no clear law on this.
B. Ex-Gratia Payments
5.9 Subrogation arises only from payments made under the terms of the policy. If
the insurer makes a payment outside the terms of the policy, making it clear
that no legal obligation to pay is accepted, and that payment is made merely as
a favour (known as “ex-gratia” payment), which usually arises from goodwill
or good business relationship, the insurer will not be entitled to subrogate
against a third party. The insured is entitled to retain any amount secured in
this way.
C. Source Of Subrogation Rights
5.10 We have seen that the effect of the doctrine of subrogation is to pass on to the
insurer a right to recover from a third party who is legally responsible for the
loss suffered by the insured. There are two main sources for such a right. It may
arise in:
 tort; and
 contract.
C1. Tort
5.11 Subrogation rights most frequently arise in tort. In most cases, the third party
will have negligently damaged the property belonging to the insured covered
under the latter’s Property Insurance policy. For example, a lorry driver may
negligently drive his motor vehicle into a building causing damage. If the
owners of the building claim for such damage under their Property Insurance,
the insurers will, on the face of it, be able to exercise their subrogation rights
against the lorry driver in the name of the insured owners.
C2. Contract
5.12 Subrogation rights may exist in contract. If the insured has an alternative
contractual right of recovery, in addition to that provided by the insured’s own
insurance, the insurers will be able to enforce this right for their own benefit.
For example, property insurers that pay claims for damage to buildings may
have rights of recovery against the insured’s tenant who is legally responsible
for the damage under the terms of the lease agreement.
D. Modification Of Subrogation Rights
5.13 Subrogation rights are often modified as a result of agreements among the
insurance companies. Sometimes, insurers agree to modify their rights to
subrogation against third parties. This is particularly common where the third
party is also insured. As we have seen, if the third party is covered by his own
Liability Insurance, the result is that one insurer will end up claiming against
another insurer. This will result in extra administrative costs and possibly
wasteful and expensive litigation among insurers, if they cannot agree on which
one of their insureds is to blame for the damage.

5.14 An example of such modification of subrogation rights is the Barometer Of

Liability Agreement (BOLA) being used by motor insurers in the Singapore
Motor Insurance market.
Insurance Insurance
Policy Policy
6. CONTRIBUTION
6.1 Contribution (known as double or dual insurance) is the right of one insurer to
recover an equitable proportion of a paid claim from another insurer who is
also liable for the same claim.
6.2 Like subrogation, contribution applies only to insurance policies which are
contracts of indemnity. It effectively prevents the insured from “making a profit
from his loss”. Contribution is concerned with the sharing of losses among
insurers. It comes into effect when two or more insurers are liable to pay the
same claim. If the insured claims from all of them, then he will recover more
than the amount that he has lost, and this is a breach of the principle of
indemnity. If the insured claims only from one insurer, then it will be unfair, as
the other insurers have all received premiums to cover the risk. However, the
principle of contribution has evolved to ensure that all insurers who are
involved in covering the risk pay an equitable proportion or rateable share of
the same claim.
A. When Contribution Arises
6.3 At Common Law, the following requirements must be satisfied before

contribution arises:
 two or more policies of indemnity must exist;
 the policies must cover a common interest;
 the policies must cover a common peril which gives rise to the loss;
 the policies must cover a common subject matter; and
 each policy must be liable for the loss.
6.4 In the next few sections, you will see that for the principle of contribution to
apply, there is a need only for interest, peril and subject matter to be common
to all policies. There is no requirement that the policies must be identical, as
long as there is some overlap in the insurance covers.
A1. Two Or More Policies Of Indemnity
6.5 Contribution will arise when there is more than one indemnity contract covering
the same subject matter. Suppose Harry, who owns a restaurant, effects a new
Fire Insurance policy with a new insurer, without cancelling an existing Fire
Insurance policy, which the new policy is intended to replace. Hence, there will
be two similar Fire Insurance policies covering the same restaurant. If a fire
occurs at Harry’s restaurant, contribution among the insurers will arise.
6.6 In such a case, the insured should claim only on one contract of insurance and
should inform the insurer of the existence of another policy. It is then up to that

insurer (not the insured) to work out the contribution arrangements. The
insured is not entitled to claim on both policies. In any event, the claim form
will usually contain a relevant question such as the following:
“Is there any other insurance covering the incident? If so, please state
the policy number and name of the insurance company.”
6.7 You must note that contribution does not apply in the case of a Life Insurance
policy, or any other non-indemnity contract of insurance such as Personal
Accident Insurance covering accidental death and permanent total disablement.
A2. A Common Interest
6.8 Different interests in the same property may exist in the case of landlord and
tenant, mortgagor and mortgagee, or seller and purchaser of a building. If each
of them effects a policy to cover only one’s own interest, then there will be no
double insurance and no contribution. However, if either or both parties insure
for the benefit of the other, as well as themselves, contribution may arise. For
example, where a husband and wife insure a property jointly, and a second
insurance is subsequently arranged by any one of them to cover each own
interest only, then there is double insurance.
A3. A Common Peril
6.9 The range of perils need not be identical, provided that there is an overlap
between the policies. Therefore, an “All Risks” Insurance policy may be drawn
into contribution with a Fire Insurance policy, where the source of loss is fire,
despite the broader cover provided by the former.
6.10 It is also common for a person to have more than two policies covering the
same peril. For example, Ivan’s camera has been stolen from his car. The loss
may be covered under Ivan’s Motor Insurance policy (which may have been
extended to cover theft of personal effects in the motor vehicle) and also
covered under a Householder’s Insurance policy or Personal All Risks Insurance
policy. If Ivan has been on holiday during that time, there may even be an
additional cover under a separate Travel Insurance policy. As such, contribution
will arise among the insurers, so that each will pay an equitable proportion of
the claim.
A4. A Common Subject Matter
6.11 The subject matter which is affected by the loss must be common to both
policies. However, the policies need not cover exactly the same subject matter.
For example, Best Trading Company may have one policy covering goods only
in a particular warehouse in Ang Mo Kio Industrial Park, and another policy
covering goods in all warehouses owned by the company throughout
Singapore. Alternatively, a person may have a Householder’s Insurance policy
covering all their personal possessions and a separate “All Risks” Insurance
policy covering only a small number of specified items, such as antiques,
jewellery and art. The range of properties covered by the policies does not have
to be the same types, provided that there is some overlap in the insurance
covers.

6.12 You must also bear in mind that the subject matter may be something other
than property. It can also be a legal liability that one assumes, or that of a
possible financial loss.
A5. Each Policy Liable For The Loss
6.13 Contribution will arise only where both insurers can be called upon to pay under
their policies. This may not be the case if one insurer has the right to reject the
claim, for example, for breach of condition.
6.14 For instance, an insured had two similar Home Insurance policies with Insurer
A and Insurer B. The insured’s semi-detached house caught fire recently and
his neighbour’s garden was damaged. Insurer A negotiated for a settlement of
S$50,000 with the neighbour. Following Insurer A’s settlement with the
neighbour, Insurer A claimed a 50% contribution from Insurer B. Insurer B
refused to contribute on the grounds that the insured had failed to notify them
of the loss and had breached a policy condition which required him to do so, so
that there was no liability under the policy. Insurer A’s claim for contribution
may fail in the Court, as Insurer B may have the right to reject the claim.
B. Basis Of Contribution
6.15 There are various ways of calculating the amount of contribution for the various
classes of insurance.
C. Modifications To The Principle
6.16 There are some situations in which the principle of contribution is modified.
Some common examples are described below:
Contribution
C1. Non-Contribution Clauses
6.17 Certain policies have what is known as a non-contribution clause. The effect of
this clause is that the policy will not contribute if there is another insurance
policy in force. However, the Courts do not favour such clauses, and in
situations, where a similar clause applies to both or all policies, they are treated
as cancelling each other out. This means that each insurer will contribute its
own rateable proportion or rateable share of the same loss.
C2. More Specific Insurance Clauses
6.18 Certain policies include a clause which restricts cover in situations, where a
more specific insurance has been arranged. The most common example is a
Householder’s Insurance policy which restricts cover in this way. This is
because many individuals insure jewellery and other items specifically, and it
is not the intention for both policies to contribute.
C3. Market Agreements
6.19 Market agreements among insurers modify the application of contribution

itself. This can happen in two ways. Firstly, insurers may agree to share losses

in cases where, strictly speaking, contribution does not arise in law. An example
is the agreement which some insurers have on Fire Insurance claims. Insurers
may agree to share certain losses, where their policies cover the same subject
matter against the same peril, even though the policies may not cover the same
interest.
6.20 Secondly, they may agree to waive the rights of contribution in some cases,
where such a right clearly exists, so that the whole loss is borne by one insurer.
An example is when one person (A) drives a car belonging to another person
(B) and injures a third party (C). Contribution may arise in law, if A is an insured
driver under B’s policy, and A also has his own policy with a “driving other cars’
extension”. Under the market agreement, B’s insurer (who insures the motor
vehicle involved in the accident) will provide the indemnity to A and not seek
contribution from A’s own insurers. A’s insurer will be called upon to pay, only
where A is not an insured driver under B’s policy.
7. PROXIMATE CAUSE
7.1 Proximate cause was defined in the case law of Pawsey & Company v. Scottish
Union and National Insurance Company (1908) as “the active efficient cause
that sets in motion a train of events which brings about a result, without the
intervention of any force started and working actively from a new and
independent source”.
7.2 The proximate cause (or causa proxima in Latin) of an occurrence is always the
dominant cause, and there is a direct link between it and the resulting loss. A
single event is not always the direct cause of a loss.
7.3 At times, additional events may occur between the proximate cause of the loss
and the loss itself, but these events occur in a type of “chain reaction”, with no
other causal element interrupting the sequence. We shall illustrate proximate
cause using Example 3.2.
Example 3.2: An Illustration Of Proximate Cause
A power station had a small fire in a control unit that caused a short-circuit
in the electrical wiring. This caused one machine to stop operating. Since this
machine regulated another, the second machine ran out of control and
flipped a flywheel off its shaft, which badly damaged the adjacent machinery.
In this example, the fire was the proximate cause of the damage to the
machinery, because it started the chain reaction, and there were no other
intervening causes.

A. Types Of Perils
7.4 Once the insurer has established the proximate cause of the loss, it must ensure
that the peril is covered by the policy. Perils can be classified as described
below:
Insured Perils − those named in the policy as covered, e.g.

collision under a Motor Car Insurance
policy.
Uninsured or Unnamed − those perils not excluded in an All Risks
Perils Insurance policy, e.g. water damage caused
by putting out a fire.
Excluded Perils − those named in the policy as specifically not
covered, e.g. fire as a result of war, etc.
7.5 The insurer will decide whether a claim is valid or not, by establishing which of
the above categories that the peril (being the proximate cause of the loss) will
fall into. It is only necessary to find the proximate cause of a loss, where the
events before the loss are not all insured perils.
7.6 If the loss is due to an uninsured or unnamed peril, then the insurer will be liable
if the proximate cause is an insured peril.
7.7 Examples 3.3 and 3.4 below show how proximate causes are classified.
Example 3.3: Classification Of A Proximate Cause
Suppose there is a Fire Insurance policy, which excludes damage from

explosion, and suppose a tree branch falls onto the insured house:
 The resulting property damage will not be covered by the Fire
Insurance policy, since damage by a falling tree branch is an uninsured
peril.
 However, if the tree branch lands on some electrical circuitry and
causes an electrical fault, which in turn starts a fire, the fire damage
will be covered (fire is an insured peril).
 Finally, if the fire reaches a gas cylinder and causes an explosion, the
resulting damage will not be covered (explosion being an excluded
peril).
Example 3.4: Classification Of A Proximate Cause
Suppose a Householder’s Insurance policy covers a direct physical loss

to a property resulting from fire or lightning. A direct physical loss means
that the fire or lightning must be the proximate cause of loss. Assume
that a fire starts in the bedroom of a house. Also assume that the fire-
fighters spray water onto the other rooms to keep the fire from spreading,
and that the water causes considerable damage to the furniture, antiques,
books, carpets and other household contents. In this instance, the entire
loss is covered, including the water damage. This is because even though
water damage is an uninsured peril, the fire which is the proximate cause
of loss, is an insured peril.


4. Law Of Contract & Agency
CHAPTER 4
LAW OF CONTRACT & AGENCY
CHAPTER OUTLINE
1. Introduction
2. Contracts
3. Elements Of A Valid Contract
4. Vitiating Factors
5. Law Of Agency
6. Creation Of An Agency
7. Duties & Rights Of An Agent
8. Agents’ Authority
9. Termination Of Agency
LEARNING POINTS
 define a contract
 understand the elements of a valid contract
 understand how the law limits the following persons’ contractual capacity:
- minors
- persons suffering legal disability
- undischarged bankrupts
 explain the six vitiating factors that can render a contract invalid
 understand the nature of law of agency
 define agents, principals and third parties
 know how an agency is created
 know the rights, responsibilities and duties of an agent including the role of agents
in claims
 be familiar with the different types of agents’ authority
 be aware of the consequences of an agent acting outside his authority
 recognise how an agency may be terminated

1. INTRODUCTION
1.1 In this chapter, we will cover the law of contract as insurance is a form of
contract. We will then focus on the law of agency as it is common for insurance
agents to be authorised by insurers to act on their behalf e.g. selling or
arranging insurance.
2. CONTRACTS
2.1 A general insurance policy is the evidence of an insurance contract between the
insurer and the insured. The obligations of the insurer and the rights of the
insured are governed by this contract. In order for the contract to be valid,
certain conditions must be met. Let us begin by first looking at the meaning of
a contract.
2.2 There are several ways of defining a contract. A contract is “an agreement
enforceable by law”. It can also be defined as “a legally binding agreement
between two or more parties”. The agreement involves a promise or a set of
promises to perform one or more acts. The promise may be made by one of the
parties to the contract, or by all the parties involved.
2.3 Therefore, a contract is an agreement. However, not all agreements are

contracts. For example, an agreement between two friends to dine is not
considered a contract, because there is no intention to legally enforce the
agreement by one party if the other party fails to turn up. In other words, one
party is not going to sue the other for failing to turn up for the dinner. Contracts
are only those agreements that give rise to rights which the law will protect,
and obligations which the law will enforce. An example is an insurance contract,
or the policy which is the evidence of the insurance contract.
2.4 An insurance contract is an agreement, enforceable by law, made between the

insured and the insurer. The insured agrees to pay a premium to the insurer.
The insurer agrees to indemnify the insured for damage to the subject matter
caused by an insured peril covered by the policy.
3. ELEMENTS OF A VALID CONTRACT
3.1 For a contract to be enforceable, it must meet all the requirements as prescribed
by law for the formation of a valid contract, i.e. it must have the elements as
described below:
A. Intention To Create Legal Relationship
3.2 The first requirement of a contract is the intention of all the parties to enter into
a legal relationship i.e. they intend to enforce their rights. Without such an
intention, the contract cannot come into existence.

B. Offer & Acceptance
3.3 A contract is an agreement, and for the parties to come to an agreement, there
must be a “meeting of minds” (“consensus ad idem” in Latin) or mutual
agreement between the parties to the contract.
(a) Ordinarily, mutual agreement is evidenced by the making of an offer

expressed either orally, in writing, or by conduct by one party (the offeror)
and the acceptance of the offer by another party (the offeree). The offer
must be unconditionally accepted (i.e. unqualified acceptance) to
constitute an agreement. If the acceptance is conditional (i.e. new terms
are introduced), it is only a counteroffer which is then open to be accepted
or rejected by the person who has made the original offer. An offer may
be withdrawn by the person making it, before it is accepted by the other
party.
(b) In the case of general insurance:
(i) There is no rule as to which party (the proposer or insurer) makes
the offer and which party accepts. Sometimes, the proposal form
which is submitted to the insurer will be the offer, and the insurer
will accept it, by confirming cover or issuing the policy. In any other
case, the insurer may quote a premium based on information
supplied in the proposal form and, in doing so, the insurer makes an
offer which the proposer may then accept or decline.
(ii) Sometimes, an insurance contract is finalised only after lengthy

negotiations between the proposer and insurer, often involving a
broker or other intermediary. In such case, there may be a long
series of offers, rejections and counteroffers, before a firm
acceptance is made by one party or the other.
(c) Although an insurance contract will normally come into existence once an
offer is accepted, the cover may not operate immediately. The parties may
agree that the risk will begin to run at some date in the future (as in the
case of Travel Insurance). In this case, there is a binding contract to insure,
but the risk has not yet been attached. Sometimes, the insurer stipulates
that the risk will be in force only if the premium is paid to the insurer (or
the intermediary through whom the policy was effected) on or before the
inception date or the renewal date of the coverage, e.g. Payment Before
Cover Warranty in personal general insurance and bonds.
C. Consideration
3.4 A contract is ordinarily based on reciprocity. When a party promises to do

certain thing(s) under a contract, he is called the promisor. In giving the
promise, the promisor must receive something in return, and what he receives
for the promise is called consideration.
3.5 Consideration can be in money or monetary worth. It can be a return promise

to do certain thing(s), or to abstain from doing certain thing(s), or to forbear
some acts. All these shall constitute the consideration.

3.6 For example, if a person travels in a bus, the fare that he pays is the
consideration for the right to travel in the bus. The wages paid to an employee
are the consideration for the services rendered by him to the employer.
3.7 A contract is not enforceable at law, unless a consideration has passed from the
promisee to the promisor. In a Personal Accident Insurance contract, the
premium paid is the consideration for the promise contained in the policy.
D. Capacity To Contract
3.8 A person of legal age, without mental or other incapacity, is legally competent
to enter into a contract. Such a person is said to have contractual capacity.
However, the law limits the capacity of certain persons to do so. The special
features of some of the categories of persons are discussed below:
(a) Minors
(i) Any person who has not attained the age of 18 years is treated as a
minor. Under Section 35 of the Civil Law Act (Cap. 43), a contract
entered into by a minor who has attained the age of 18 years shall
have effect as if he were of full age, except as otherwise provided
under other written law, and except for certain contracts like the sale
and purchase of land.
(ii) Section 58(1) of the Insurance Act (Cap. 142) also lays down special
provisions regarding the capacity of minors to enter into insurance
contracts. A minor who is over the age of 10 years, but is under the
age of 16 years, has the capacity to enter into a contract of insurance
with the consent in writing of his parent or guardian. Therefore, it
implies that no such consent is required for a person who is 16 years
old or above, and that he may enter the contract of insurance on his
own.
(iii) However, the law does not appear to give any rights to a minor to
assign, mortgage or surrender his insurance policy. Neither does it
make any provision for a policy owner, who is still a minor, to effect
policy transaction which involves the payment of policy money to
him. Neither can the minor give a valid discharge in respect of the
policy money payable to him under the policy, where he is the policy
owner. Instead, the minor, who is the policy owner, will have to wait
until he has attained the age of 18 years, before he can give a valid
discharge in terms of the policy money payable to him upon the
death of the life insured under the policy.
(b) Persons Suffering Legal Disability

A contract entered into by a person of unsound mind or a drunkard, will
not be binding on him, except if the person, entering into a contract with
such person was not aware of his mental state. In other words, a person
of unsound mind can void the contract, only if the other party also knows
or has reason to believe that he is unsound.

(c) Undischarged Bankrupts

The Bankruptcy Act (Cap. 20) places restrictions on the rights of
undischarged bankrupts to enter into contracts.
4. VITIATING FACTORS
4.1 An insurance contract which contains the elements required by law as

mentioned above may still be invalid owing to the following reasons:
 misrepresentation;
 duress;
 undue influence;
 illegal contract;
 mistake; and
 non est factum.
4.2 When a contract is induced by misrepresentation, duress or undue influence, it is

voidable at the option by the innocent party. This means that the innocent party
has a choice whether to uphold the contract or to call it off. However, a contract
which is illegal or formed by mistake is void, which means that the Courts will
treat the contract as never having existed.
A. Misrepresentation
4.3 A contract is voidable by a party to the contract if he was induced into entering
the contract by misrepresentation on the part of the other party. At common
law, in order for a contract to be invalidated, it must be shown that the
misrepresentation or false statement:
(a) was a statement of fact as opposed to a statement of opinion, law or belief.
A promise being a statement about the future, is not a statement of fact;
(b) was made by a party to the contract. A false statement by a non-party to
the contract cannot invalidate a contract;
(c) was material, such that it would affect the judgement of a reasonable man
or, a prudent insurer in the case of an insurance contract;
(d) induced the other party to enter into the contract. The other party must
have relied on the false statement in deciding to enter into the contract; or
(e) caused some detriment or disadvantage to the party who relied on it. If no
detriment is caused to the party relying on the false statement, he may
elect to continue with the contract.
B. Duress
4.4 A contract is formed by mutual consent of the parties. Both parties must be
genuinely willing to enter the contract. Accordingly, if a party is under coercion
to consent, the contract may not be valid, as the consent given is not genuine.

4.5 Traditionally, the Courts have recognised that actual harm or a threat to harm a
person or his loved ones will amount to duress which invalidates the contract.
Hence, if Andrew points a gun at Bernard’s son forcing Bernard to sign the
contract, the contract is invalid. However, the threat must not be so trivial that
a person with reasonable courage will not be coerced. For example, a threat to
cut one’s hair may not be held as duress which vitiates consent.
4.6 The threat must be illegal. Hence, if the threat is to prosecute a crime which has
been committed or to a civil wrong, it does not amount to duress, and the
contract cannot be impeached. However, the contract may be void on the
grounds of public policy if it amounts to an agreement which perverts the
course of justice.
C. Undue Influence
4.7 When there is inequality between the parties to a contract (such as where
relations between the parties are such that one of the parties is in a position to
dominate the will of the other party), and one of them (i.e. the dominator) takes
an unfair advantage of the situation of the other and forces an agreement upon
him, the contract may be set aside under the doctrine of undue influence. Undue
influence has occurred between:
 Parent and child
 Husband and wife
 Trustee and beneficiary
 Attorney and client
 Pastor and parishioner
 Doctor and patient
 Administrator and legatee
 Guardian and ward
 Fiancé and fiancée
D. Illegal Contract
4.8 It is important to know that certain types of contract are prohibited by statute
or at Common Law on the grounds of public policy. No party can enforce such
contracts in Courts. They are void and not voidable at the choice of the parties.
4.9 Section 5 of the Civil Law Act (Cap. 43) provides that all contracts or
agreements, whether orally or in writing, by way of gaming or wagering shall
be null and void. Accordingly, no one can sue for recovery of the moneys won
under such circumstances. Hence, gaming and waging debts are not legal
debts. There is nothing to prohibit parties from honouring their words in a game
or wager, but the gates of justice will be shut at them.
4.10 Similarly, an insurance contract will amount to a wagering contract if the policy
owner does not have the insurable interest in the insured subject matter and
such policy owner cannot sue the insurer for payment under the policy.

E. Mistake
4.11 Sometimes, parties would reach an agreement without knowing that the facts,
which were the very reason for the contract, did not exist, or not knowing the
existence of certain facts, the existence of which would have caused the parties
to not enter into the contract. In such cases, their consent is mistaken, and the
contract is therefore void ab initio (i.e. the contract is treated as if it had not
existed at all). For example, a contract for the sale of goods- the goods, without
the knowledge of the sellers, have been destroyed at the time when the contract
was made.
F. Non Est Factum
4.12 The term “non est factum” means “this is not my deed”. As a general rule, if a
person who is not under any incapacity signs a contract, he will be bound by
the contract whether he has read it or not. However, if he could show that the
document which he signed was not the one he intended to sign and the mistake
was not due to his carelessness, he might be able to avoid the contract on the
ground of non est factum. Fraud is not an element required for the operation of
this law. However, it presents itself in most of the cases involving non est
factum. If Mrs Chan, an old and illiterate lady, was given a document by her
grandson to sign, and told it was for entering a lottery game when it was in fact
a guarantee for his debt, she could claim the defence of non est factum to avoid
the contract, if she was subsequently sued on the guarantee.
4.13 The mistake must be a fundamental mistake as to the character or effect of the
document. If a party was careless or ignorant as to what he was signing, he
could not rely on the defence of non est factum to avoid the contract. Thus, if in
the same case, if Mrs Chan had simply signed the document without asking her
grandson what it was for, she would be bound by the guarantee.
5. LAW OF AGENCY
5.1 Insurance policies are often arranged through an insurance intermediary,

namely an agent or a broker. It will therefore be necessary for you to have
knowledge of the general principles of agency.
A. Agents, Principals & Third Parties
5.2 There are three parties involved in an agency:
A1. The Agent
5.3 Basically, an agent is a person who has the authority or power to act on behalf
of his principal. The agent’s acts will be deemed to be acts of his principal and
will be binding on his principal. For example, an insurance agent receives his
authority from the insurer (the principal) to sell an insurance product. The
agent’s act of selling the product will be as if the product was sold by the insurer
itself.

5.4 The essence of an agent’s position is that he is only an intermediary. He may

not be personally liable to the third party if he has simply acted as an
intermediary. If the agent is liable, he may be entitled to an indemnity from the
principal.
A2. The Principal
5.5 The principal is the one who gives authority to the agent. The principal might
incur a liability to a third party for the agent’s actions so taken on his behalf.
A3. The Third Party
5.6 Any person, other than the principal and the agent, may be referred to as a third
party in the context of an agency. In the example of the insurance agent above,
the customer or policyholder that bought the insurance is the third party.
6. CREATION OF AN AGENCY
6.1 The relationship of principal and agent may be created in the following manner:
(a) By agreement, whether contractual or not, between the principal and the
agent that may be expressed, or implied from the conduct or situation of
the parties.
(b) By retrospective ratification by the principal, of acts done on his behalf.
A. Agency By Agreement
6.2 The basic way by which the agency relationship arises between the agent and
principal is by agreement. This agreement does not need to be contractual,
although some form of agreement will normally be necessary.
6.3 For example, a person may ask a friend or family member to perform certain
tasks on his behalf, without any intention to create a contractual relationship
with them in respect of such tasks. Nevertheless, the friend or family member
who had agreed to the request and performed such tasks would be an agent of
that person when performing the requested tasks.
6.4 It is also possible for an agent to bind his principal with respect to third parties
if the principal is, in fact, willing for the agent to do so, even though the agent
may not be aware of this.
6.5 For example, a principal grants his agent with a certain authority, but the agent
has acted on the principal’s behalf without knowledge of such authority.
Nevertheless, the acts may be binding on the principal, as they are within the
authority granted to the agent, even though the agent may not be aware that
he has that authority when he performs the acts.
6.6 The agreement by which the agent is appointed may be express or implied from
the conduct or situation of the parties.

(a) Express Agreement

(i) The simplest and most common way from which an agency arises is by
an express agreement, whether written or oral, by the principal, and
acceptance by the agent.
(ii) In the case of a written agreement, the terms of the agency, such as the
duties, authority and power of the agent, the duration of the agency and
the remuneration of the agent, will usually be set out expressly in the
written agreement.
(iii) As mentioned above, an agency may be created formally in writing or
verbally. It may also be created by conduct without any formal
appointment or contract. However, there are some circumstances,
whereby a formal written appointment is essential and/or required by law.
For example, under Section 35M of the Insurance Act (Cap. 142), the
appointment of an insurance agent by an insurance company must be
specified in writing as evidenced in an Agency Agreement.
(b) Implied Agreement

(i) An agreement between the principal and the agent may also be implied
from the conduct of the parties, where one party conducts himself in such
a way that it is reasonable for the other party to infer from that conduct
that an agency relationship has been created between the principal and
the agent. This is to be viewed from the perspective of the principal and
the agent, namely whether it will be reasonable for the principal and the
agent to think that an agency relationship has been created between them.
B. Agency By Ratification
6.7 The relationship of principal and agent may be created under the doctrine of
ratification. Under this doctrine, where an act is done purportedly in the name
or on behalf of another by a person who has no authority to do that act, the
person in whose name or on whose behalf the act is done, may, by ratifying the
act, make it valid and effectual as if it had been originally done with his
authority. To ratify an act is to sign or give formal consent to, making it officially
valid.
6.8 This ratification is done for past acts. It does not matter whether the act was
done by an agent who had exceeded his authority, or by a person who had no
authority to act for the principal at all.
6.9 However, ratification only validates past acts of the agent and only creates an
agency in respect of the transaction ratified. It does not, per se, give the agent
any authority for future transactions.
6.10 For this doctrine to apply, the following conditions must be satisfied:
(a) Only an act that is capable of being done by means of an agent is capable
of ratification. As such, void or illegal acts cannot be ratified.
(b) Only the person whose name or on whose behalf that the act purported
to be done has the power to ratify the act. As such, an undisclosed

principal cannot ratify. For example, the undisclosed principal cannot

ratify an act if the agent has performed the act on his own behalf and not
on behalf of the principal;
(c) The principal ratifying the act must have been in existence and competent
at the time when the act was done.
(d) At the time of ratification, the person ratifying the act should have full
knowledge of all the material circumstances in which the act was done,
although knowledge of the legal effect of the act might be imputed to him.
(e) Ratification is not effective if it prejudices a third party. As such, the

ratification should be done within a reasonable time;
(f) Ratification must be of the whole contract. As such, the adoption of a part
of a transaction will operate as a ratification of the whole.
(g) As with the grant of authority by the principal to the agent that may be
expressed or implied, the ratification by the principal of the agent’s act
retrospectively may also be expressed or implied:
(i) An express ratification is a clear manifestation by the principal that he
treats the act, which was otherwise unauthorised, as authorised. One
example would be that of a shipmaster selling his ship without the
authority of the owner. The owner may formally ratify the sale and
receive the purchase money with full knowledge of the circumstances
in which the ship was sold.
(ii) The ratification may be implied, when the conduct of the principal is
such as to amount to clear evidence that he adopts or recognises the
act in whole or in part. Depending on the circumstances, mere
acceptance or inactivity by the principal may be sufficient.
For example, Ann receives the rents of a certain property for many
years, without the authority of the owner. The owner sues Ann for
possession and for an account of the rents and profit. This action by
the owner is a sufficient ratification to render Ann, the agent of the
owner, from the commencement of receiving the rent.
7. DUTIES AND RIGHTS OF AN AGENT
A. Duties Of An Agent
7.1 An agent owes his principal the following duties:

(a) A duty to act in accordance with the terms of the Agency Agreement, but
not exceeding his authority. The agent must comply strictly with the terms
of what he has agreed to do. He will be in a breach of contract if he exceeds
his authority or fails to obey the principal’s instructions. However, he is
not under a duty to perform any act which is either illegal or void.

(b) A duty to exercise reasonable care and skill in the performance of his
duties.
(c) A duty to carry out the contract with dispatch. Where no time for
performance is stated, the agent must perform the contract within a
reasonable time having regard to all the circumstances of the case.
(d) A duty to perform personally and not delegate his duties, unless expressly
authorised by the principal or implied from the circumstances, trade
customs or necessity.
(e) Fiduciary duties to act in good faith and not allow personal interest to
conflict with those of his principal, including making full disclosure of
matters that relate to a possible conflict of interest, and also any
information acquired in the course of the agent’s duties that may affect
the principal’s position. These fiduciary duties apply whether or not the
agency is gratuitous i.e. given or done free of charge. An agent must not,
without the knowledge of his principal, accept any profit or benefit from
his agency, other than that contemplated by the parties at the time of
making the contract of agency.
(f) A duty to account to the principal for all moneys received in the course of
his agency duties. The agent is also not allowed to accept any bribe or
secret profit and must pay over to the principal such bribe and secret
profit.
7.2 With regard to (f) above, the agent has a fiduciary duty to account for all moneys
in his possession received on behalf of the principal. The principal’s money and
property must be kept separate from the agent’s own money.
7.3 In insurance, many insurance agents/brokers are authorised by their principals

to collect premium payments, in order to facilitate the application and
underwriting processes. In Singapore, the GIA requires that all premiums due
from the agents to their principals shown in the monthly statements of accounts
(issued by their principals/insurers) shall be paid in full within the credit period
allowed by their principals. The credit period shall not exceed 90 days after the
close of the month as covered by such a statement of account. According to
Regulation 7 (14) of the Insurance (Intermediaries) Regulation, brokers must
pay, to the insurer, all premiums received from the policyholder by the 90th day
from the date of commencement of cover.
B. Rights Of An Agent
7.4 An agent’s rights and responsibilities are basically governed by the express
terms of his Agency Agreement.
7.5 However, the law also imposes on the agent special duties of a fiduciary nature,
since an agent has been conferred with the authority and power to affect and
change the legal position of his principal.
7.6 Some of these duties and terms are implied by law and originate from equity.
These duties and terms are in addition to the express terms of the Agency
Agreement, unless overridden by explicit terms in the Agency Agreement.

7.7 Generally, the rights of an agent under an Agency Agreement include:
B1. Remuneration
7.8 The right to remuneration (the right to be paid) either expressly provided under
the Agency Agreement or implied from the circumstances. In general, the mere
employment of a professional person means that the parties should have the
intention of remunerating that person, unless there are circumstances to the
contrary.
7.9 For example, the Agency Agreement expressly provides that the agent is only
entitled to his remuneration upon completion of a task, so the agent will not be
entitled to any remuneration until the completion of the sale. The agent will also
not be entitled to any remuneration for any unauthorised transaction which has
not been ratified by the principal, and in cases of misconduct, breach of duty or
illegal or void transaction.
B2. Indemnity
7.10 The right to reimbursement of expenses that have been reasonably incurred
and indemnity from liabilities incurred in the course of execution of his
authority in the agency, unless the act was not authorised or ratified by the
principal, or the agent was in breach of his duty, or the transaction was illegal
or void.
B3. Right Of Lien
7.11 The right to a lien allows the agent to retain property belonging to the principal
as security for commission or money owed by the principal to him – this lien,
however, does not come with a general right to sell the retained property.
7.12 The application of an agent’s right of lien is more relevant in general insurance.
In international commercial Marine Insurance, a broker often advances the
premium on behalf of the client. In such a case, the broker has a lien (right to
retain) on the policy until the premium is paid. Without the Marine Insurance
policy, the insured will not be able to make a claim.
C. Role Of Agent In Claims
7.13 When the insured advises the agent of an incident which may give rise to a
claim under the policy, the agent must inform the insurer without delay. The
agent must also give prompt advice to the insured of the insurer’s requirements
concerning claim submission, including the provision of information required
to establish the nature and true extent of the loss. Information received from
the insured must be passed to the insurer without delay.
7.14 The agent must also be careful not to give any indication of acceptance or
rejection of the claim, or any admission or denial of fact or liability (unless
expressly at the insurer’s written instructions). The agent must make it clear to
the insured that all correspondence made relating to the insurer’s investigation
and processing of a claim is strictly on a “without prejudice” basis.

8. AGENTS’ AUTHORITY
8.1 A principal is bound, not only by acts that are within the actual authority of the
agent, but also acts which are within the authority that he appears to have. The
former, commonly referred to as “actual authority”, is real in the sense that it
was given expressly by the principal or by implication of law. The latter,
commonly referred to as “apparent authority”, is where the agent has no real
authority to do the act in question, but appears in the eyes of a third party that
he has such authority and is able to bind his principal. For example, an
insurance agent has been issuing cover notes on behalf of his insurer where in
fact he is not authorised to do so. It may appear to the policyholder being the
third party that the agent has authority to do so.
A. Actual Or Express Authority
8.2 Actual authority stems from the consent by the principal to the agent that the
agent should represent or act for him. This authority given by the principal to
the agent:
(a) may take the form of oral words or be in writing, commonly referred to as
“express authority”. It forms part of the Agency Agreement between the
principal and the agent; or
(b) may be implied by the law because of the interpretation put by the law on
the relationship and dealings of the two parties, commonly referred to as
“implied authority”. This includes:
(i) incidental authority, which is the implied authority to do whatever is
necessarily, or ordinarily incidental to the effective execution of the
expressed, authorised authority;
(ii) usual authority, which is the implied authority to do whatever an
agent of the type concerned usually has authority to do, even though
he may not be actually authorised to do so. For example, an
insurance agent may be usually authorised to collect premiums. In
essence, the law recognises that the agent has been placed in a
position which normally carries with it certain authority, and he is
implied to have such authority, unless it is withdrawn from him; and
(iii) customary authority, which is the implied authority to act in
accordance with such applicable business customs as is reasonable.
This may include authority implied from the course of dealing
between the parties and the circumstances of the case. Again, the
authority by an insurance agent to issue Marine cover notes may be
deemed as customary in Marine insurance.
B. Apparent Or Ostensible Authority
8.3 Apparent authority, also referred to as ostensible authority, stems from a

manifestation made by the principal to a third party that the agent has the
authority, and that the principal may be bound by the acts of the agent. This
may take the form of an express representation. It may be one regarded by the
law as a representation that the agent has authority. As such, the principal may
be bound, as against a third party, by that agent’s acts within the authority

which that agent appears to have. This is so, even though the principal has not
in fact given that agent such authority, or has limited that authority by
instructions, not made known to the third party.
8.4 In essence, apparent or ostensible authority is the authority of an agent as it

appears to others, and which the principal holds out or permits to be held out,
as the authority which his agent is vested with. A third party dealing with the
agent will not normally know the exact limit of his authority, and should be able
to rely on what appears to be the authority as represented by the principal, even
though unknown to such party, it is something different from what the agent
on general criteria impliedly have, or even may not have given the prohibition
known to the agent by the principal.
8.5 This means that a principal is bound not only by acts which are within the actual
authority of the agent, but also by acts which are within the authority that they
appear to have. A principal may be held liable on the grounds of apparent
authority, even if the agent acted fraudulently and for his own benefit.
C. Acts Outside Authority
8.6 An agent may, at times, carry out certain acts in the course of his business,
which do not fall within his authority. For example, Principal B authorises Agent
A to buy, on their behalf, a specific quantity of wool and to not exceed a certain
purchase price. Agent A enters into a contract with Seller C to purchase a
greater quantity of wool and at a higher price than that authorised by Principal
B. Because of Agent A’s lack of authority, the contract between Agent A and
Seller C does not bind Principal B, in addition, it does not create a contract
between Agent A and Seller C.
9. TERMINATION OF AGENCY
9.1 In law, the word “agency” is used to connote the relation which exists where
one person, namely the agent, has the authority or capacity to create legal
relations between his principal and a third party. Given the special relations of
the parties, the termination of authority between the principal and the agent
may not affect a third party who does not have notice of the termination.
A. Termination Of An Agency By Act or Conduct
9.2 The agency relationship between the principal and the agent may be terminated
either by the act or conduct of the parties, or by the operation of law. The act or
conduct of the parties may be in the form of an agreement between the parties
to dissolve the relationship. It may also be based on the facts of the case. As in
the case of the creation of an agency, the agreement to terminate may either be
express or implied. The categories are as follows:
(a) Withdrawal Or Revocation Of Authority By The Principal
(i) The principal may revoke the agent’s authority at any time before
the authority is exercised. However, the principal may be in breach

of contract if the agency contract requires a period of notice to be

given.
(ii) The agent cannot force his principal to abide by the contract, since
an agency is a contract of personal services, but he can claim
damages.
(iii) Where the Agency Agreement involves a continuing relationship
between the principal and the agent, the revocation by the principal
is effective only when the agent has received or has been given
notice of such revocation.
(b) Renunciation By The Agent

Generally, an agent may renounce his authority at any time before
completion of the agency. Whether the renunciation by the agent is a
breach of contract will depend on the terms of the Agency Agreement
between the two parties.
(c) Breach By A Party

A breach by one party can cause the agency to be terminated by the other
party. For example, non-payment for goods that have already been
delivered by the agent is a sufficient cause to terminate the agency, since
the non-payment by the principal will be a breach of the Agency
Agreement.
B. Termination Of Agency By Law
9.3 The law, on the other hand, terminates the agency:

(a) On the completion of performance of a specific task. The agent’s official
authority ends on completion of the performance of the specific task, and
his authority to bind the principal terminates automatically.
(b) On the expiration of time where a specific period of time was provided.
However, it is not necessary that the time be expressly stated, since it may
be presumed from the nature of the authority or facts of the case.
(c) On the happening of an event which makes the principal incapable of
continuing the contract, such as death, bankruptcy or unsoundness of
mind of the principal.
(d) Generally, as between the principal and the agent, the authority of an
agent is terminated by the principal’s death, by the principal becoming
incapable by reason of mental illness of managing his affairs, or by the
principal’s bankruptcy. A contract made by an agent after the death,
incapacitation or bankruptcy of the principal is not binding on the
principal’s personal representatives but may be ratified by them if they
think fit. As between the principal and a third party dealing with the agent,
without knowledge of the condition of the principal, the agent’s authority
to bind the principal continues.
(d) On the happening of an event which makes the agent incapable of
continuing the contract, such as death, bankruptcy or unsoundness of
mind of the agent. Generally, the death or incapacity of the agent to
manage the principal’s affairs by reason of mental illness terminates the

agency. The bankruptcy of an agent will not automatically terminate the

authority of the agent. This will depend on the construction of the Agency
Agreement, and whether the bankruptcy will prevent the agent from
carrying out his duties to the principal.
(e) On the frustration of contract, or the happening of an event rendering the
continuance of the agency unlawful. This occurs, for example, where the
subject matter has already been sold, or the task was impossible to be
performed or cannot be performed, because of illegality.
C. Effects Of Termination
9.4 The termination of the agency contract basically dissolves the relationship
between the principal and the agent. However, not all consequences of the
relationship will cease. For example, commission already earned by the agent,
indemnity vested to the agent, and the right to sue for breaches of contract by
the principal or agent remains.
9.5 For a third party, when the agency is terminated by the act of the principal and
agent, only the actual authority of the agent comes to an end, while the
apparent or ostensible authority of the agent remains. A third party dealing with
the agent will not normally know the exact limit of the agent’s authority. Thus,
it will have to rely on what appears to be the authority as represented by the
principal. Therefore, the termination of the agency between the principal and
the agent will not affect the apparent and ostensible authority of the agent vis-
à-vis the third party, until and unless the third party has notice of such
termination or has become aware of circumstances.
9.6 On the other hand, where the agency was involuntarily terminated by operation
of law, for example, owing to the death and insanity of the principal or agent,
the agency would come to an end, regardless of whether the third party was
aware of it.

5. Insurance Documents
CHAPTER 5
INSURANCE DOCUMENTS
CHAPTER OUTLINE
1. Introduction
2. Proposal Form
3. Cover Note
4. Certificate Of Insurance
5. Insurance Policy
6. Endorsements
7. Renewal Notice Or Expiry Notice
8. Renewal Certificate
9. Claim Form
Appendix 5A – Sample Proposal Form For Motor Insurance
Appendix 5B – Sample Proposal Form For Public Liability Insurance
Appendix 5C – Sample Certificate Of Insurance (Motor Insurance)
Appendix 5D – Sample Certificate Of Insurance (Work Injury Compensation Insurance)
Appendix 5E – Sample Personal Accident Insurance Policy Document
Appendix 5F – Sample Travel Insurance Policy
LEARNING POINTS
 know the purpose of a proposal form and explain how it forms the basis of the
insurance contract
 be familiar with the main sections of questions asked for in the proposal form,
including the declaration and the warning statement
 understand what a cover note is
 explain the functions of a certificate of insurance
 be familiar with the various sections of an insurance policy document
 understand the various types of conditions in an insurance policy
 know what warranties and the two types of warranties in insurance contracts are
 know the purpose of an endorsement and the renewal notice
 understand the uses of a renewal certificate and the information contained in it
 realise the importance and the uses of a claim form, as well as outline the main
sections contained in it

1. INTRODUCTION
1.1 In the previous chapter, we have explained that a general insurance policy is an
important contract governing the obligations of the insurer and the rights of the
insured. In this chapter, we will examine the insurance policy in detail. Besides
the policy document, there are other important insurance documents that will
be explained. We shall begin with an insurance document that initiates the
application for most insurance contracts – the proposal form.
Proposal
Form
2. PROPOSAL FORM
2.1 The proposal form (application form) is the most common tool by which the
insurer receives information about the risks to be insured. The information
provided by the proposer (intending insured) in most cases forms the only basis
upon which the underwriter decides whether or not to accept the risk and on
what terms and premium rates. As such, it is a very important document, as you
will see in the next section. See Appendix 5A and Appendix 5B for a sample
copy of proposal forms for Private Motor Insurance and Public Liability
Insurance respectively.
A. Basis Of Contract
2.2 The proposal form is the basis of the insurance contract and is incorporated into
the contract. This has the effect of making the proposal form part of the contract,
even though it is not actually reproduced and printed with the policy document.
Therefore, the proposer has to be particularly careful to supply correct, accurate
and comprehensive information when completing the proposal form, as it will
become part of the contract.
2.3 The fact that the proposal form is the basis of the contract is further
strengthened by the declaration of the proposer at the end of the proposal form.
The declaration is also considered as part of the contract. By signing the
declaration, the proposer is confirming that the information which has been
provided to the insurer is true to the best of his knowledge and belief. Details of
the declaration will be discussed later in this chapter.
2.4 Let us now proceed to look at the questions asked in various types of proposal
forms.
B. Questions Asked In A Proposal Form
2.5 Proposal forms are of variable lengths depending on the nature of the risk, and
the information which an insurer will need to be able to underwrite the risk.
2.6 Basically, questions asked in a proposal form can be broadly classified into five
main sections:
 Details Of The Proposer

These questions are not specific to the
And/Or The Insured
actual risk itself.
 Period Of Insurance
These questions are risk specific in the
 Details Of The Risk To Be sense that they relate to the form of
Insured risk for which cover is being sought.
These are the questions that will assist
 The Subject Matter Of the underwriter in determining
Insurance whether or not to accept the risk, what
 The Insurance History Of The terms to impose, and what price
Proposer And/Or The Insured (premium) to charge.
B1. Details Of The Proposer And/Or The Insured
2.7 In general insurance, the proposer is usually insuring themselves or property

which they own. However, sometimes, the proposer can be another person who
has an insurable interest in the subject matter of the insurance, e.g. the wife on
the life of her husband in a Personal Accident Insurance policy.
2.8 The details required of the proposer and/or the insured are:
(a) Name in full - This is required for the purpose of identification.
(b) Address - This is required for identification and communication. It can also
be a material factor (risk location) for the underwriting of the risk, e.g. in
the case of Fire or Theft Insurance.
(c) Occupation or type of business - This provides information for the insurer
to underwrite the risk, especially with Personal Accident, Motor, Theft and
Fire Insurance policies. It is obvious that the type of business can have a
material bearing on the hazards involved in the risk.
(d) Interested party - This will enable the insurer to know if there is any other
party interested in the policy in the event of a claim, e.g. a mortgagee, or
an owner named under a hire-purchase agreement.
(e) Other questions - Depending on the class of insurance, various questions
may be asked on the gender, nationality, date of birth, demerit points (in
Motor Insurance), etc.
B2. Period Of Insurance
2.9 In general insurance business, the period concerned is normally a full year (12
months) from a date as determined by the proposer, although exceptions may
arise, e.g. Travel Insurance where a shorter period may be indicated for
coverage of a single trip, or Foreign Domestic Worker (Maid) Insurance, where
the period of insurance is usually 14 or 26 months. However, for most classes
of insurance, the premium rates applied assume a normal policy period of one
year.
2.10 The policy period begins on the policy’s effective date (the time and date that
the coverage under the policy goes into effect) and it ends on the expiry date
(the time and date that the coverage under the policy expires).
When Coverage Is In Effect
Effective Date Expiry Date

Policy Period
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2.11 In most cases, the policy will lapse on the expiry date, unless the insured gives
instructions to renew the policy, and the insurer accepts the renewal
instructions.
B3. Details Of The Risk To Be Insured
2.12 In this section, the insurer attempts to elicit sufficient information to underwrite
the risk. This process will involve a decision as to the insurability of the risk and
determining the premium charge and other contract terms.
2.13 Questions asked here vary widely between classes of insurance.
2.14 Examples are:

(a) Fire Insurance
What is the construction of the risk? If the building is constructed of timber,
it is almost certainly more hazardous than one built of concrete.
Where is the location of the risk? This is important for determining how far
the risk is from a fire brigade station, as well as the surrounding risks in
the neighbourhood.
What is the occupation of the premises? Are there hazardous goods stored
in the premises? Are the manufacturing processes involved in hazardous
chemicals, flammable materials or substances, etc.?
(b) Accident Insurance
In the case of Personal Accident Insurance, questions will be asked to

elicit the following information:
 occupation (including nature of work or duties);
 age;
 health;
 previous history of injury and sickness; and
 any kind of physical defect or infirmity, etc.
(c) Motor Insurance
Questions will be asked on the driver and the motor vehicle, such as his
age, occupation, driving experience, demerit points, claims experience for
the last three years; make, model and year of the motor vehicle, its
registration number, seating and engine capacity, as well as engine and
chassis number.
The questions asked in a proposal form serve to elicit information on the
physical and moral hazard of the risks to be insured.
B4. The Subject Matter Of Insurance
2.15 The subject matter of insurance is the object exposed to risk, such as people,
building, house, factory, stock, vehicle, aircraft or sea vessel. The subject matter
must be capable of being identified.
2.16 Proposal forms thus make provisions to record the description and the location,
etc. of the insured subject matter. The proposer must take care to provide
accurate descriptions of the subject matter. For example, in Fire Insurance policy
forms, there is a condition which states that any mis-description of the insured
subject matter or omission of material facts will not render the insurer liable for
the policy, which means no claim will be paid.
B5. The Insurance History Of The Proposer And/Or The Insured
2.17 In addition to obtaining information on the past claim history of the insured, this
section also attempts to solicit information on whether the proposer is currently
and/or has previously insured with other insurers.
2.18 Thus, questions will be asked on whether the proposer has ever been declined,
cancelled, accepted on special terms, or refused renewal by another insurer. If
so, full details as to the name of the insurer, policy number, type of cover, etc.
are required.
2.19 These questions assist the underwriter to be put on guard against proposers
with a poor claims experience, or those intending to defraud insurers.
C. Declaration & Warning Statement
2.20 At the end of all the questions, the proposer is required to:
&
 declare (sometimes to warrant) the truth and completeness of the
answers given;
 state that he has disclosed all material facts;
 agree that the proposal is the basis of the contract;
 agree that he accepts the normal terms, provisions, limitations, exclusions
(exceptions) and conditions as contained in the policy; and
 sign and date the proposal form.
2.21 NOTE: While the agent can assist the proposer to complete the proposal form,
the latter must read through and check the answers and sign the form himself.
The agent must not sign the form on the proposer’s behalf.
2.22 As mentioned earlier, the purpose of the declaration is for the proposer to
confirm that the information provided is true to the best of his knowledge and
belief.
2.23 Besides including a declaration, every proposal form contains a warning

statement in relation to Section 25(5) of the Insurance Act (Cap. 142), which
states as follows:
“You are to disclose in this proposal form, fully and faithfully, all the facts
which you know or ought to know; otherwise you may receive nothing
from the policy.”
2.24 The purpose of the warning statement is, therefore, to caution the proposer
about the facts to be disclosed and the danger if any material facts are not
dutifully disclosed. It also signifies the duty of disclosure by the proposer
(intending insured), thereby reinforcing the principle of utmost good faith.
Compare & Contrast

Readers can gain a more complete knowledge of proposal forms, by
comparing and contrasting the proposal forms of different insurers,
concerning the questions asked for the same class of insurance and the
declarations to be made.
3. COVER NOTE
3.1 It is not always possible to issue an insurance policy as soon as cover is required
by an insured. Thus, while negotiations are underway, or while further
information is being sought (e.g. risk surveys), temporary cover is given, and a
Cover Note is issued. A Cover Note may also be useful, when the insured has to
prove to some other party of the existence of insurance or that insurance has
been effected. The format of the Cover Note will vary with different classes of
insurance.
3.2 The Cover Note usually contains a wording to the effect that it is:
 valid only for a certain period;
 subject to the usual terms, exclusions and conditions of the insurance policy
for that class of business; and
 subject to any further special clauses, if applicable, and specified in the Cover
Note.
3.3 A Cover Note may be thought of as a temporary policy and will normally contain
sufficient details to identify the risks being insured, such as:
 insured’s name and address;
 sum insured;
 period of insurance (this is usually a short period, perhaps 15 or 30 days);
 risks covered;
 description of risks being insured;
 serial number;
 warranties;
 extensions; and
 signature of authorised signatory of insurer and date of issue, including time
of issue for certain classes of insurance, e.g. Motor Insurance.
3.4 Soon after the Cover Note has been given to the insured, a formal policy of
insurance will be issued, and it is cross-referenced to the Cover Note number.
3.5 A Cover Note has the same legal status as the actual insurance policy. If a loss
occurs during the period of insurance, when a Cover Note is in force (i.e. before
a formal policy of insurance is issued), the insurer is liable to pay the claim,
subject to the standard policy wording, unless special terms have been included
in the Cover Note.
Certificate
of
Insurance
4. CERTIFICATE OF INSURANCE
4.1 When insurance is compulsory by law, the law also requires that a prescribed
Certificate of Insurance is issued to prove that a policy is in force. This does
make sense. For instance, in the case of a motor accident, how will the police or
someone involved know that a driver has complied with the law and has a valid
insurance policy? We can make the driver carry the actual policy document with
him all the time, but this is cumbersome. A small Certificate of Insurance thus
becomes useful in such a situation.
4.2 A Certificate of Insurance is only evidence of, and is not equivalent to, a policy
of insurance.
4.3 Certificates of Insurance are normally used in Marine Cargo, Motor and Work
Injury Compensation Insurance (sometimes for Card Protection and Travel
Insurance, as well as Group Insurance to individual members to evidence their
participation in a group plan).
A. Motor Insurance
4.4 In Singapore, according to the Motor Vehicles (Third-Party Risks and

Compensation) Act (Cap. 189), it is an offence to drive or use a motor vehicle on
a public road, without a valid insurance policy insuring for at least “Act” cover,
i.e. death of or bodily injury to third party.
4.5 In addition to the insurance policy, a Certificate of Insurance in the prescribed
form required by the Act is issued to provide evidence of insurance to the police
(as and when required), and the road tax collection centre authorised by the
Land Transport Authority of Singapore. See Appendix 5C for a sample of the
Private Motor Car Certificate of Insurance.
4.6 This Certificate of Insurance must be kept by the motorist at all times. In the
event of an accident, details of the respective parties can be exchanged.
4.7 When the motor vehicle is sold, the law requires that the motor vehicle must be
registered in the new owner’s name within seven days of the sale. The insurer
requires the Certificate of Insurance to be returned immediately after the sale
(i.e. it is not transferable, unless the consent of the insurer is obtained. The latter
will then issue a fresh Certificate of Insurance in the name of the new owner).
4.8 Different prescribed certificates are issued for commercial vehicles and
motorcycles in Singapore.
B. Work Injury Compensation Insurance
4.9 Under the Work Injury Compensation Act 2019 (No. 27 of 2019), it is required
that a copy of the Certificate of Insurance must be prominently displayed at the
insured’s place of business. Where the insured has more than one place of
business, the Certificate of Insurance must be displayed at each place of
business at which he employs any employee covered by the insurance. As the
insurer provides only one certificate, it is the responsibility of the insured to
make sufficient copies for display. See Appendix 5D for a sample Work Injury
Compensation Insurance Certificate.
C. Marine Cargo Insurance
4.10 The Motor Insurance and Work Injury Compensation Certificates of Insurance
provide formal proof of the existence of insurance cover required by law.
However, in Marine Cargo Insurance, the certificate has a different function. It is
not required by law.
4.11 Often, insureds have regular shipments of cargo. It is sometimes inconvenient

for the insurer to issue an insurance policy for each and every shipment.
4.12 Thus, an Open Cover - as a sort of master policy - is issued. This is the most
common form of policy for insuring cargo. It incorporates pre-agreed details of
the class of the vessels, voyage, types of cargoes, basis of valuation and limits,
terms and conditions of coverage, together with a rating structure. Certificates
are then issued for each shipment and/or each buyer. The insured has to make
declarations (monthly or quarterly) concerning all shipments, so that the
appropriate premiums can be charged.
5. INSURANCE POLICY
5.1 An insurance policy is not the contract, but it is the written evidence of the
insurance contract. This contact is usually in force before the policy is issued.
5.2 As policies are legal documents, their wording is very important. In almost every
case, the document is prepared by the insurer, and it sets out the terms of the
insurance contract.
5.3 Since the policy is prepared by the insurer, any ambiguity in its wording will be
construed against the insurer, in favour of the insured. This is known as the
“contra proferentem” rule, which holds that the person drawing up a legal
document is responsible for any defects in it and cannot profit from such
defects.
5.4 In Singapore, policy wordings for Fire, Work Injury Compensation, Motor and
Marine Insurance do not vary a lot among insurers. However, different insurers
use different sizes, typography or colours for their policy documents.
5.5 As is the trend in the United States and the United Kingdom, policy wordings
have been redrafted using layman terms (plain English) to help the man in the
street to understand the contract better. In Singapore, some insurers are issuing
plain English policies, mostly for, personal lines, such as Foreign Domestic
Worker (Maid), Golfer’s, Health, Home, Motor, Personal Accident and Travel
Insurance.
A. Policy Document
5.6 More insurance companies are now issuing what is termed as a scheduled
policy, i.e. all the normal sections in a policy are pre-printed, and any
amendments and specific details are stated in the Schedule (see Appendices 5E
and 5F for sample policies).
5.7 A scheduled policy form is usually divided into the following sections:
A1. The Heading
5.8 It gives the name and address of the insurer and other relevant information
which varies from company to company.
A2. The Preamble Or Recital Clause
5.9 This clause recites or states the parties to the contract (not mentioning their
names). It also makes reference to the proposal form as the basis of the contract,
and the premium, as having been paid or agreed to be paid by the insured
(policyholder), as a consideration for the insurance provided by the policy.
A3. Operative Or Insuring Clause
5.10 The clause sets out, in detail, precisely what the policy is insuring. Sometimes,
policies will be on a “named perils” (or “specified perils”) basis, which means
that the causes of insured loss are stated individually.
Named Perils Versus All Risks
WE INSURE AGAINST
WE INSURE FOR LOSS ALL RISKS OF LOSS,
CAUSED BY: EXCEPT FOR:
 __________  _________
 __________  _________
 __________  _________
 __________  _________
 __________  _________
 __________  _________
 __________  _________
Named Perils All risks
5.11 If the policy covers “all risks”, then all forms of unforeseen loss and sudden
damage are covered, subject to specific policy exclusions.
5.12 The Operative Clause can be quite short, but with Motor Insurance, for instance,
the clause will have several sections, such as:
 Section I - Insurance On The Motor Vehicle;
 Section II - Liability To Third Parties;
 Section III - Medical Expense Benefits; and
 Section IV - Personal Accident Benefits.
5.13 It will be the sole responsibility of the insured to establish that a loss falls within
the Operative Clause in the event of a claim arising under a policy.
A4. Schedule
5.14 This section makes the insurance policy personal to the policyholder and
contains all information relating to the particular policy concerned. Standard
information for all policies in that class of business will be contained in the other
sections. The schedule varies according to the class of business, but it will
include the following data:
 policy number;
 date of issue;

 agency (account) number;
 period of insurance;
 risks covered;
 the property insured;
 situation of the property insured;
 sums insured (limit of liability in case of liability cover)
 clauses or special provisions applying;
 warranties applicable;
 endorsements issued; and
 authorised signature.
A5. Exclusions/Exceptions
5.15 Exclusions or exceptions are perils, risks, subject matter and other
circumstances that are specifically stated as not covered in an insurance policy.
They define the boundaries of policy cover and describe situations in which the
insurer will not pay or admit liability for claims. Exclusions help to keep
insurance premiums more uniform and reasonable.
5.16 Exclusions in a policy vary, depending on the type of coverage and the
situations which the contract is designed to cover. Every insurance contract has
exclusions. Even specified peril insurance policies, which automatically exclude
any perils not specifically stated, list certain exclusions separately to explain or
emphasise perils excluded from coverage.
5.17 As for a packaged or multi-sectioned policy, each section of the policy will
contain its own specific exclusions. In addition, there is another section entitled
“General Exceptions” which contains exclusions applying to all sections of the
policy.
5.18 It is normally the responsibility of the insurer to prove that a particular exception
applies, although the policy wording may require the insured to prove that the
exclusion shall not apply.
5.19 Exclusions specified in a policy are to:

 assist in the management of moral hazard;
 eliminate cover that requires special underwriting consideration;
 eliminate cover that is available under another class of insurance;
 eliminate cover for risks that are considered unsuitable for insurance, e.g.
fundamental risks; and
 eliminate losses that may be inevitable, unfortuitous or unexplained.
A6. Conditions
5.20 The Conditions section states the “ground rules” for the policy. It describes the
responsibilities of both the insurer and the insured.
5.21 The conditions printed in a policy are called express conditions (such as
exclusions, warranties, alteration, arbitration, subrogation, claim notification,
policy cancellation, etc.) and they regulate the policy contract.
5.22 There are also some “implied conditions” (i.e. which apply, but do not appear
in the policy document). These include:
 insurable interest;
 utmost good faith;
Conditions
 existence of subject matter;
 identity of subject matter;
 proof of ownership; and
 legality of contract.
5.23 Also, conditions whether expressed or implied can be grouped as:

(a) Conditions precedent to the policy - These are conditions which must be
fulfilled, before the contract can become valid. For example, the implied
condition of utmost good faith, requiring that all material facts must be
disclosed during the negotiations leading to the contract. If such
conditions are not complied with, there is doubt as to the validity of the
entire contract.
(b) Conditions subsequent to the policy - These are conditions which must be
fulfilled if the contract is to continue, once it becomes binding. For
example, under a Personal Accident Insurance policy, the insured is
required to inform the insurer of any change in his occupation during the
period of insurance.
(c) Conditions precedent to liability - These are conditions which must be

fulfilled, before the insured is legally entitled to recover a claim under the
contract. For example, the insured is required to notify the insurer within
a specified notification period, when a loss occurs under his policy. Failure
to comply may prejudice the insurer’s decision to pay and the
corresponding amount to be paid.
5.24 A breach of the implied conditions can affect the validity of the insurance
contract. However, a breach of the express conditions may result in the
repudiation of the claim, if it is a condition subsequent to the contract and/or
precedent to liability, or the entire contract if it is a condition precedent to the
policy.
A7. Warranties
5.25 A warranty is an undertaking by the insured that a certain state of affairs will or
will not continue, or that something shall or shall not be done throughout the
duration of the insurance contract. It goes to the heart of the contract.
5.26 A warranty in insurance is not a minor term of the contract, but one of great
importance.
5.27 A warranty is essentially a promise made by the insured relating to the facts or
to something that the insured agrees to do or not to do. A warranty may relate
to past, present or future facts (i.e. it is a promise that something was so or is or
will be so), or it may be a continuing warranty, in which the insured promises
that a state of affairs will continue to exist. For example, a warranty may require
that no work will be carried out at a height greater than 12 metres, or that an
intruder alarm is to be kept in good working order and regularly tested.
5.28 A warranty must be strictly complied with. If it is not, unless there is a waiver by
the insurer, cover may terminate, even if the breach did not cause or have any
connection with a loss, and even if the breach had been remedied by the time a
loss occurred. Termination arises from the date of the breach. Some clauses are
worded such that cover (and effectively the contract) will terminate ab initio
(from the beginning) in the event of a breach by the insured. In such cases,
unless fraud is involved, the premium will have to be refunded to the insured.
5.29 Warranties occur in most classes of insurance and are used by the insurer to
make sure that a desirable situation, disclosed as a material fact during the
application and the negotiations for the contract of insurance, actually stays
desirable and is not allowed to disappear once the insurance contract is formed.
Basically, there are two forms of warranties in insurance contracts, namely
those which:
 simply denote the scope of cover; and
 are promissory in nature.
5.30 For obvious reasons, they are usually imposed to ensure that:
 some form of “good housekeeping” or good management is observed, e.g.
in Burglary Insurance, all doors are properly locked, and the intruder alarm
system is in good working order; and
 features of higher risks are not introduced without the insurer’s knowledge,
e.g. in Fire Insurance, no flammable chemicals are stored in the premises.
5.31 Warranties can also be classified as:

(a) Implied Warranties
Those that do not appear in the policy but are understood to automatically
apply in the contract of insurance, e.g. under Marine Insurance, the vessel
insured is seaworthy.
(b) Express Warranties

Those that are written in the insurance contract, e.g. under Marine
Insurance, the goods are packed in tin-lined cases.
5.32 Generally, warranties must be strictly and literally complied with. Non-
compliance with a warranty by the insured constitutes a breach of warranty, and
the insurer is discharged from liability as from the date of the breach. In other
words, the contract is voidable from the date of the breach. However, at times,
the insurer may excuse a breach of express warranty if prior notification is
received, and an additional premium (if necessary) is paid by the insured.
5.33 So, what is the difference between a condition and a warranty? In insurance law,
a condition and a warranty have specific meanings.
5.34 A warranty can be a condition, but a condition may not be a warranty.
5.35 Firstly, let us discuss the meaning of these terms in the context of a non-
insurance contract. In such contracts, when a condition has been breached, the
party aggrieved can claim for damages. He can even terminate the contact as
the contract has been repudiated by the breach. The situation is less serious for
a breach of warranty as it is not considered a vital part of the contract i.e., he
could claim for damages but not terminate the contract.
5.36 As for insurance contracts, the situation is quite the opposite of that stated
above. Warranties play a rather more significant role in insurance law compared
to conditions. What is the effect of a breach of warranty in an insurance contract?
If the insured has breached a warranty, the insurer is no longer liable as of the
date of the breach. In effect, the insurance claims would be invalidated as a
result of such a breach of a warranty.
5.37 In most cases, the term “condition” does not relate to the statements of fact or
the risk covered within the insurance policy.
5.38 Differentiating warranties and conditions is vital for many reasons. For example,
a condition in an insurance policy may state that that the insured is to furnish
all material information about himself. If the insured does not do so, it can be
argued that the insured is in breach of his policy, but the insurer is unlikely to
reject the claim if the insurer can obtain this information elsewhere. The
situation is different for warranties as they must be more strictly complied with
for the policy to be valid.
5.39 Refer to the following section of this chapter for a comparison of exclusions/
exceptions, conditions and warranties.
A8. Comparison Of Exclusions/Exceptions, Conditions & Warranties
Exclusions/
Conditions Warranties
Exceptions
 They are used to  Implied conditions must  They must be
define and be complied with, strictly and
restrict the otherwise there is doubt literally complied
boundaries of the as to the validity of the with.
policy coverage. entire contract.
 They give the
 They allow  Conditions precedent to insurer the right
repudiation if the the contract may either to repudiate on
circumstances of be concerned with the any breach, even
a claim indicate formation of contract or if the breach did
that the exclusion be ongoing. not result in the
applies. loss or damage.
 Conditions subsequent
 They are always to the contract and/or  They are written
specified in the precedent to liability into the policy,
policy, and give the insurers the except where
usually require right to repudiate a implied.
the insurer to claim, but not to
prove that the repudiate the contract in
exclusion its entirety.
applies.
A9. Signature (Or Attestation) Clause
5.40 The wording of this clause which authenticates the policy document depends
on each insurer’s procedure on the signing of the policy document. It may read
as simply as “In witness whereof, this Policy has been signed by and on behalf
of the Company”. This is usually signed by an authorised officer of the insurance
company, and this binds the insurer to the insurance contract. The date is not
stated as it appears in the schedule.
6. ENDORSEMENTS
6.1 Since everyone’s circumstances are different, people often wish to make a
change to a standard version of a policy. As things change, existing policies
sometimes need to be modified. For example, an additional insured may need
to be included in a policy, or additional protection may be needed for certain
property. The insurer can effect any such change by passing (adding) an
endorsement to the policy.
6.2 The policy, together with the schedule and any endorsement, forms the
evidence of the insurance contract. Any endorsement must be read together
with the policy, and any word or expression to which a specific meaning has
been attached bears such meaning whenever it appears. The effective date (of
the endorsement or changes) and the wording of the endorsement effecting the
change are of significant importance.
6.3 Examples of circumstances that may necessitate endorsements are:

 change in sum insured;
 change in interested party or insurable interest;
 change in the physical risk, e.g. location, occupation;
 change in address;
 extension or change of period of insurance;
 cancellation of insurance;
 deletion of an exclusion; and
 correction of data, such as spelling errors or errors of description.
7. RENEWAL NOTICE OR EXPIRY NOTICE
7.1 Usually, a month or so, before a policy expires, the insured receives a renewal
notice, also known as an expiry notice, reminding the insured that the policy is
due to expire, and the existing terms are usually specified.
7.2 Where the insurer is going to change the terms on renewal, the intentions are
clearly stated in the notice, and the offer of renewal by the insurer is clearly
stated in it.
7.3 At times, owing to adverse claims experience, the insurer may decline renewal
of the policy, and such intention is either stamped or typed on the expiry notice.
7.4 It should be noted that, upon receipt of the renewal notice, the insured may of
course change the sum insured, etc. However, at all times, the implied condition
of utmost good faith applies, and the insured is duty bound to disclose all
material facts existing at the time of the renewal.
7.5 The information as contained in the notice is usually the same information as in
the original policy and any endorsement. In addition, there is a section for any
amendments to be requested by the insured. The information includes:
 policy number;
 expiry date or period of insurance;
 sum insured;
Renewal Notice
 renewal premium; and
 existing brief descriptions.
7.6 A renewal notice is not a legal requirement, and the insurer has the option
whether or not to send it. However, business efficiency normally dictates that it
should be sent to the insured.

7.7 Furthermore, the Singapore General Insurance Code of Practice issued by GIA
states that the insurer will inform the insured when he needs to renew his policy
or when his policy will end, at least 30 business days before expiry of the policy,
to allow him to consider and arrange for continuing cover. However, the
Singapore General Insurance Code of Practice applies only to personal lines of
general insurance.
8. RENEWAL CERTIFICATE
8.1 The insurer may issue a renewal certificate once the insured confirms that he is
renewing the policy on the same terms, or with minor changes, such as the sum
insured.
8.2 A renewal certificate is similar to the schedule of the policy, and it lists the
relevant changes, if any, to the policy. It contains the following information for
cross-referencing and identification purposes:
 policy number;
 period of insurance;
 agency/account number;
 date of issue;
 interests insured;
 sum insured;
 premiums; and
 signature of authorised officer of insurance company.
9. CLAIM FORM
9.1 It is normal for an insurer to receive a phone call or an e-mail concerning an

event leading to a claim almost immediately after the accident.
9.2 Following that, it is essential that the insurer’s claim form be completed and
submitted for processing and settling of a loss under the policy. At the same
time, the insurer must have precise information on the circumstances and extent
of the loss and must determine if the loss falls within the policy coverage. The
claim form collects pertinent information on the accident, injury, illness, loss or
damage suffered by the insured.
9.3 Different claim forms are used among insurers, and different claim forms are
used for different classes of insurance. They are usually available for
downloading from the websites of the insurers.
9.4 The insurer usually states on the claim form that it is issued without any
admission of liability, or without prejudice.
9.5 The claim form is broadly divided into the following sections:
I. Policyholder’s/Claimant’s Particulars
a) Name, address and contact details
b) Policy particulars
II. Details Of Accident
a) Circumstances of loss
b) Date of loss
c) Place of loss
d) Any third parties involved
e) Details of any witnesses
III. Details Of Injuries/Loss/Damage/Suffered
a) Description of property loss or damage
b) Details of injuries sustained
IV. Details Of Reports
a) Police Report
b) Medical Report
c) Statements made (if any) to and/or by third parties, etc.
V. Insured’s Declaration, Signature & Date
9.6 NOTE: Since there are wide variations in the claim forms of various insurance
companies, readers should do a compare-and-contrast study of various forms
from different insurance companies.
9.7 Details of the handling and settlement of claims will be discussed in the next
chapter of this Study Guide.
Appendix 5A
ABC INSURANCE COMPANY(SINGAPORE) LIMITED

(Registration No: 2009-12345-A)
21 Any Street, ABC Centre, Singapore 654321
Tel: (65) 6789 8181 Fax: (65) 6789 8282
E-mail: [email protected]
Website: www.abcinco.com.sg
PROPOSAL FORM FOR MOTOR INSURANCE
STATEMENT PURSUANT TO SECTION 25(5) OF INSURANCE ACT, CAP.142 (OR ANY SUBSEQUENT AMENDMENTS THEREOF)
You are to disclose in this proposal form, fully and faithfully, all the facts which you know in respect of the risk that is being proposed, otherwise the policy issued hereunder may be void.
PARTICULARS OF REGISTERED OWNER

Name Sex Male Female
NRIC/Passport No. Driving Licence No. Driving Experience
Nationality Singaporean Others (Please attach documentary proof) E-mail Address
Address Singapore
Contact No. (H) (O) Date of Birth
(Hp)
Occupation Indoor Outdoor Name of Employer Language/Dialect
Details of primary driver if registered owner is not driving (Name, NRIC No. date of birth, gender, driving experience, occupation - indoor/outdoor).
PARTICULARS OF NAMED DRIVERS

1. Name NRIC/Passport No. Sex Date of Birth
Male Female
Registration Date of Driving Licence Occupation Relationship to Registered Owner
Indoor Outdoor
2. Name NRIC/Passport No. Sex Date of Birth
Male Female
Registration Date of Driving Licence Occupation Relationship to Registered Owner
Indoor Outdoor
DETAILS OF INSURANCE COVER

Period of Insurance: From To
No Claim Discount (NCD) Entitlement %
To enable us to confirm your NCD Entitlement, please provide the details below:
Previous Insurer Policy No.
Vehicle No. Expiry Date
I undertake to pay any difference in the premium payable under the policy issued by ABC Insurance Company Limited, if my previous insurer states that I am not entitled to a No
Claim Discount or that my NCD Entitlement is lower than what is stated here.
Cover Required
Quality Applicable to Private Car only - Repair must be carried out by our quality workshop (except for cars under warranty).
Comprehensive Third Party Fire & Theft Third Party
Do you wish to insure COE and PARF value? (Applicable to Quality Comprehensive and Third Party Fire & Theft Cover only)
Yes No
ADDITIONAL OPTIONS
For Quality and Comprehensive plans only Accessories (other than factory-fitted)
 Plus (waiver of basic excess and courtesy car benefit) (a) Description
 NCD Protection (applicable only for 50% NCD)
Additional Excess Premium Reduction

(b) Value
 S$ 500 8%
 S$1,000 12%
 S$1,500 15%
Applicable to Motorcycle only: Details of additional authorised driver (1 driver only) (Name, NRIC No., date of birth, driving experience,
occupation – indoor/outdoor)
TYPE AND DETAILS OF VEHICLE

Type Private car Saloon Off-Peak Car SUV
Station Wagon/MPV Coupe Turbo
Anti-theft device (Car Tracker, please describe)
Commercial vehicle Standard Van Standard Lorry/Pickup Garbage Truck Hood/Canopy
Standard Lorry with Crane/Tailgate Refrigerated Vehicle Tanker Ambulance
Trailer Tipper Mixer Prime Mover
Tow Truck Others (Please Specify)
Bus  School children only

 General purposes
Motor-cycle Side Car Re-conditioned Bike
Model Registration No. Usage Private Company
Others (Please Specify)
Registration Date Original Registration Date Engine No. Chassis No.
Seating Capacity (including driver) CC/Tonnage (For commercial vehicle only)
Unladen Weight Laden Weight
Name of finance company (if under hire-purchase)
OTHER PARTICULARS
Have you or your named driver(s) been convicted of any driving offences for the past 3 years? Yes No
If Yes, please give details.
Have you or your authorised driver(s) been involved in any motor accident for the past 3 years? Yes No
If Yes, please give details below:
Date of Accident Name of Insurance Company Details of Claim Amount of Claim (S$)
*(OD/TP)
*(OD/TP)
*(OD/TP)
* Delete where appropriate.
DECLARATION
I/We hereby declare that the Motor Vehicle described, shall be kept in GOOD CONDITION and that the information given above are in every respect true and
correct. I/We hereby agree that this Declaration shall be the basis of the Contract of Insurance between me/us and ABC Insurance Company (Singapore) Limited
(herein called the Company).
Signature of Proposer/Company Stamp Date
IMPORTANT
1. Please note that the liability of the Company does not commence until this proposal has been accepted by the Company and the premium paid.
2. Please do not leave any answer blank. Fill “Nil” or “NA” where applicable.
3. The policy will carry a Payment Before Cover Warranty which requires the premium to be paid in full within a specific period failing which there would be no liability under
the policy.
4. If the Registered Owner is not driving the vehicle, the particulars of the Primary Driver must be stated in this Application Form.
5. All private car policyholders shall be responsible for Unnamed Driver Excess of S$2,500, in addition to the Excess stated under the Policy, if the said driver is aged 26 years and
below or has less than 1 year relevant driving experience. The Unnamed Driver Excess is S$500 if aged above 26 years.
6. All motorcycle policyholders shall be responsible for Named Driver Excess of S$500, in addition to the Excess stated under the Policy, if the said driver is less than 21 years or
has less than 2 years relevant driving experience.
FOR OFFICIAL USE ONLY

Agent/Representative: Code No:
Policy No.: Date: Premium: Excess:
Entry By: Date: Checked by: Date:
Policy Delivery: HAND/MAIL Remarks:
Appendix 5B
ABC INSURANCE COMPANY (SINGAPORE) LIMITED

Tel: (65) 6789 8181 Fax: (65) 6789 8282
IMPORTANT NOTICE
If this Proposal is accepted or when the cover commences, it is a fundamental and absolute Special Condition of this contract of insurance that the premium due must be paid and received
by the insurers/brokers/agents within sixty (60) days from the inception date of the cover. Where the period of insurance is less than 60 days, the premium due must be paid and received
within the period of insurance.
If this Condition is not complied with, then this contract is automatically cancelled and insurers shall be entitled to the pro-rata premium for the period they have been on risk.
NOTICE: Statement pursuant to Section 25(5) of the Insurance Act (Cap. 142) (or any subsequent Amendments thereof). You are to disclose in this Proposal Form, fully and
faithfully, all the facts which you know or ought to know in respect of the risk that is being proposed. Otherwise, the policy issued hereunder may be void.
PROPOSAL FORM FOR PUBLIC LIABILITY INSURANCE
Proposer’s Full
Name:______________________________________________________________________________________________________________
Address:_______________________________________________________________________________________________________________________
Business:____________________________________________________________________________ Tel:___________________________________
(State whether Manufacturer, Wholesaler or Retailer. If Contractor, please state kind of work undertaken.)
Period of Insurance: From:______________________________________________ To: ___________________________________________
Amount of Indemnity Required: _______________________________________________________________________ Any One Accident
_______________________________________________________________________ Any One Period of Insurance
SCHEDULE OF PREMISES OR OUTSIDE CONTRACTS TO WHICH THE INSURANCE IS TO APPLY

Situation of Premises or Number Description of Premises (e.g. office, shop, store, Freeholders, Leaseholder
Sites of Contracts Building Employees factory, showroom or contracts) or Tenant
THE FOLLOWING QUESTIONS MUST BE ANSWERED BY THE PROPOSER (PLEASE TICK APPROPRIATE BOX BELOW)
1. Do you occupy the whole of the premises?

If No, state which part you occupy. If you have tenants or sub-tenants,  Yes  No
please give particulars.
2. Do you or any of your employees undertake duties away from the

premises for the purposes of your business?  Yes  No
If Yes, please give particulars.
3. Does your company use any lifts, elevators, escalators in your business
which are to be included in the insurance?  Yes  No
If Yes, please give particulars.
4. Does your company use any Machinery, Electrical or other Mechanical

Appliances (other than lifts, elevators and escalators)?  Yes  No
If Yes, please give particulars
5. Does your company or any of your employees handle or use

(a)  Yes  No
(a) explosives or chemicals?
(b)  Yes  No
(b) radioisotopes, radioactive substances or other sources of ionising
radiations?
6. Does your company have any

(a)  Yes  No
(a) Highly inflammable goods used, stored or carried?
(b)  Yes  No
(b) Any effluent, fumes or anything of a noxious nature discharged from
your premises.
7. Have any claims been made upon you during the last 5 years in respect of
 Yes  No
bodily injury or property damage at law?
Date of Claim Nature of Claim Amount of Claim
(S$)
8. Have you ever proposed for insurance or been insured against the liability
to which this proposal relates?
 Yes  No
If Yes, state name of Insurer.
9. Has any company

(a)  Yes  No
(a) declined to insure you?
(b)  Yes  No
(b) required special terms to insure you? (c)  Yes  No
(c) cancelled or refused to renew your insurance?
Total Premium _________________________________
3% GST _______________________________________
Grand Total ____________________________________
Deductible _____________________________________
I/We hereby declare the above statements and particulars to be true and correct and agree that they shall be the basis of the contract
between me/us and ABC Insurance Company (Singapore) Limited.
Proposer’s Signature & Company Stamp
Agent’s Code
_______________________________
Agent’s Name
______________________________ ______________________________________________
Agent’s Contact No.

_________________________
Date: ________/________/__________
Day Month Year
Note: No Liability is undertaken until the Proposal has been accepted and the Premium paid in full.
Appendix 5C
CERTIFICATE OF INSURANCE
Motor Vehicles (Third-Party Risks and Compensation) Act (Chapter 189)

Motor Vehicles (Third-Party Risks and Compensation) Rules, 1960
Road Transport Act, 1987 (Malaysia)
Motor Vehicles (Third-Party Risks) Rules, 1959 (Malaysia)
CERTIFICATE No.
1. Index Mark and Registration Number of Vehicle

Chassis Number
2. Name of Policyholder
3. Effective Date of the Commencement of Insurance for the

purposes of the Ordinance/Regulations
4. Date of Expiry of Insurance
5. Persons or Classes of Persons entitled to drive*
(a) The policyholder.
(b) Any other person who is driving on the policyholder’s order or with his permission.
Provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the motor vehicle
or has been so permitted and is not disqualified by order of a court of law or by reason of any enactment or regulation in that behalf
from driving the motor vehicle.
6. Limitations as to use:*
(a) Use for social domestic and pleasure purposes and in connection with the Policyholder’s business or profession.
The policy does not cover:
(i) Use for hire or reward.
(ii) Use for racing, pace-making, reliability trial or speed-testing.
(iii) Use for the carriage of goods (other than samples) in connection with any trade or business.
(iv) Use for any purpose in connection with the Motor Trade.
* Limitations rendered inoperative by Section 8 of the Motor Vehicles (Third-Party Risks and Compensation) Act (Chapter 189) and Section
95 of the Road Transport Act, 1987 (Malaysia), are not to be included under these headings.
We hereby Certify that the policy to which this Certificate relates is issued in accordance with the provisions of the Motor Vehicles (Third-
Party Risks and Compensation) Act (Chapter 189) and Part IV of the Road Transport Act, 1987 (Malaysia).
For ABC Insurance Company (Singapore) Limited

Agency:
Date of Issue:
Reprint:
Countersigned By:
Authorised Officer Chief Executive
APPENDIX 5D
WORK INJURY COMPENSATION

INSURANCE REGULATION 2019
CERTIFICATE OF INSURANCE
[Regulation 4(1)]
Policy No: WIC-123456
1. Name of Insurer: ABC Insurance Company (Singapore) Limited
2. Name of Insured: Ace Engineering Works Private Limited
3. Date of Commencement
of the Policy: 1 September 2020
4. Date of Expiry
of the Policy: 31 August 2021
I/We certify that the Policy to which this Certificate relates is issued in accordance with the provisions of the Work
Injury Compensation Act 2019 (No. 27 of 2019).
For and on behalf of

ABC Insurance Company (Singapore) Limited
Approved Insurer
Authorised Signature
AN EXTRACT FROM
THE WORK INJURY COMPENSATION INSURANCE
REGULATIONS, 2019
4.—(1) Where a designated insurer insures an employer under an approved policy, the designated insurer must, within 7 days after the
date on which the approved policy commences or is renewed, issue to the employer a certificate of insurance containing the
following particulars:
(a) the name of the insurer;
(b) the name of the insured;
(c) the date of commencement of the policy;
(d) the date of expiry of the policy.
(2) A person that contravenes paragraph (1) shall be guilty of an offence and shall be liable on conviction —
(a) to a fine not exceeding $2,000; or
(b) if the person is a repeat offender, to a fine not exceeding $4,000.
(3) The certificate of insurance mentioned in paragraph (1) may be provided in electronic form if the information contained therein is
accessible so as to be usable for subsequent reference.
5.—(1) Where a certificate of insurance has been issued to an employer in accordance with regulation 4, the employer must display a
copy of the certificate of insurance in accordance with paragraphs (2) and (3) throughout the period of validity of the insurance
policy to which the certificate relates —
(a) at the employer’s place of business; or
(b) where the employer has more than one place of business, at each place of business at which the employer employs any
employee whose claims may be the subject of an indemnity under the insurance policy to which that certificate relates.
(2) The copies of certificates of insurance displayed for the purposes of paragraph (1) must be displayed in a manner that is easily seen
and read by every employee whose claims may be the subject of indemnity under the insurance policy to which the certificate
relates.
(3) Copies of certificates of insurance must be displayed at the places mentioned in paragraph (1)(a) or (b) only during the period of
validity of the insurance policy to which the certificate relates.
(4) In this regulation, the period of validity of an insurance policy is the period —
(a) starting on the date of commencement of the insurance policy; and
(b) ending on the date of expiry or cancellation of that insurance policy.
(5) A person who contravenes paragraph (1) shall be guilty of an offence and shall be liable on conviction —
(a) to a fine not exceeding $2,000; or
(b) if the person is a repeat offender, to a fine not exceeding $4,000.
Appendix 5E
ABC INSURANCE COMPANY (SINGAPORE)

LIMITED
Tel: (65) 6789 8181 Fax: (65) 6789 8282
PERSONAL ACCIDENT INSURANCE POLICY
DEFINITION OF WORDS
Certain words have been defined below. These have the same meaning wherever they are used in the Policy or the Schedule. They appear
in bold print (e.g. Insured Person, Injury) or begin with a capital letter (e.g. You, We).
We, Us, Our, the Company

ABC Insurance Company (Singapore) Limited
You, Your, the Insured

The policy owner named as Insured in the Schedule.
Insured Person
Each of the persons named as such in the Schedule who meets the eligibility criteria set out in General Condition 3 of the Policy.
Schedule
The Schedule containing details of the Insured Person(s), type of cover selected and Period of Insurance. The Schedule forms part of the
Policy.
Period of Insurance
The period shown in the Schedule, and any further period for which You agree to pay and We agree to accept premium.
Commencement Date
Original inception date of cover under this Policy as shown in the Schedule.
Child
A person named as the Insured Person in the Schedule who is the Insured's biological or legally adopted and unmarried Child aged
between one year to 18 years or 23 years if pursuing full-time education in a recognised tertiary institution within his/her Usual Country
of Residence as Singapore.
Accident
An event which happens suddenly and gives rise to a result which the Insured Person did not intend or anticipate.
Injury
Bodily injury suffered anywhere in the world caused solely by Accident and not by sickness, disease or gradual physical or mental wear
and tear.
Physician
A qualified medical practitioner other than You, Your relative, the Insured Person or the Insured Person's relative who is licensed by the
Medical Authorities of the country in which treatment is provided to practise Western medicine and surgery, and who in rendering such
treatment is practicing within the scope of his or her licensing and training in his/her geographical area of practice.
Hospital
A lawfully operating institution for the care and treatment of sick and injured persons, which has 24 hours nursing services by registered
graduate nurses, one or more Physicians available at all times and organised facilities for diagnosis and major surgery, which shall not
primarily be a clinic, a place for alcoholics or drug addicts, a nursing, rest or convalescent home, home for the aged or similar
establishment.
Chinese Physician
A person other than You, Your relative, the Insured Person or the Insured Person's relative engaging in the practice of traditional Chinese
medicine and/or acupuncture (including a herbalist, bonesetter or chiropractor), who is duly licensed or registered to practise according
to the laws and regulations applicable in the geographical area of his/her practice.
Daily Hospitalisation Cash Benefit

Cash benefit payable at an agreed sum per day in the event of an Insured Person's confinement in a Hospital for a continuous uninterrupted
period of at least 24 hours upon the advice of a Physician for which the Hospital makes a charge for room and board.
Usual Country of Residence

The country in which the Insured Person is usually living at the inception of this insurance. As a condition precedent to liability, the
Company must be informed in writing of any change in the Usual Country of Residence. A permanent change in the Usual Country of
Residence is deemed to occur when the Insured Person lives or intends to live in another country for more than 6 consecutive months
during any Period of Insurance. The Company reserves the right to continue cover on the terms and conditions it considers appropriate
to the new country of residence or to decline to continue cover under the Policy.
Burns
3rd degree burns.
Weekly Benefit
Compensation payable at a rate per week.
THE BENEFITS
We will pay You:
The Compensation for death or disablement (the Results) as described below if the Insured Person suffers Injury which within 104 weeks
of its happening is the sale cause of the death or such disablement.
SCHEDULE OF BENEFITS
RESULTS COMPENSATION
Death The Sum Insured specified in
A.
the Schedule.
Permanent and Total Disablement specified below and certified by a Physician:
Total and permanent disablement from engaging in or attending to employment or The Sum Insured specified in
B.
occupation of any and every kind or where there is no employment or occupation, the Schedule.
from attending to an Insured's Person's usual duties.
A percentage of the Sum
Permanent Partial disablement specified below and certified by a Physician: Insured
specified in the Schedule:
1. Loss of one or both arms (between shoulder and wrist) 100%
2. Loss of one or both legs (between hip and ankle) 100%
3. Loss of sight in one or both eyes 100%
4. Loss of sight in one eye except for perception of light 50%
5. Loss of lens of one eye 50%
6. Loss of hearing in both ears 75%
7. Loss of hearing in one ear 15%
C.
8. Loss of speech 50%
9. Loss of four fingers and thumb of one hand 50%
10. Loss of four fingers of one hand 40%
11. Loss of thumb - one phalanx or two phalanges 20%
12. Loss of finger - three phalanges 10%
13. Loss of finger - two phalanges 5%
14. Loss of finger- one phalanx 3%
15. Loss of all toes of one foot 17%
16. Loss of great toe - one phalanx or two phalanges 5%
17. Loss of any toe other than great toe - one phalanx or two phalanges 3%
SCHEDULE OF BENEFITS
18. Third Degree Burns
(a) Head - damage as a percentage of total body surface area
equals to or greater than 2% but less than 5% 25%
equals to or greater than 8% 100%
(b) Body- damage as a percentage of total body surface area
equals to or greater than 20% 100%
Any amount determined by Us
at Our absolute discretion by
Any permanent partial disability not specified above comparison with the
(other than loss of sense of taste or smell for which no compensation is payable) percentages shown above and
in proportion to the degree of
disability as assessed by Our
medical advisors.
1. Temporary Total disablement from engaging in or attending to the Insured The Weekly Benefit specified
Person's usual employment or occupation and certified by a Physician. under the Sum Insured in the
2.Temporary Partial disablement from engaging in or attending to the Insured Schedule payable up to 104
D.
Person's usual employment or occupation and certified by a Physician. weeks from the
commencement of the first
Result to occur.
Medical Expenses
Medical, surgical, hospital, nursing home and nursing fees or charges including
mobility aids necessarily and reasonably incurred as a result of Injury for
professional services rendered by a Physician and I or at a Hospital within 12
months of the occurrence of an Accident. The Sum Insured specified in
E.
Medical expenses incurred necessarily and reasonably for treatment of Injury by a the Schedule.
Chinese Physician is covered up to 50% of the Sum Insured under this benefit
subject to a limit of SGD75 per consultation and not more than one consultation per
day. In the case of a Child Insured Person, the limit per consultation shall be reduced
to SGD25.
The daily benefit specified
under
the Sum Insured in the
Daily Hospitalisation Cash Benefits
Schedule payable up to 50
F. An Insured Person's confinement in a Hospital for a continuous period of 24 hours
consecutive days subject to an
as a result of Injury.
Overall Limit as slated in the
Schedule for each Period of
Insurance.
Recuperation Benefit
An additional lump sum benefit payable in the event of an Insured Person's The Sum Insured specified in
G.
confinement in a Hospital as a result of Injury for a period exceeding 14 consecutive the Schedule.
days.
Bereavement Grant.
The Sum Insured specified in
H. A lump sum benefit payable in the event of the Insured Person's death caused by an
the Schedule.
Injury within 104 weeks of the Injury.
COMPENSATION LIMITS IN RESPECT OF ANY ONE INSURED PERSON

1. Compensation will not be payable for:
(a) any specific item of Result B or C where that item is also comprised in any other item of Result B or C for which a greater amount
of Compensation is payable in the circumstances.
(b) Result A in addition to any Result B or C if caused by the same Accident, except that if a payment has been made under any part
of Result B or C and death occurs subsequently solely caused by and within 104 weeks of the Accident, then we will pay any
difference if the Compensation payable for Result A is greater than that already paid for Result B or C.
(c) more than 100% of the Sum Insured for Result A or B or C (whichever is the higher)in anyone Period of Insurance in aggregate
for any or all of Results for anyone Insured Person whether arising from the same or different Accidents.
(d) Result B or C until one year after the happening of the Injury. If We are reasonably satisfied that the disablement from employment
is total and permanent, We may partly or wholly waive this waiting period.
2. Weekly Benefit shall not be payable for:
(a) any period of time subsequent to the death of the Insured Person or subsequent to Compensation becoming payable under any
part of Result B or C.
(b) both Results 01 and 02 for the same period of disablement.
3. Weekly Benefit for either Results D1 or 02 shall be payable when the total amount has been agreed, or at Your request at intervals of
not less than four weeks (but not in advance) commencing four weeks after receipt by Us of written notice of the Injury.
4. The maximum period the Company will pay under Result F for anyone Injury is up to 50 consecutive days subject to the Overall Limit
indicated in the Schedule for anyone Period of Insurance.
5. Nothing will be payable in respect of Result E if there is any other insurance in force covering the loss or if You or the Insured Person
are entitled to indemnity from any other source, provided that We shall not be relieved of liability under this Result so far as concerns
any excess beyond the amount payable under such other insurance or indemnity.
6. The limits of compensation specified above will apply regardless of the number of times the Policy is renewed.
OVERALL COMPENSATION LIMIT
Our maximum aggregate liability in respect of all Insured Persons travelling in one aircraft or surface transport vehicle or vessel shall not
exceed the Conveyance Limit of SGD5,000,000 or the aggregate of the amount of Compensation payable in respect of such Insured
Persons, whichever is the lesser.
If the aggregate amount of all claims under this Policy in respect of all Insured Persons travelling in one conveyance exceeds the
Conveyance Limit, the Company's liability in respect of each of such Insured Persons will be a rateable proportion of the benefits due in
respect of that person.
EXTRA BENEFITS
1. INSURANCE FOR CHILD

(a) Where an Insured and his/her legal spouse are insured at the same time under this Policy, up to 3 of the Insured's biological or
legally adopted, unmarried Children (aged between one year to 18 years or 23 years if pursuing full-time education in a recognised
tertiary institution within their Usual Country of Residence as Singapore) shall be covered at 10% of the Sum Insured of the
Insured or his/her insured spouse (whichever is the higher Sum Insured) for the following Results for each Child named in the
Schedule:
Result A. Death
Result B. Permanent and Total Disablement
Result E. Medical Expenses
(b) Where the Insured is insured on his/her own under this Policy and subject to the payment of the additional required premium, up
to 3 of the Insured's biological or legally adopted, unmarried Children (aged between one year to 18 years or 23 years if pursuing
full time education in a recognised tertiary institution within their Usual Country of Residence as Singapore) shall be covered at
10% of the Sum Insured of the Insured for the following Results for each Child named in the Schedule:
Result A. Death
Result B. Permanent and Total Disablement
Result E. Medical Expenses
2. LOSS AND DAMAGE TO CLOTHING AND PERSONAL BELONGINGS

The Company undertakes to pay to the Insured Person who sustains Injury and damage to clothing and personal belongings worn or
carried by such Insured Person in the same Accident (but only to the extent that they are not recoverable from any other source), an
amount not exceeding SGD500 for such loss or damage arising out of anyone Injury provided that the Medical Expense benefit under
Result F is also payable under this Policy.
3. RENEWAL BONUS
3.1 Upon each renewal of this Policy, the original Sum Insured in respect of each Insured Person for Result A (Death) and Result B
(Permanent and Total Disablement) at the Commencement Date will be increased by 10% as Renewal Bonus for the renewed Period
of Insurance provided that:
(i) no claim has arisen in respect of the Insured Person during the preceding Period of Insurance in respect of:
a) Result A (Death);
b) Result B (Permanent and Total Disablement);
c) Result C (Permanent Partial Disablement)
d) Result D1 (Temporary Total Disablement)
e) Result D2 (Temporary Partial Disablement);
f) Result F (Hospitalisation Cash Benefits)
g) Result G (Recuperation Benefit)
h) Result H (Bereavement Grant);
(ii) the increase in the original Sum Insured as Renewal Bonus shall be for the first three consecutive 12- month renewals of the
Policy only;
(iii) the Renewal Bonus does not apply to any Child Insured Person; and
(iv) the Renewal Bonus does not apply to the Terrorism extension under Extra Benefit 4 below.
3.2 Where the Insured requests for an increase or reduction to the Sum Insured for an Insured Person in respect of Result A (Death) and
Result B (Permanent and Total Disablement) during any Period of Insurance and agreed to by Us, We will increase the revised Sum
Insured for that Insured Person by 10% as Renewal Bonus upon the renewal of the Policy for the renewed Period of Insurance provided
that
(i) the request to revise the Sum Insured is made by the Insured within the first six months of the relevant Period of Insurance;
(ii) any accumulated Renewal Bonus for the Period(s) of Insurance prior to the Period of Insurance in which the Sum Insured was
revised, will lapse and not be added on;
(iii) no claim has arisen in respect of the Insured Person during the preceding Period of Insurance in respect of any or all of the Results
listed in 3.1.(i) above;
(iv) the increase in the revised Sum Insured as Renewal Bonus shall only be for the first three consecutive 12- month renewals of the
Policy following the Period of Insurance in which the Sum Insured was revised;
(v) the Renewal Bonus does not apply to any Child Insured Person; and
(vi) the Renewal Bonus does not apply to the Terrorism extension under Extra Benefit 4 below.
3.3 No additional premium is required for the Renewal Bonus.
4. TERRORISM
This Policy is extended to cover the Insured Person against death or disablement (the following Results) as described below if the
Insured Person suffers an Injury which within 104 weeks of its happening is the sole cause of the death or such disablement and the
Injury is sustained through acts of terrorism provided that there is no liability when such acts of terrorism involve the use of biological,
chemical agents or nuclear devices:
Result A Death
Result B Permanent and Total Disablement
Result C Permanent Partial Disablement
Result D1 Temporary Total Disablement
Result D2 Temporary Partial Disablement
Result E Medical Expenses
Result F Daily Hospitalisation Cash Benefits
Result G Recuperation Benefit
Result H Bereavement Grant
The limit for each of the Result above is per the specified Sum Insured applicable to the Result. The aggregate limit for all the above
Results is up to the Sum Insured for Result A (Death benefit) at the Commencement Date of this Policy or in the event of an increase
or reduction to the Sum Insured for Result A (Death benefit) and Result B (permanent and Total Disablement) as requested by the
Insured and agreed to by Us during any Period of Insurance, up to the applicable increased or decreased Sum Insured for Result A
(Death benefit) or SGD250,000 for each Insured Person, whichever is lesser.
Cover under this extension for each Child Insured Person is in respect of Result A, Result B and Result E only. The limit of this cover
is at 10% of the Sum Insured under Result A, Result B and Result E of the Insured. Where the Insured and his/her legal spouse are
insured at the same time under this Policy, the limit shall be that of the Sum Insured of the Insured or his/her insured spouse,
whichever is the higher Sum Insured for Result A, Result B and Result E.
5. RESERVIST TRAINING
This Policy is extended to cover Injury sustained by the Insured Person while on part-time National Service as a Reservist in the Navy,
Army, Air Force, Police, Fire Brigade or Vigilante Corps, provided that We will not be liable to Pay any compensation if the Insured
Person was taking part in or was present at any military, navy or air force Operation during actual warfare or any insurrection or any
expedition or operation of a war-like character either as a Combatant or non-combatant when the Injury was sustained.
6. RIOT & STRIKE

This Policy is extended to cover the Insured Person against death caused by Injury or Injury as a result of Riot & Strike. The Company
shall not be liable for any claim arising out or in connection with the Insured Person's own participation or provocation of any such
act or if such act could reasonably have been avoided by the Insured Person.
7. MOTORCYCLING
This Policy is extended to cover motor-cycling (whether as a rider or pillion-rider) provided that at the time of Accident, the Insured
Person is wearing a safety helmet, and not engaging in or practising for racing and hill climbing contests, reliability trials, speed or
duration testing.
8. BURNS
This Policy is extended to cover the Insured Person against death caused by Injury or Injury as a result of Burns subject to the limit as
set out under item 18 of Result C. The company shall not be liable for any claim for such death or Injury arising out of or in connection
with the Insured Person's own wilful or intentional act.
9. SUFFOCATION BY SMOKE, POISONOUS FUMES, GAS AND DROWNING

Any Result sustained by an Insured Person due to suffocation by smoke, poisonous fumes, gas and drowning shall be deemed to be
Injury sustained by an Insured Person provided that such Injury does not arise out of an Insured Person's wilful and intentional act.
10. DISAPPEARANCE
We shall presume death to have been suffered by the Insured Person if he or she is missing for twelve consecutive months, and
sufficient evidence is provided that leads Us to the conclusion that death was caused by an Injury. However, if at any time after
payment of Compensation under this Policy for such death the Insured Person is found to be living, such Compensation shall be
refunded to Us.
11. EXPOSURE
If an Insured Person suffers an Injury and then, in consequence of that Injury suffers death or disablement as a result of exposure to
the elements, We will consider such death or disablement as having been caused by an Injury.
12. AMATEUR SPORTS

This Policy is extended to cover any Injury happening to the Insured Person while engaged in sports as a form of recreation and not
on a professional basis except for:
(a) parachuting
(b) hang gliding
(c) any kind of race (other than on foot or swimming) or trial of speed or reliability
(d) potholing, mountaineering or rock climbing necessitating the use of guides or ropes
(e) underwater activities necessitating the use of compressed air or gas
All Extra Benefits are subject to the Terms, Conditions, and Exceptions of this Policy.
GENERAL CONDITIONS
The conditions which appear in the Policy or in any Endorsement are part of the contract and must be complied with. They are where
their nature permit conditions precedent to the right to recover from Us.
1. Co-operation
As a condition precedent to the Company's liability, the Insured Person or his/her representatives shall co-operate fully with the
Company and its medical advisers and will fully and faithfully disclose all material facts and matters which the Insured Person knows
or ought to know and will upon request as the Company may reasonably make execute any document to empower the Company to
obtain relevant information, at the Insured or the Insured Person's expense, from any Physician, Hospital or other source.
2. Reasonable Precautions and Material Changes

The Insured Person shall take all reasonable precautions to prevent and minimise any Injury. The Company must be informed
immediately in writing as soon as You are aware of any change in the employment, occupation, duties or pursuits of any Insured
Person, or any other change which may increase the possibility of a claim under this Policy. The Company reserves the right to
continue cover on terms and conditions it considers appropriate to such changes in material information or circumstances or to
decline to continue cover under the Policy.
3. Eligibility
Unless We agree in writing otherwise, any person You wish to insure under this Policy must be named as an Insured Person in the
Schedule and must at the Commencement Date of the Policy be the following:
(a) Yourself aged between 18 years and 65 years old, or
(b) Your legal spouse aged between 18 years and 65 years old, or
(c) Your biological or legally adopted, unmarried Child aged between 1 year to 18 years or 23 years if pursuing full-time education
in a recognised tertiary institution within his/her Usual Country of Residence as Singapore.
4. Alterations
(a) We have the right to vary the premium payable and all other terms, conditions and exceptions of the Policy by giving the Insured
30 days' notice of such variation(s).
(b) If the date of birth of the Insured Person has been incorrectly stated, the benefits will be amended by Us having regard to the true
date of birth. If the true date of birth is such that, had it been known to Us at the time of the Policy was proposed for, We would
not have issued the Policy, then We may cancel the Policy and no benefits will be payable.
(c) Any other misrepresentation of or failure to disclose material facts by the Insured or Insured Person, will entitle the Company to
alter, amend or cancel the Policy having regard to the true facts. A material fact is any information that could influence the
Company in its assessment of the proposal.
5. Cancellation
Either the Insured or the Company may cancel this Policy by giving the other party 14 days notice in writing sent to the last known
address. Refunds of premium in respect of a Period of Insurance will be made as follows:
(a) If the Insured cancels the Policy, the Company will refund the Insured the premium paid less the premium calculated at Our Short
Period rates from the date of cancellation provided no claim has arisen in relation to that Period of Insurance and the amount
refundable is more than SGD10.00.
(b) If the Company cancels the Policy, the Company will make a pro-rata refund of the premium paid.
6. Termination
(a) The entire Policy will terminate and all Insured Persons' cover under it will cease immediately upon:
i) non-payment of premium by the due date as described in the Payment Before Cover Warranty of this Policy; or
ii) the cancellation of this Policy as described in General Condition 5.
(b) Unless We have agreed otherwise in writing, the cover of an Insured Person under this Policy will terminate immediately in any
of the following circumstances, whichever first occurs:
i) when the Insured Person's Usual Country of Residence ceases to be Singapore
ii) where an Insured Person on the expiry of the Period of Insurance during which he or she attains the age of 76 years
iii) where the Insured Person is a Child of the Insured, on the expiry of the Period of Insurance during which he/she attains the
age of 19 years, or 24 years if studying full-time at a recognised tertiary institution within his/her Usual Country of Residence
as Singapore.
7. In the Event of Fraud

If any claim shall in any respect be false or fraudulent or if fraudulent means or devices are used by the Insured Person(s) or anyone
acting on their behalf to obtain benefit under this Policy, then the Policy will be cancelled immediately and all benefit and premium
forfeited.
8. No Trust
The Company will not recognise or be affected by any notice of trust, charge or assignment relating to this Policy and the Insured's
receipt or that of the Insured's legal personal representative shall in all cases effectively discharge Our liability.
9. Legal Personal Representatives

The terms, exceptions and conditions of this Policy, so far as applicable and with necessary modifications, shall apply to the legal
personal representatives of the Insured or the Insured Person.
10. Exclusion of Rights Under the Contracts (Rights of Third Parties) Act
A person who is not a party to this Policy shall have no right under the Contracts (Rights of Third Parties) Act to enforce any of its
terms. Insured Persons (other than the Insured) are not parties to this Policy contract.
CLAIMS CONDITIONS
The payment of claims under this Policy is dependent upon observance of its terms and conditions by You, and so far as they apply, by
the Insured Person or any other claimant.
1. You must report in writing to us as soon as reasonably possible, full details of any Injury which may result in a claim under this Policy.
2. You or the Insured Person shall employ the services of a registered medical practitioner and the Insured Person shall undergo any
treatment such practitioner shall deem necessary.
3. All certificates, information and evidence must be provided at your expense or at the expense of any claimant in the form and nature
required.
4. The Insured Person may have to undergo further medical examination required by Us at Our expense.
5. In the event of death of the Insured Person, We shall require sight of the death certificate and may require a post-mortem examination
at Our expense.
6. Where we have accepted a claim but the amount to be paid is in dispute, the matter shall be referred to an independent arbitrator
acceptable to the parties involved. Where any dispute is by this Condition to be referred to arbitration, the making of an award shall
be a condition precedent to any right of action against the Company.
7. If the Company offers an amount in settlement or disclaims liability altogether for a claim, and such a claim is not within twelve
calendar months from the date of such an offer or disclaimer referred to arbitration as required under Condition 6 or made the subject
of a pending court action, the claim shall be deemed to be abandoned and the Company shall have no liability in respect of it.
GENERAL EXCEPTIONS
We will not pay any sum under this Policy for:
1. Injury directly or indirectly caused by, resulting from or in connection with any of the following regardless of any other cause or event
contributing concurrently or in any other sequence to the Injury:
(a) ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the
combustion of nuclear fuel
(b) the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other
nuclear assembly or nuclear components thereof
(c) any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter
(d) the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter. The exclusion in this
sub-clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried,
stored, or used for commercial, agricultural, medical, scientific, or other similar peaceful purposes
(e) any chemical, biological, bio-chemical, or electromagnetic weapon.
2. death, disability, loss, damage, destruction, any legal liabilities, cost or expense including consequential loss of whatsoever nature,
directly or indirectly caused by, resulting from or in connection with any of the following regardless of any other cause or event
contributing concurrently or in any other sequence to the loss:
(a) war, invasion, acts of foreign enemies, hostilities or warlike operations (whether war be declared or not), civil war, rebellion,
revolution, insurrection, civil commotion assuming the proportions of or amounting to an uprising, military or usurped power,
or
(b) any act of terrorism including but not limited to
(i) the use or threat of force, violence and/or
(ii) harm or damage to life or to property (or the threat of such harm or damage) including, but not limited to, nuclear radiation
and/or contamination by chemical and/or biological agents, by any person(s) or group(s) of persons, committed for political,
religious, ideological or similar purposes, express or otherwise, and/or to put the public or any section of the public in fear,
or
(c) any action taken in controlling, preventing, suppressing or in any way relating to (a) or (b) above.
3. Injury caused by the Insured Person engaging in:

(a) air travel except as a passenger in a fully licensed passenger carrying aircraft
(b) any trade, technical or sporting activity or as crew in connection with an aircraft
4. Injury caused by the Insured Person engaging in or practising for:
(a) parachuting
(b) hang gliding
(c) any kind of race (other than on foot or swimming) or trial of speed or reliability
(d) potholing, mountaineering or rock climbing necessitating the use of guides or ropes
(e) underwater activities necessitating the use of compressed air or gas.
5. Injury caused by:
(a) suicide, self-injury or wilful exposure to peril (other than in an attempt to save human life)
(b) pregnancy or childbirth
(c) insanity
(d) any pre-existing physical or mental defect or infirmity
(e) the Insured Person being under the influence of drugs (other than those prescribed by a registered Medical Practitioner but not
when prescribed for the treatment of drug addiction)
(f) the Insured Person being under the influence of alcohol, unless it can be established to our reasonable satisfaction by any
claimant that alcohol was not a factor contributing to the happening of the Injury
6. Injury to any Insured Person who is employed:
(a) as a full time military personnel, law enforcement officer, civil defence officer, security officer; navy, fire fighters or
(b) as professional sportspersons, entertainers, motor vehicle or motor bike racers or
(c) in any off-shore occupations such as diver, rig workers, fisherman; ship crew or
(d) as shipyard crew; work on board sea vessels or
(e) as air crew; work on board aircraft or
(f) as construction workers, work at heights above 30 feet or work underground, in tunnels, demolition and quarry workers or
(g) as workers engaged in maintenance, cleaning, roofing or repair activities involving scaffolding or gondolas; or
(h) in any occupation dealing with explosives, poisonous or hazardous gases or substances
If We say that by reason of any of these General Exceptions any claim is not covered by this insurance, then the burden of proving that
the claim is covered shall be upon You.
ABC Insurance Helpline (65) 6789 8181

A 24-hour emergency help line has been arranged for You with an authorised Help Centre should You need assistance in the event
of an emergency whilst overseas. When You are residing in Singapore, the following services are also available to You
- Arrangement of Home Visit by Physician

- Arrangement of Private Medical Transportation
- Arrangement of Appointment with the Medical Providers in Singapore
It is understood and agreed that the emergency helpline only provides referral information and arrangement assistance. The service
provider(s) is/are not Our agents and You shall pay the service provider directly for the costs of any service rendered by the service
provider. It is further understood and agreed that We do not warrant and are in no way responsible or liable for the action of or
advice or information given or statements made by any service provider or any person in the provision of service or assistance
pursuant to the emergency helpline. We are also in no way liable for any injury, damage or loss to persons, property or goods
whatsoever caused arising from any act, omission, default or neglect of the service provider or any person in the provision of service
or assistance pursuant to the emergency helpline.
PAYMENT BEFORE COVER WARRANTY

1. Notwithstanding anything herein contained but subject to clauses 2 and 3 hereof, it is hereby agreed and declared that the total
premium due must be paid and actually received in full by the Company (or the intermediary through whom this Policy was effected)
on or before the inception date (“the inception date”) of the coverage under the Policy, Renewal Certificate or Cover Note.
2. In the event that the total premium due is not paid and actually received in full by the Company (or the intermediary through whom
this Policy was effected) on or before the inception date referred to above, then the Policy, Renewal Certificate, Cover Note and
Endorsement shall not attach and no benefits whatsoever shall be payable by the Company. Any payment received thereafter shall
be of no effect whatsoever as cover never attached on the Policy, Renewal Certificate, or Cover Note.
3. In respect of insurance coverage with "Free Look" provision, the Insured may return the original policy document to the Company or
intermediary within the "Free Look" period if the Insured decides to cancel the cover during the "Free Look" period. In such an event,
the Insured will receive a full refund of the premium paid to the Company provided that no claim has been made under the insurance.
Policy Owners' Protection Scheme

This policy is protected under the Policy Owners' Protection Scheme which is administered by the Singapore Deposit Insurance
Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the
types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact your insurer
or visit the GIA / LlA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).
IMPORTANT- You are requested to read this Policy. If any error or misdescription be found, the Policy should be returned to the
issuing office for correction.
Appendix 5F
ABC INSURANCE COMPANY (SINGAPORE) LIMITED
Tel: (65) 6789 8181 Fax: (65) 6789 8282
Travel Insurance Policy
IMPORTANT NOTICE
1. Before we provide cover, you and all Insured Persons must fully and faithfully tell us everything you know (or could reasonably be
expected to know) that is relevant to our decision in whether or not to insure the Insured Persons, otherwise you may receive no
benefit from your Policy.
2. The insurance cover under this Policy is based on the information submitted to us, as set out in the accompanying documents. Please
read these documents carefully. If they contain any information that is incorrect, please notify us immediately, otherwise you may
receive no benefit in the event of a claim and/or your Policy may be voided and our liabilities shall be restricted to a refund of premiums
paid for that Period of Insurance without interest. If any information, which you subsequently provide us, differs materially from the
information submitted to us earlier, we may offer cover on different terms or decline it altogether.
HOW YOUR INSURANCE OPERATES

Your Policy is a contract between you and us, and comprises:
• your Application and any enrolment forms submitted to us;
• any declarations made by the Insured Persons;
• this Policy document;
• the Schedule;
• any supplementary agreements or riders; and
• any Endorsements
and shall be read together as one contract and any word or expression to which a specific meaning has been attached in any part shall
bear the same meaning wherever it appears.
This Policy shall become effective on the date specified in the Schedule and end at 23:59 Standard Singapore Time on the last day of the
Period of Insurance.
Having received and accepted all requisite premiums, we will provide the cover shown in the relevant sections of the Policy, up to the
sums insured or limits of indemnity stated in the Schedule and/or Endorsements.
PART A - POLICY DEFINITIONS

For the purpose of this Insurance, the following definitions apply:
1. “Accident” or “Accidental” means an event, which is sudden, unforeseen and unexpected, that results in death, disablement, solely
and independently of any other causes.
2. “Air Travel” means riding as a passenger (not as an operator or crew member) in or on, boarding or alighting from a properly licensed
private and/or commercial airline common carrier.
3. "Child/Children" means unemployed and unmarried child/children under the age of 18 years or up to 25 years, if he/she is studying
full-time in a recognized institution of higher learning.
4. "Chinese Physician” (including herbalist or bonesetter)" means a person qualified as a Traditional Chinese medicine practitioner (other
than an Insured Person or a member of his Immediate Family or his business associates including any business partners, employers
or employees) engaged in the practice of traditional Chinese medicine, and who is duly licensed and/or registered with the relevant
traditional Chinese medical board or council to practice traditional Chinese medicine and who in rendering treatment, is practicing
within the scope of his licensing and training in the geographical area of his practice.
5. “Cover” means insurance cover in accordance with the terms of this Policy, as applicable to each Insured Person.
6. “Emergency Treatment” means a sudden change in an Insured Person’s health, which requires immediate and urgent medical
treatment to avoid death or impairment to the Insured Person's immediate health.
7. “Golfing Equipment” means golf clubs and golf bags.
8. “Hospital” means an establishment duly constituted and licensed in the geographical area in which it is located as a medical or
surgical hospital for the care and treatment of sick and injured persons as bed-paying patients, and which:
(a) provides facilities for diagnosis, treatment and minor or major Surgery;
(b) provides twenty-four (24) hours nursing services by registered graduate nurses;
(c) is supervised by a full-time staff of Physicians at all times; and (d) is not primarily a clinic, a mental hospital or institution, a place
for custodial care or facility for alcoholics or drug addicts, a spa, or hydroclinic or a nursing or rest or convalescent home or a
home for the aged, or such similar establishments.
9. “Hospital Allowance” means being confined in a hospital as a registered in patient because of a medical necessity and on the
recommendation of a Physician. One day of Hospital Confinement means a continuous 24-hour period for which the Hospital makes
a room and board for the treatment of Injury or Illness.
10. “Hostage” means You (except a minor held hostage by his or her parents) being or held by another person by force or against your
will as a prisoner.
11. “Illness" means a physical condition marked by a pathological deviation from the normal healthy state manifesting itself during the
period of your trip during the currency of this Policy and shall exclude any Pre-existing conditions.
12. “Injury” means an external and visible bodily injury sustained by an Insured Person and caused solely and directly by an Accident
and does not include any illness or naturally occurring medical conditions or degenerative process.
13. “Insolvency” means the inability of an individual or entity to pay his/its debts when they are due and is deemed to occur, in the case
of an individual, upon a bankruptcy petition being presented against him and in the case of an entity, upon a resolution for winding
up being passed by or a winding up petition being presented against it.
14. “Immediate Family Member" means spouse, child, son-in-law, daughter-in-law, parent, parent-in-law, grandparent, grandparent-in-
law, grandchild, brother, sister, brother-in-law, sister-in-law.

15. “Jewellery” means valuable objects worn on the body, which have inclusions of precious or semi-precious metals or precious or
semi-precious stones.
16. “Kidnap” means an event or connected series of events of Your seizing, detaining or carrying or taking away by force or fraud (except
a minor kidnapped by his or her parents) against Your will for the purpose of demanding a ransom.
17. “Laptop Computer” means the complete laptop computer including accessories or attachments that come as standard equipment
with the laptop. Any handheld computers or devices are excluded from this category.
18. “Loss of sight" means total and irrecoverable loss of sight.
19. “Loss of limb" means loss by physical severance of a hand at or above the wrist or of a foot at or above the ankle.
20. “Loss of fingers" means complete severance through or above the metacarpophalangeal joints.
21. “Main Insured Person” means the person named as such in the Policy Schedule or Certificate of Insurance.
22. “Medical Expenses” means expenses incurred during your trip within 90 days of sustaining injury or sickness which you paid to a
legal Physician, hospital and/or ambulance service of medical, surgical, x-ray, hospital or nursing treatment including the cost of
medical supplies and ambulance hire and including the cost of dental treatment where such treatment is necessarily incurred to
restore sound and natural teeth and is caused by an Accident. All treatment including specialist treatment must be prescribed or
referred by a Physician in order for expenses to be reimbursed under this policy and will not exceed the usual level of charges for
similar treatment, medical services or supplies in the location where the expenses were incurred had this insurance not existed.
23. “Overseas” means to or in the countries specified in the Policy Schedule according to the chosen plan.
24. “Nuclear, Chemical, Biological Terrorism” shall mean the use of any nuclear weapon or device or the emission, discharge, dispersal,
release or escape of any solid, liquid or gaseous Chemical agent and/or Biological agent during the period of this insurance by any
person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s),
committed for political, religious or ideological purposes or reasons including the intention to influence any government and/or to
put the public, or any section of the public, in fear.
“Chemical” agent shall mean any compound, which, when suitably disseminated, produces incapacitating, damaging or lethal effects
on people, animals, plants, or material property.
“Biological” agent shall mean any pathogenic (disease producing) micro -organism(s) and/or biologically produced toxin(s) (including
genetically modified organisms and chemically synthesised toxins) which cause illness and/or death in humans, animals or plants.
25. “Period of Insurance” means the period specified in the Policy.
26. “Physician” means a person qualified as a Physician (other than an Insured Person or a member of his Immediate Family or his
business associates including any business partners, employers or employees) by a medical degree in western medicine and duly
licensed and registered with the relevant medical board or council to provide medical and surgical treatment and who, in rendering
treatment, is practicing within the scope of his licensing and training in the geographical area of practice. A reference to a “Physician”
in this Policy shall be construed to mean, wherever appropriate, a General Practitioner and/or a Specialist.
27. “Pre-existing conditions" means any condition for which you have received medical treatment, diagnosis, consultation or prescribed
drugs within a six(6) month period preceding the commencement date of the Trip or, a condition for which medical advice or treatment
was recommended by a registered Physician within a six(6) month period preceding the commencement date of the Trip, or medical
condition for which you have made a claim on a previous trip.
28. “Public Place” means any place to which the general public has access, for example (but not limited to) airports, shops, restaurants,
hotel foyers, parks, beaches, golf course, driving range, public buildings and like places.
29. “Public Transport” means any regularly scheduled mode of transportation provide and operated by a duly licensed carrier and meant
for the local public interest to move around and which is recognized by respective countries (bus, ferry, hovercraft, hydrofoil, ship,
train, tram or underground train). This excludes all modes of transportation that are chartered or arranged as part of a tour, even if
the services are regularly scheduled. Common Air Carrier is treated as Public Transport in this policy.
30. “Relative” means spouse, child, son-in-law, daughter-in-law, parent, parent-in-law, grandparent, grandparent-in-law, grandchild,
brother, sister, brother-in-law, sister-in-law, niece, nephew, aunt or uncle.
31. “Residents of Singapore" means Singapore Citizens and Permanent Residents (holders of re-entry permits) as well as holders of
employment passes, work permits, students' passes or dependant’s passes.
32. “Selected Plan” means the choice of Premier or Basic Plan which You or Your representative made at the time of application.
33. “Serious injury" or "Serious Illness" whenever applied to you, means you requiring Treatment by a physician and which results in
you being certified by that physician as unfit to travel or continue with your planned Trip. When applied to the Immediate Family
Member or travel companion, it shall mean Injury or Illness certified as being dangerous to life by a Physician and which results in
your discontinuation or cancellation of your planned Trip.
34. “Sickness” means any noticeable change in your physical health due to a medical condition contracted, commencing or manifesting
during the period of your trip in which you seek the care of a physician to treat the sickness for which the claim is made provided the
sickness is not pre-existing and the nature of the sickness is not excluded under this Policy.
35. “Stolen” means dishonestly and illegally taken from You against Your will, whether by stealth, by force or threat of force or by
coercion, and “Theft” has the same meaning.
36. “Travel Agent” means a travel agent registered in Singapore, which is a member of the National Association of Travel Agents
Singapore, or any subsidiary of such travel agent.
37. “Travel Companion” means a person who has travel bookings to accompany You on the Trip.
38. “Terrorism” means any actual or threatened use of force of violence directed at or causing damage, injury, harm or disruption or
commission of an act dangerous to human life or property, against any individual, property or government with the stated or unstated
objective of pursuing economic, ethnic, nationalistic, political, racial or religious interests, whether such interest are declared or not.
Robberies or other criminal acts primarily committed for personal gain and acts arising primarily from prior personal relationships
between perpetrator(s) and victim(s) will not be considered Terrorism. Terrorism also includes any act, which is verified or recognized
by the (relevant) government as an act of terrorism.
39. “Total and Permanent Disablement" means (a) total disability which prevents you from attending to your business or occupation (of
any and every kind) or if you have no business or occupation from attending to your usual duties and, (b) lasting twelve calendar
months and at the expiry of that period being beyond hope of improvement.
40. “Trip" means a planned journey Overseas.
41. “Valuables” mean articles of gold, silver or other precious metal, jewellery, furs and precious and semi-precious gems.
42. “War” means war, whether declared or not, or any warlike activities including use of military force by an sovereign nation to achieve
economic, geographic, nationalistic, political, racial, religion or other ends.
43. “We/Our/Us/Insurer" means XYZ Insurance Singapore Pte Ltd.
44. “You/Your/Insured Person" means the Main Insured Person and other Insured Person(s) shown in the Policy Schedule or Certificate
of Insurance.
PART B – ELIGIBILITY AND COVER

1. This Policy Covers the Main Insured Person, his/her legal spouse and child(ren) as shown in the Policy Schedule.
2. This Policy Covers Insured Persons only if they are Residents of Singapore.
3. An Insured Child must travel with at least one (1) Insured adult for the Cover to be valid.
4. For the purposes of benefits Section 1 to 40 excluding Section 22 to 24 in Part C, an Insured Person shall be Covered under this Policy
during an Overseas Trip from and returning to Singapore during the Period of Insurance. Cover shall be considered to commence
when an Insured Person leave his/her place or residence or business in Singapore (whichever is later) for a direct journey to commence
the planned Overseas Trip and terminates:
a) upon his/her arrival at his/her place of residence or business in Singapore on the completion of the planned Trip;
b) two hours after his/her arrival in Singapore on the completion of the planned Trip;
c) at 12.01 a.m. (Singapore time) on the 182nd day after the Insured Person's commencement of any Trip;
whichever is the earliest; however, Cover will be automatically extended (even if this goes beyond the Period of Insurance) without
payment of any additional premium for up to:
(d)30 days if you are at that time hospitalized and/or quarantined Overseas as advised by a Physician;
(e) 72 hours if any scheduled Public Transport in which you are travelling at that time (which is bound for Singapore) is unavoidably
delayed.
5. For the purposes of benefits Section 22 to 24 in Part C, an Insured Person shall be considered to be Covered under this Policy in
respect of a planned Overseas Trip from and returning to Singapore during the Period of Insurance. Cover shall be considered to
commence when the Insured Person has made payment of any travel and/or accommodation expenses for the planned Overseas
Trip.
PART C –BENEFITS
This following benefits are payable, up to the applicable limits, only if the insured event occurs while You are Covered under this Policy.
SECTION 1 & 2 - PERSONAL ACCIDENT

If You are involved in an Accident and as a consequence, sustain bodily injury or death within 90 days of the date of the Accident, during
the Period of Insurance, we will pay the compensation, up to the limits of the Selected Plan as shown in the Schedule below:
Premier Basic
Sum Insured Sum Insured
1 Insured Person up to 70 $400,000 $200,000

years
2.Insured Person above 70 $200,000 $100,000
years
3.Insured Child $100,000 $50,000
Percentage of Schedule of Compensation Principal Sum

Insured
1. Death by Accident 100%
2. Total and Permanent Disablement of:
a) loss of two limbs 100%
b) loss of both hands or of all fingers and both 100%
thumbs
c) total and permanent loss of sight of both eyes 100%
d) total and permanent loss of sight of one eye 50%
e) total paralysis 100%
f) injuries resulting in being permanently 100%
bedridden
g) loss of hand at wrist 100%
h) loss of arm at shoulder; between shoulder and 100%
elbow; at and below elbow
i) loss of leg at hip; between knee & hip; below 100%
knee
Provisions
1. No benefits will be payable:
a) Under Schedule of Compensation (1) unless such death occurs within 90 days of the date of Injury or Accident.
b) Under Schedule of Compensation (2) except on proof to us that the disablement has continued for 12 months from the date of Injury
or Accident and in all probability will continue for the remainder of your life.
2. The maximum amount of all benefits payable for one or more injuries sustained by an Insured Person during the Period of Insurance
shall not exceed the maximum limit as stated in the Policy or Certificate of Insurance unless other endorsed in the policy.
SECTION 3 - DOUBLE PUBLIC TRANSPORT

In the event an Accident occurs during your trip and You are riding as a farepaying passenger in Public Transport, resulting in your Death,
the benefits payable under Section 1 (according to the age of the Insured Person) shall be doubled, but not exceeding the following limits.
Premier Basic
Sum Insured Sum Insured
1. Insured Person up to 70 years $800,000 $400,000
2. Insured Person above 70 $400,000 $200,000
years
3. Insured Child $200,000 $100,000
N.B.: This Policy will only pay for any claim under Section 1, 2 or 3 for the same event but not for more than one of the Sections.
SECTION 4 - TUITION GRANT FOR EACH LEGALLY DEPENDENT CHILD

If the benefits under Section 1 becomes payable to the Main Insured, and such Main Insured who, at the date of the Accident, has a legal
Child or Children, we will pay the sum insured, up to the limit specified on the Schedule of Benefits for each legal child up to a maximum
of 4 (four) children.
N.B. This benefit is only payable once for any child even if the child is covered by more than one travel insurance policy underwritten by
us for the same Trip.
SECTION 5 - MEDICAL EXPENSES (OUTSIDE OF SINGAPORE)

We will reimburse you up to the limit specified in Section 5 of the Selected Plan for medically necessary expenses including dental
expenses incurred as a direct result of bodily Injury or Illness sustained during your trip.
Outside of Singapore (within 365 days from date of incident)

a) Medical, Hospital and Emergency dental treatment (where such treatment is necessary to restore sound and natural teeth and is caused
by an Accident) expenses.
b) Expenses incurred for treatment by Chinese Physician are subject to a maximum of $50 per visit per day, up to a maximum of $200.
c) Additional accommodation and transportation expenses necessarily incurred by you to remain behind upon written advice of a
Physician, including
i. cost of an ordinary room accommodation in any reasonable hotel up to $200 per day, but excluding the cost of drinks, meals and
other room services.
ii. cost of a return scheduled economy airfare, rail or sea transport fare.
The total medical expenses incurred shall not exceed the maximum limit under Section 5 of the Schedule of Benefits. All treatment must
be prescribed by a Physician or Chinese Physician in order for the expenses to be reimbursed. If you are entitled to a refund of all or part
of such expenses from other sources, we will only be liable for the amount that exceeds the reimbursement recoverable from such other
sources.
Exclusions:
We will not pay for claims in respect of:
1. Meals and other incidental expenses except those incurred by you during hospitalization for medical treatment at a hospital.
2. Treatment or aid obtained in Singapore.
(a) Surgery or medical treatment, which in the opinion of the Physician treating you can be reasonably delayed until your return to
Singapore.
SECTION 6 – PREGNANCY RELATED EXPENSES

We will reimburse you up to the limit specified in Section 6 of the Selected Plan, the Medical Expenses that are necessarily incurred during
your trip for a pregnancy related sickness.
This section does not apply to pregnancy-related sickness or treatment, which you sought in Singapore or upon return to Singapore.
If you are entitled to a refund of all or part of the expenses from any person or any other source, we will only pay the amount of Medical
Expenses over and above the refunded amount up to the limits indicated on the Selected Plan.
Exclusions:
For the purpose of Section 6, pregnancy-related sickness or treatment or losses suffered as a result of pregnancy-related sickness does
not include the following:
1. Any expenses incurred due to events occurring during the first trimester of pregnancy (i.e. 0-12 weeks).
2. Ectopic pregnancy, childbirth, including premature childbirth or stillbirth.
3. Abortion or miscarriage, except if related to accidental injury and not attributed to any natural causes and/or sickness relating to
pregnancy or childbirth.
4. Tests or treatment relating to fertility, contraception, sterilization, birth defects or congenital illness.
5. Any depressive, psychological or psychiatric illness, including post-natal depression.
6. Any pre-existing medical condition.
SECTION 7 – OVERSEAS HOSPITAL ALLOWANCE

If you are admitted in a hospital as an in-patient on the recommendation of a Physician as a result of bodily Injury or Illness sustained
during the Trip, we will pay you $200 for each full day you are hospitalized up to the maximum limit of the Selected Plan specified on the
Schedule of Benefits. Payment will be made after the Period of Hospital Confinement.
Exclusions:
1. Treatment or aid obtained in Singapore.
2. Surgery or medical treatment, which in the opinion of the Physician treating you can be reasonably delayed until your return to
Singapore.
3. Any pre-existing medical condition.
SECTION 8 - HOSPITAL VISIT BENEFIT

If you are hospitalized during your trip for more than five (5) consecutive days as a result of Injury or Illness sustained during the Trip, and
your medical condition forbids evacuation and no adult member of your Family is with you, we will reimburse up to the limit specified on
the Schedule of Benefits, the expenses necessarily incurred for one (1) relative or friend, who on written advice of a Physician, is required
to stay with you or visit you or travel with you, including:
(a) cost of an ordinary room accommodation in any reasonable hotel up to $200 per day, but excluding the cost of drinks, meals and other
room services.
(b)cost of a return scheduled economy airfare, rail or sea transport fare.
N.B. This Policy will only pay for any claim under any one of the Section 8 or 9 for the same event, but not both.
SECTION 9 – COMPASSIONATE VISIT

In the event of Your death due to an Accident or Sickness during your trip and no adult member of Your family was present at Your Death.
We will pay, up to the limit specified on the Schedule of Benefit, the reasonable travel expense incurred by one (1) relative or friend to
assist in the final arrangements at your Destination including:
a) cost of an ordinary room accommodation in any reasonable hotel up to $200 per day, but excluding the cost of drinks, meals and other
room services.
b) cost of a return scheduled economy airfare, rail or sea transport fare.
N.B. This Policy will only pay for any claim under any one of the Section 8 or 9 for the same event, but not both.
SECTION 10 - CHILD CARE BENEFIT

If you are hospitalized Overseas as a result of Injury or Illness sustained during the Trip, and there is no other adult to accompany the
child/children home, we will reimburse up to the limit specified on the Schedule of Benefits, expenses necessarily incurred for one (1)
relative or friend to accompany your child/children below the age of 18 back to Singapore including:
a) cost of an ordinary room accommodation in any reasonable hotel up to $200 per day, but excluding the cost of drinks, meals and other
room services.
b) cost of a return scheduled economy airfare, rail or sea transport fare.
SECTION 11 - SPECIAL GRANT

We will pay up to the limit specified in Section 11 of the Selected Plan, if, during a trip, an Insured Person dies from:
a) an Injury;
b) an Illness during or after treatment for such Illness, where such treatment was carried out at a Hospital.
Provisions
1. No benefits will be payable unless such death occurs during your trip.
SECTION 12 - MEDICAL EXPENSES (IN SINGAPORE)

We will reimburse you up to the limit specified in Section 12 of the Selected Plan on the Schedule of Benefits for medically necessary
expenses incurred as a direct result of Injury or Illness sustained during the Period of Insurance:
1. In Singapore, within 90 days immediately following your return:
a) For the necessary follow-up medical and hospital expenses (including the cost of ambulance). Expenses incurred for treatment by
Chinese Physician are subject to a maximum of $50 per visit per day, up to a maximum of $200.
b) For the necessary medical treatment sought within five (5) days upon return to Singapore, where initial treatment for Injury or Illness
sustained by you during the Trip was not sought during your trip. Expenses incurred for treatment by Chinese Physician are subject
to a maximum of $50 per visit per day, up to a maximum of $200.
The total medical expenses incurred shall not exceed the maximum limit under Section 12 of the Schedule of Benefit. All treatment must
be prescribed by a Physician or Chinese Physician in order for the expenses to be reimbursed. If you are entitled to a refund of all or part
of such expenses from other sources, we will only be liable for the amount that exceeds the reimbursement recoverable from such other
sources.
Exclusions
1. We will not pay for claims in respect of meals and other incidental expenses except those incurred by you during hospitalization for
medical treatment at a hospital.
SECTION 13 - EMERGENCY MEDICAL ASSISTANCE AND EVACUATION

If you suffer Injury or Illness or is in need of medical, legal administrative emergency assistance during your trip (except for prior travel
information which may be obtained locally), arising out of and in the course of this trip, provided that such Trip is not undertaken against
the advice of the physician, and/or for the purpose of obtaining or seeking any medical or surgical treatment abroad, the following services
under Section 13, 14 and 15 are available directly from XYZ Assistance Services (“the Assistance Company”) upon specific verbal
notification by you or your personal representative to the following 24-hour Hotline on a collect call basis.
XYZ Assistance Singapore: (65) 6300 9999
Providing the following information:
a) Your full name, travelling dates, NRIC/Employment Pass number and policy or certificate number.
b) The name of the place and telephone number where the Assistance Company can reach you or your representative; and
c) A brief description of the emergency and the nature of help required
EMERGENCY MEDICAL ASSISTANCE AND EVACUATION

If you suffer Injury or Illness such that XYZ Assistance Services (”the Assistance Company”) medical team and the attending Physician
recommended hospitalization, the Assistance Company will arrange for:
a) Your transfer to one of the nearest hospital, and
b) If necessary on medical grounds, your transfer with necessary medical supervision by any means (including, but not limited to, air
ambulance, scheduled commercial flight, and road ambulance) to a hospital more appropriately equipped for the particular injury or
illness, All costs for Emergency Medical Transfer/Evacuation will be borne entirely by the Assistance Company up the limits stated in
this Section.
SECTION 14 - EMERGENCY MEDICAL REPATRIATION

When after local treatment, your medical condition will not prevent your medically supervised repatriation as a regular passenger,
according to the medical opinion of both attending physician and the Assistance Company alarm centre doctor; the Assistance Company
will organize and pay for your repatriation to Singapore by scheduled airline flight (on the appropriate means of transportation, including
any supplementary cost of transportation to and from the airport, provided that your original return ticket is not valid for such repatriation,
and provided that you surrender any unused portion of your ticket to the Assistance Company.) Any decision on the repatriation of the
Insured shall be made jointly and exclusively by both the attending physician and the Assistance Company alarm centre doctor under
constant medical supervision.
All costs for Emergency Medical Repatriation will be borne entirely by the Assistance Company, up the limits stated in this Section.
SECTION 15 - REPATRIATION OF MORTAL REMAINS/LOCAL BURIAL
The Assistance Company will organize and pay the cost of transportation of the mortal remains of the deceased Insured (or his/her ashes)
from the place of death to Singapore in the event of his/her death for burial.
As an alternative, upon specific request of the personal representative of the deceased insured, and wherever possible, the Assistance
Company will organize and pay for the cost of local burial in the country in which the Insured was visiting at the time of his death.
The Assistance Company’s financial responsibility for such local burial shall be limited to the equivalent of the cost of the repatriation.
Should the deceased insured’s representative choose an alternative destination besides Singapore for burial, the Assistance Company
will organize and pay for the cost of transportation of the mortal remains to this alternative site, up to the equivalent cost of transporting
the remains to Singapore.
Exclusions applicable to Section 13, 14 and 15
We will not pay for claims arising from the following treatment, items, conditions and their related or consequent expenses:
1. Emergency Medical Evacuation or Repatriation or costs not approved and arranged by the appointed Assistance Company or it’s
authorized representative, except that we reserve the right to waive this exclusion if you or your travelling companions cannot for
reasons beyond your control to notify the Assistance Company during an emergency situation. In any event, we reserve the right to
reimburse you only for those expenses incurred for service, which the Assistance Company would have provided under the same
circumstances.
2, Any event occurring or treatment received when you are in Singapore.
3. Any expense if you are not suffering from a serious medical condition or if the treatment can be reasonably delayed until you return to
Singapore, or any treatment or expenses related to childbirth, pregnancy which endangers the life of the mother and/or unborn children
in the event of childbirth, miscarriage of pregnancy after 6 months therefore of.
4. Any treatment performed or ordered by a person who is not a Physician/ Chinese Physician.
5. The cost of burial in Singapore.
SECTION 16 - BAGGAGE AND PERSONAL EFFECTS

We will reimburse you up to the limit specified in Section 16 of the Selected Plan for:
a) loss of or damage to baggage taken, or purchased on the Trip and owned by you, including clothing and personal effects worn or
carried on the person, trunks, suitcases and the like receptacles and excluding Valuables.
b) Theft of Valuables owned by (and not hired by, loaned to or entrusted to) You up to the sum of $500;
occurring during your Trip.
We will make payment or at our option reinstate or repair, subject to due allowance for wear and tear and depreciation.
If any article is proven to be beyond economical repair, a claim will be dealt with under this policy as if the article had been lost.
In the event of loss or damage to any property insured forming part of a pair or set, our liability shall not exceed a proportionate part of
the value on the pair or set. We shall not be liable for more than $800 in respect of any one article or pair or set of articles.
SECTION 16A - LAPTOP, WIRELESS HANDHELD DEVICE AND MOBILE PHONE

We will reimburse you up to the limit specified in Section 16A of the Selected Plan for loss of or damage to a Laptop computer, wireless
handheld device for e-mail or Mobile Phone owned by (and not hired by or loaned or entrusted to) You; occurring during the Period of
Insurance during your Trip.
We will make payment or at our option reinstate or repair, subject to due allowance for wear and tear and depreciation.
If any article is proven to be beyond economical repair, a claim will be dealt with under this policy as if the article had been lost.
We shall not be liable for more than $1,000 in respect of any one article or pair or set of articles.
Exclusions applicable to Section 16 and 16A
1. Loss or damage to animals, motor vehicle (including accessories), motorcycles, snow skis, boats, motors, any other conveyances,
household furniture, musical instruments, sports equipment, antiques, securities, stamps, money/documents, or contact or cornea
lenses or damage to fragile articles, including glass and porcelain items, fruits or food articles, perishables & consumables items.
2. Loss or damage of Business goods or samples or equipment of any kind.

3. Loss of or damage caused by normal wear and tear, gradual deterioration, moths, vermin, inherent vice, mechanical or electrical
breakdown or derangement, or damage sustained due to any process initiated by an Insured Person to repair, clean or alter any
property.
4. Cost of reproducing data whether recorded on tapes, cards, and discs or otherwise.
5. Loss or damage whilst in the custody of an airline or other carrier, unless reported immediately on discovery and in the case of airline
a Property Irregularity Report is obtained.
6. Losses not reported to the police within 24 hours and report not obtained at the place of loss.
7. Loss or damage or Theft of insured’s property left unattended in a public place.
8. Loss or damage to property resulting directly or indirectly from insurrection, rebellion, revolution, civil war, usurped power, or action
taken by Government Authorities in hindering, combating or defending against such an occurrence; seizure or destruction under
quarantine under customs regulations, confiscation by order of Government Authorities or risk of contraband or illegal transportation
of trade.
9. Loss or damage to property insured under any other insurance policy, or otherwise reimbursed by a common carrier or a hotel.
10. Loss or Theft of property, which could have been avoided by the taking of reasonable precautions.
11. Loss or damage or theft of property where we have reasonable grounds for believing that Your claim is not made in good faith.
12. Loss or damage to Insured Person’s baggage sent in advance, mailed or shipped separately.
SECTION 17 – PURCHASE OF ESSENTIAL ITEMS

We will reimburse you up to the limit specified in Section 17 on the Selected Plan for the purchase of essential personal items if your
baggage is stolen or lost.
We shall not be liable for more than $50 in respect of any one article or pair or set of articles.
For the avoidance of doubt, this Section does not apply to baggage stolen or lost upon your return to Singapore at the end of the Trip.
SECTION 18 - BAGGAGE DELAY

We will pay you a cash benefit if your checked-in baggage have been delayed, misdirected or temporarily misplaced for at least six (6)
hours from the time of your arrival at the scheduled destination abroad and in Singapore as specified in the itinerary supplied to you. The
maximum limit payable is up to the limit specified in Section 18 of the Selected Plan.
SECTION 19 - PERSONAL MONEY AND TRAVEL DOCUMENTS

We will reimburse you up to the limit specified in Section 19 of the Selected Plan for the cost obtaining replacement your passports, travel
tickets and relevant travel documents loss as well as additional travel expenses and hotel accommodation incurred to replace lost travel
documents. Such loss must be due to robbery, burglary, theft or natural disasters (typhoon, earthquakes, etc.) during your trip.
We will reimbursed you up to $500 for the loss of money (cash, travellers’ cheques or banknotes) belonging to you and in your care,
custody or control during the trip. Such loss must be due to robbery, burglary, theft or natural disasters (typhoon, earthquakes, etc.)
during your trip.
Exclusions
1. Shortage due to error, omission, exchange or depreciation in value.
2. Travellers' cheques not immediately reported to the local branch or agent of issuing authority.
3. Loss of money not in the personal custody of the Insured Person.
4. Loss of cash cards.
SECTION 20 – LOSS OF CREDIT CARD

If You suffer financial loss as a direct result of the fraudulent use of Your credit card(s) following its loss or Theft during the Trip, We will
pay for such loss up to the limit specified in Section 20 of the Selected Plan.
The loss must be reported to the card company(s) within six(6) hours of the incident. Any claim must be accompanied by a report issued
by the card company(s) evidencing the loss. The benefits under this Section do not apply to an Insured Person who is a Child.
For the avoidance of doubt: this Section does not apply upon your return to Singapore at the end of the Trip.
SECTION 21 - PERSONAL LIABILITY

We will indemnify you up to the limit specified in Section 21 of the Selected Plan for legal liability to a third party arising during the Period
of Insurance as a result of:
a) Accidental Injury (including death) caused solely by you to any third party
b) Accidental loss of or damage to property caused solely by you of any third party.
In addition, we will indemnify you for:
1. Third parties' costs and expenses recoverable from you and
2. Your costs and expenses incurred with our written prior consent.
Exclusions
We will not pay for claims arising out of, in respect of, consequent upon:
1. Employer's liability, contractual liability or liability to a member of your Family.
2. Property, animals belonging to you, or, in your care custody or control.
3. Any wilful, malicious or unlawful act.
4. Pursuit of trade, business or profession.
5. Ownership or occupation of land or buildings (other than occupation only of any temporary residence).
6. Ownership, possession or use of vehicles, aircraft or watercraft or any other conveyance.

7. Legal costs resulting from any criminal proceedings.
8. The influence of intoxicants, mountaineering, ski racing in major events, ski jumping, ice hockey, the use of bobsleighs or skeletons,
riding or driving in races or rallies or the use of firearms.
9. Judgments that are not in the first instance delivered by or obtained from a Court of competent jurisdiction within Singapore.
SECTION 22 - LOSS OF DEPOSIT OR CANCELLATION

We will reimburse you up to the limit specified in Section 22 of the Selected Plan, for loss of travel and/or accommodation expenses paid
in advance by you which are not recoverable from any other source consequent upon the cancellation of the planned Trip after the
insurance has been effected and which cancellation occurred within thirty (30) days (except for sub-clause 4 hereunder) before the date
of commencement of the Trip and which is as a result of:
1. Your death, Serious Injury or Serious Illness or the death, Serious Injury or Serious Illness of your Immediate Family Member or travel
companion (including compulsory quarantine). A death certificate must be obtained or written advice from the attending Physician
treating you or your Immediate Family Member or travel companion must be obtained confirming the advisability to cancel the Trip
due to Serious Injury or Serious Illness.
2. Unexpected outbreak of strike, riot or civil commotion arising out of circumstances beyond your control at the planned destination.
3. Witness summons, jury service, which were not made known to you prior to the taking up of this policy.
4. Serious damage to your residence in Singapore from fire, flood or similar natural disaster occurring within one week before the
commencement date of the Trip and your presence is required on the premises on the commencement date of the Trip.
Exclusions
We will not pay for:
1. Any loss caused directly or indirectly by government regulations or control, bankruptcy, liquidation or default of travel agencies, or
carrier caused cancellation.
2. Any loss that is covered by any other existing insurance scheme, government programme or which will be paid or refunded by a hotel,
carrier or travel agent or any other provider of travel and/or accommodation.
N.B. This Policy will only pay for any claim under either Section 22 or 23 for the same event but not for both Sections.
SECTION 23 – REPLACEMENT TRAVELLER

If, due to You or Your Immediate Family Member being admitted into a Hospital as an in-patient on the recommendation of a Physician
as a result of bodily Injury or Illness, You do not proceed with a planned Trip, but another person takes Your place and proceeds on the
Trip, We will reimburse You up to the limit specified on Section 23 of the Selected Plan, for administrative fees or charges incurred in
making the necessary changes in travel and/or accommodation arrangements to enable this person to take Your place on the Trip,
provided the admission into Hospital takes place after the insurance has been effected and within seven (7) days before the date of
commencement of the Trip.
Exclusions
1. We will not pay for more than one incident of change of traveller.
N.B. This Policy will only pay for any claim under either Section 22 or 23 for the same event but not for both Sections.
SECTION 24 – FINANCIAL COLLAPSE OF TRAVEL AGENCY
We will reimburse you up to the limit specified in Section 24 of the Selected Plan, for the loss of irrecoverable travel deposits or travel
fares paid in advance, due to a Trip being cancelled because of Insolvency of a Travel Agent to whom You made such payments.
Exclusion
We will not pay for any loss;
1) Caused directly or indirectly by government regulations or control; or
2) Caused by cancellation by the carrier or any other provider of the travel and/or accommodation; or
3) That is covered by any other existing insurance scheme or government program; or
4) Which will be paid or refunded by a hotel, airline, travel agent or any other provider of travel and/or accommodation; or
5) Insolvency which occurred before the effective date of your policy; or
6) Caused by a failure by any airline, cruise-line, tour operator or Travel Agent, persons or agency to provide the travel arrangements for
reasons other than Insolvency; or
7) Should this insurance be purchased less than 7 days before the date of departure.
SECTION 25 - TRAVEL DELAY

1. If the departure of the scheduled Public Transport in which you have arranged to travel is delayed for at least six (6) hours from the
time specified in the Itinerary supplied to you due to strike/industrial action, adverse weather conditions or mechanical
breakdown/derangement or structural defect of that scheduled public transport, we will pay up to the limit specified in this Section of
the Selected Plan.
2. In addition, if any part of the planned Trip is cancelled due to the delay, but you still continue with the rest of the Trip, we will reimburse
you for irrecoverable deposits or charges paid in advance or contracted to be paid for the benefit of those parts that are cancelled, up
to the maximum benefit specified in Section 25 of the Selected Plan.
The total compensation payable for (1) & (2) above shall not exceed the maximum limit under Section 25 of the Selected Plan. The delay
must be verified in writing by the operator(s) of the conveyance or their handling agent(s) on the number of hours delayed and the reason
for the delay. If you are entitled to a refund of all or part of such expenses from other sources, we will only be liable for the amount that
exceeds the reimbursement recoverable from such other sources.
Exclusions
We will not pay for claims arising directly or indirectly from, in respect of, or due to:
1. Failure of the Insured Person to check in according to the itinerary supplied to him, obtain written confirmation from the carriers or
their handling agents of the number of hours of delay and the reason for such delay.
2. Strike or industrial action existing on the date you purchases this insurance.
3. Your late arrival at the airport or port after check-in or boarding time (except for the late arrival due to strike or industrial action).
N.B. This Policy will only pay for any claim under either Sections 25, 26 or 33 for the same event but not for more than one Sections.
SECTION 26 – FLIGHT DIVERSION

In the event that whilst travelling on a scheduled flight Your flight is diverted due to adverse weather conditions which prevents you from
continuing your trip and you are delayed from arriving at your planned destination by at least six (6) consecutive hours. We will pay up
to $100 for every full six (6) consecutive hours of delay up to a maximum limit specified in this Section of the Selected Plan, during the
Policy Period.
N.B. This Policy will only pay for any claim under either Sections 25, 26 or 33 for the same event but not more than one Sections.
SECTION 27 – TRIP CURTAILMENT

We will reimburse you for the proportional return of the irrecoverable prepaid cost of the planned Trip in respect of travelling expenses
only as shown on the booking invoice, calculated at pro rate for each complete day of the planned Trip lost, including reasonable additional
hotel and repatriation costs to Singapore, necessarily and unavoidably incurred, due to the necessary and unavoidable curtailment (as
defined) of the planned Trip due to:
a) your death, Serious Injury or Serious Illness and upon written medical advice from the attending Physician to curtail the Trip;
b) Unexpected death, Serious Injury or Serious Illness of your Immediate Family Member or travel companion.
c) Hijacking of the aircraft in which you are on board as a passenger.
d) Natural disasters, which prevent you from continuing with the scheduled Trip.
e) Unexpected outbreak of strike, riot or civil commotion arising out of circumstances beyond your control.
A medical certificate must be obtained from the Physician treating you confirming the advisability to return to Singapore due to your
Illness or Injury. This coverage is effective only if policy is purchased before you become aware of any circumstances, which could lead
to the disruption of the planned Trip.
"Curtailment" shall mean abandonment of the planned Trip as shown on the booking invoice and return to place of residence in Singapore.
Exclusions
1. Government regulations or Act, delay or amendment of the booked Trip (including error, omission or default) by the provider of any
service forming part of the booked Trip as well as the agent or tour operator through whom the Trip was booked.
2. Your business, financial or contractual obligation or those of your travelling companion.
3. Your disinclination to travel or financial circumstances.
4. Unlawful acts of, or criminal proceedings against any person on whom the booked Trip depends, other than attendance, under the
subpoena as a witness at a Court of Law.
5. Your failure to notify travel agent/tour operator or provider of transport or accommodation immediately upon finding it necessary to
cancel or curtail the travel arrangement.
SECTION 28 - OVERBOOKED FLIGHT

If you are denied boarding of an aircraft on a commercial scheduled flight due to over-booking, and no alternative transportation is made
available to you within four (4) hours of the scheduled departure time of such flight, we shall indemnify you for expenses incurred, upon
providing evidence of receipts/bills in respect of hotel accommodation and restaurant meals or refreshments, if not provided or
compensated by the carrier or any third party.
The overbooked flight details to be obtained by you must be verified in writing by the operator(s) of the airline or their handling agent(s).
N.B. This Policy will only pay for any claim under either Sections 28 or 29 for the same event but not for both Sections.
SECTION 29 - FLIGHT MISCONNECTION

If the confirmed onward connecting scheduled flight is missed at the transfer point due to the late arrival of your incoming confirmed
connecting scheduled flight, and no alternative onward transportation is made available to you within four (4) hours of the actual arrival
time of your incoming flight, we shall indemnify you for expenses incurred, upon providing evidence of receipts/bills in respect of hotel
accommodation and restaurant meals or refreshments, if not provided or compensated by the carrier or any third party.
The flight misconnection details to be obtained by you must be verified in writing by the operator(s) of the airline or their handling agent(s).
N.B. This Policy will only pay for any claim under either Sections 28 or 29 for the same event but not for both Sections.
SECTION 30: RENTAL CAR EXCESS COVERS

We will reimburse you up the limit specified in Section 30 of the Selected Plan for any excess or deductible, which you become legally
liable to pay in respect of loss or damage to rental vehicle during the rental period during your trip.
Provisions
1. The rental vehicle must be rented from a licensed rental agency.
2. As part of the hiring agreement you must take up all comprehensive motor insurance against loss or damage to rental vehicle during
the rental period.
3. You must comply with all requirements of the rental organization under the hiring agreement and the Insurer of the rental vehicle as
well as the laws, rules and regulations of the country.
4. The rental vehicle must be rented and driven by you or any of your family members named as the insured under Certificate of Insurance
/ policy who shall include legally married spouse and children and must hold legally valid license(s) to drive the rental vehicle provided
always that you or any of your family members is not disqualified by any order from a Court of Law or is not prohibited by reasons of
any law, enactment, rule or regulation from renting and driving the rental at all material time.
Exclusions
We will not pay for:
1. Loss or damage arising from operation of the rental vehicle in violation of the terms of the rental agreement or loss or damage which
occurs beyond the limits of any public roads or in the violation of laws, rules and regulations of the country.
2. Loss or damage arising from wear and tear, gradual deterioration, damage from insects or vermin, inherent vice, latent defect or
damage.
SECTION 31 – EMERGENCY PERSONAL MOBILE PHONE CHARGES

We will reimburse you up to the limit specified in Section 31 of the Selected Plan for the actual telephone charges incurred for using Your
personal mobile phone during a medical assistance/emergency, and for which a claim has been submitted under Sections 1, 2, 3, 5 and
6.
Exclusions
1. No reimbursement will be payable for charges for telephone calls made via standard land lines, public telephones or using pre-paid
calling cards.
SECTION 32 – LOSS OF SPORTS EQUIPMENT

We will reimburse you up to the limit specified in Section 32 of the Selected Plan for loss or Theft of sports equipment owned by (and not
hired by or loaned or entrusted to) You occurring during the trip.
Exclusions
1. Loss caused by normal wear and tear, gradual deterioration, moths, vermin, inherent vice, mechanical or electrical breakdown or
derangement.
2. Loss whilst in the custody of an airline or other carrier, unless reported immediately on discovery and in the case of airline a Property
Irregularity Report is obtained.
4. Loss or Theft of insured’s property left unattended in a public place
5. Loss to property resulting directly or indirectly from insurrection, rebellion, revolution, civil war, usurped power, or action taken by
Government Authorities in hindering, combating or defending against such an occurrence; seizure or destruction under quarantine
under customs regulations, confiscation by order of Government Authorities or risk of contraband or illegal transportation of trade.
6. Loss to property insured under any other insurance policy, or otherwise reimbursed by a common carrier or a hotel.
7. Loss or Theft of property, which could have been avoided by the taking of reasonable precautions.
8. Loss or theft of property where we have reasonable grounds for believing that Your claim is not made in good faith.
9. Loss to Insured Person’s sports equipment sent in advance, mailed or shipped separately.
10. Damage to Insured Person’s sports equipment.
SECTION 33 - HIJACKING
We shall pay you a cash benefit for each full six (6) hours if the scheduled Public Transport that you are travelling in during your Trip is
hijacked. The maximum limit payable is up to the limit specified in Section 33 of the Selected Plan.
"Hijack" shall mean unlawful seizure and control of a public conveyance from the regular crew by use or threatened use of violent means.
N.B. This Policy will only pay for any claim under either Sections 25,26 or 33 for the same event but not more than one Sections.
SECTION 34 – KIDNAP & HOSTAGE

We will pay a benefit of S$500 per day for every 24-hour period that you are held Hostage following kidnap, which occurs during your
Trip. The maximum limit payable is up to the limit specified in Section 34 of the Selected Plan.
Exclusion
We will not pay any benefit in this Section for loss or damage due to the following:
1. Your fraudulent, dishonest or criminal acts;
2. Events which takes place in your country of residence, any country located in Central or Southern America or Africa, or any country in
which United Nations armed forces are present and active;
3. Actual loss or damage to property of any description, including intellectual property as a result of the Kidnap and Hostage.
4. Any loss or damage suffer not in accordance with a trip.
SECTION 35 - HOME CARE BENEFIT

We will, by payment or at our option by reinstatement or repair, indemnify you against physical loss or damage to the Contents, Valuables
and/or stamp, coin, medal collections, works of art based within your residence in Singapore that was left vacant because of your Trip,
caused by fire occurring during the period of insurance and after your Trip commences.
Definition
(i) "Contents" shall mean household furniture and furnishing, clothing and personal effects belonging to you or to members of your Family
or domestic servants permanently residing with you and fixtures and fittings you own (or for which you are responsible) not being
landlord's fixtures and fittings. Contents shall exclude Deeds, bonds, bills of exchange, promissory notes, cheques, travellers' cheques,
securities for money, documents of any kind, cash, currency notes.
In the event of loss or damage to any property insured forming part of a pair or set, our liability shall not exceed a proportionate part of
the value on the pair or set. We shall not be liable for more than $500 in respect of any one article or pair or set of articles.
Exclusions
1. Wear, tear, depreciation, the process of cleaning, dyeing, repairing or restoring any article, the action of light or atmospheric conditions,
moth, insects, vermin or any other gradually operating cause.
2. Any loss or damage occasioned through the wilful act of the Insured Person or with the connivance of the Insured Person.
3. Any loss (whether temporary or permanent) of the insured property or any part thereof by reason of confiscation, requisition, detention
or legal or illegal occupation of such property or of any premises, vehicle or thing containing the same by any government authorities.
4. Electrical or mechanical breakdown.
5. Business or professional use in respect of photographic and sporting equipment and accessories and musical instruments.
6. Motor vehicles, boats, bicycles and any equipment or accessories relating thereto.
SECTION 36 – PET CARE

We will pay any additional expense, which You become legally liable to pay for placing Your cat or dog in a kennel/cattery or pet hotel for
the duration of the Trip and You are unable to collect the pet on the day as agreed with the kennel/cattery or pet hotel, and this is solely
due to the delay of Your final inbound flight, rail, coach or sea vessel to Singapore. We will pay up to $50 for every full eight (8) consecutive
hours of delay, up to the limit specified in Section 36 of the Selected Plan.
You are to provide Us with written confirmation from:
a) the carrier stating the reason for the delay and the scheduled and actual departure time of the carrier.
b) the kennel/cattery or pet hotel stating the original and actual pick-up dates.
Exclusions
1. We will not pay for a claim under this Section if the reason for the delay was made known or was informed publicly prior to the purchase
of this Policy.
SECTION 37 – FULL TERRORISM COVER

We will pay You the benefit in Section 1 to 40 excluding Section 13 to 15 for losses arising from Terrorism including nuclear, chemical
and biological substances during the Trip, subject to the respective limits of the Selected Plan and the Terms and Exclusions of the Plan.
SECTION 38 – GOLF EQUIPMENT

In the event of loss or damage to Golfing Equipment owned by (and not hired by or loaned or entrusted to) You occurring in a Public
Place, We will pay up to the limit specified in Section 38 of the Selected Plan for the following:
a) the replacement or repair cost of the lost or damaged Golf Equipment; and
b) the cost for hiring replacement Golf Equipment.
If as a result of any damage, the Golf Equipment is proven to be beyond economical repairs, We will treat a claim under this Policy as if
the article had been lost.
We will not be liable for more than the limit specified on the Selected Plan, in respect of any one article or pair or set of articles.
We may make payment or at Our option reinstate or repair the Golf Equipment, subject to due allowance for wear and tear and
depreciation.
SECTION 39 – HIRED GOLF EQUIPMENT

We will reimburse you up to the limit specified in Section 39 of the Selected Plan for the cost of hiring replacement Golf Equipment and
for which a claim has been submitted under Section 38
SECTION 40 – HOLE-IN-ONE
If you complete a hole-in-one in an organized event at any 18-hole golf course, We will pay up to the limit specified in Section 40 of the
Selected Plan to cover the cost of one round of celebratory drinks.
You must provide us with written confirmation from the Golf Club Professional that the hole-in-one was achieved and the receipts for the
cost of celebratory drinks on the date of the accomplishment at the golf club.
Exclusions applicable to Section 38, 39 and 40
With regards to Golf Equipment, We will not be liable for:
1. Loss of or damage to golf balls and clubs whilst actually in the course of play or practice.
2. Loss of or damage due to wear and tear or damage due to any process of repair or while being worked upon resulting therefrom.
3. Loss of or damage resulting from Your wilful act or negligence.
4. Loss of or damage arising from confiscation or retention by customs or other officials.
5. Loss of or damage covered by any other Policy.
6. Loss or damage or Theft of insured’s property left unattended in a public place.
7. Loss or damage or Theft of property, which could have been avoided by the taking of reasonable precautions.
8. Loss or damage or theft of property where we have reasonable grounds for believing that Your claim is not made in good faith.
N.B. This Policy will only pay for any claim under either Sections 16,17, 18,32 or 38 for the same event but not more than one Sections.
PART D - GENERAL EXCLUSIONS

- APPLICABLE TO ALL SECTIONS
WE WILL NOT PAY UNDER ANY SECTION OF THIS POLICY FOR THE LOSS OR LIABILITY DIRECTLY OR INDIRECTLY ARISING AS A
RESULT OF:
1. from any Pre-existing conditions.
2. by suicide or attempted suicide, intentional self-Injury, wilful exposure to danger (other than in an attempt to save human life), or the
committing of any criminal acts.
3. by the effect or influence of alcohol or drugs, unless the drug is taken in accordance with an authorised medical prescription.
4. directly or indirectly by Human Immunodeficiency Virus (HIV) and/or any HIV related illness including Acquired Immune Deficiency
Syndrome (AIDS) and/or any mutant derivatives or variations however caused.
5. by your travelling on, or against medical advice, or where the Trip is made solely for the purpose of obtaining treatment.
6. from mental and nervous disorders, including insanity.
7. Congenital Conditions and any physical birth defects arising out of or resulting therefrom.
8. by any form of cosmetic (aesthetic) or plastic surgery or treatment, or any treatment which relates to or is needed because of previous
cosmetic treatment, provided that this exclusion does not apply to reconstructive surgery if:
a) it is carried out to restore function or appearance after an Accident or following Surgery for a medical condition, provided that the
Accident or Surgery occurred while the Insured Person was covered during the Period of Insurance or Trip and
b) it is done at a medically appropriate stage after the Accident or Surgery.
9. activities engaging in sports or games in a professional capacity or where you would or could earn income or remuneration from
engaging in such sports or games.
10. underwater activities requiring the use of artificial breathing apparatus except leisure scuba diving under the supervision of a qualified
diving instructor.
11. accidents whilst engaged in racing, motor rallies and competitions, mountaineering (reasonably requiring the use of ropes), rock
climbing, and hiking/trekking in remote areas unless with licensed guides, pot-holing, and any activity involving you being airborne
(whether suspended or not) not limiting to parachuting, hand gliding, bungee jumping, Sky diving, high diving.
12. air travel other than as a fare paying passenger on a regular scheduled airline or licensed chartered aircraft.
13. any illegal activities, loss resulting directly or indirectly from action taken by Government Authorities including confiscation, seizure,
destruction and restriction.
14. loss of or damage to hired or leased equipment; testing of any kind of conveyance.
15. employment on merchant vessels or as a manual worker; naval, military or air-force service or operations, regular or temporary,
military or police duties.
16. offshore activities like diving, oil-rigging, mining, aerial photography or handling of explosives.
17. survey of offshore installations or facilities under construction including survey from aerial conveyance.
18. war, invasion, act of foreign enemy hostilities (whether war is declared or not), civil war, rebellion, revolution, insurrection, military
or usurped power or confiscation or nationalisation or requisition or destruction of or damage to property under the order of any
government of public or local authority or following the warning of any intended strike, riot or civil commotion through or by general
mass media.
19. ionising radiations, or contamination by radioactivity from any irradiated nuclear fuel, or from any nuclear waste from the combustion
of nuclear fuel.
20. radioactive toxic explosive, or other hazardous properties of any explosive nuclear assembly, or of its nuclear component.
21. consequential loss or damage of any kind.
22. your direct participation in terrorist acts.
PART E - GENERAL CONDITIONS - APPLICABLE TO ALL SECTIONS OF THIS POLICY

You must comply with the following conditions to have the full protection of your Policy. Our liability shall be conditional on your
observance of the terms of this Policy.
1. Fit for Travel
At the time of your trip, You must be medically fit to travel and not be aware of any circumstances which could lead to cancellation or
disruption of the Trip, otherwise any claim is not payable.
2. Age
In the event of any claim, the age of the Insured Person will be determined as at the date of Injury or Illness with reference to the date of
birth.
3. Interpretation
This Policy, Certificate and the Schedule shall be read together and any word or expression to which a specific meaning has been attached
in any part of this Policy, Certificate or Schedule shall bear such meaning wherever it may appear.
4. Reasonable Care
You shall act in a prudent manner and exercise reasonable care for the safety and supervision of your property as if uninsured and to
prevent loss, damage, Accident, Injury or illness.
5. Mis-Representation
This policy shall be voidable in the event of misrepresentation, misdescription or non-disclosure or concealment of any circumstances
material to or in connection with your health, and in particular;
(a) whether you are in suffering from a disease, illness, disability or handicap; or
(b)whether you are aware of circumstances suggesting that you may be suffering from a disease, illness, disability or handicap.
6. Fraud
If you, or anyone acting for you, make a claim under the policy knowing the claim to be false or fraudulently inflated, we will not pay the
claim and all cover under the Policy will be forfeited.
7. Duplication of Cover
In the event that an Insured Person is covered under more than one travel insurance policy for the same Trip, cover will only be effective
for the policy, which provides the highest benefit level.
8. Payment of Premiums
Coverage and claims are valid only subject to the successful collection of premium by us and your compliance of the terms and conditions
contained herein. We reserve the right to refuse any coverage and/or reject any claims resulting from non-payment of premium.
9. Payment of Benefits
All benefits payable under this Policy shall be paid to you concerned, and, in the event of your death, to your estate. Such payment shall
be a full and final discharge to us. Benefits payable under this Policy are in Singapore dollars.
10. Claims
If any Injury, Accident, loss or damage or Theft happens you must:
a) make a report within 24 hours of the incident, to the police or the relevant authorities at place of loss or to the management of the
establishment where the incident occurred, if property is lost, Stolen or malicious damage is suspected, and any claim must be
accompanied by written documentation from such authorities.
b) take all reasonable steps to recover missing property.
c) give written notification to us within 30 working days upon completion of the journey.
You must also:
a) send to us immediately any writ, summons, letters or other documents in connection with the claim.
b) at your expense, or at the expense of any person representing you, provide us with certificates, information and other documents
(including where necessary translation) as we may reasonably require.
c) send written details of your claim to us within 30 working days upon completion of the journey.
d) execute or do any deeds and things and render such co-operation and assistance as we reasonably require
e) You must not:
f) admit or deny any claim made by someone else against you or make any agreement with him or her.
We shall be entitled to:
a) request an examination by a medical referee appointed by us for a non-fatal Injury.
b) negotiate, settle or defend any such claim in your name and on your behalf.
c) use any legal right of recovery you have.
d) request an autopsy and/or post-mortem examination in the event of death.
e) at our option, choose to make payment, reinstate or repair the lost or damaged property.
Our liability is limited solely to the payment of the benefits you are entitled to under this policy. We, assume no liability for the availability,
quality or results of any medical treatment or other service, or your failure to obtain any treatment or service covered by the terms of this
policy.
11. Other Insurances
If you have or should have any other insurance providing cover for the same loss, damage or liability, we shall not be liable to pay except
for any excess beyond the amount which would have been payable under the Policy or Policies had this insurance not been effected. (Not
applicable to Section 1, 2 and 3).
12. Governing Law
This policy shall be governed by and interpreted in accordance with Singapore Law.
13. Arbitration
If we admit liability for a claim but there is a dispute as to the amount to be paid, the dispute will be referred to an arbitrator. The arbitrator
will be appointed jointly by you and us in accordance with the law at the time. You may not take legal action against us over the dispute
before the arbitrator has reached a decision.
14. Interest
No amount payable under this Policy shall carry interest.
15. Clerical Error
A clerical error by XYZ shall not invalidate insurance otherwise validly in force, nor continue insurance otherwise not validly in force.
16. Contracts (Rights of Third Parties) Act 2001
A person or any entity who is not a party to this policy contract shall have no right under the Contracts (Right of Third Parties) Act 2001
to enforce any of its items.
17. Payment Before Cover Warranty
a) This clause 17A only applies if the Policyholder is an Individual.
b) Notwithstanding anything herein contained but subject to clause 17A(c) hereof, it is hereby agreed and declared that the total premium
due must be paid and actually received in full by us (or the intermediary through whom this Policy was effected) on or before the
inception date (“the inception date”) of the coverage under the Policy, Renewal Certificate, Cover Note or Endorsement.
c) In the event that the total premium due is not paid and actually received in full by us (or the intermediary through whom this Policy
was effected) on or before the inception date referred to above, then the Policy, Renewal Certificate, Cover Note and Endorsement shall
be deemed to be cancelled immediately and no benefits whatsoever shall be payable by us. Any payment received thereafter shall be
of no effect whatsoever on the cancellation of the Policy, Renewal Certificate, Cover Note and Endorsement.
18. Payment Before Cover Warranty
a) This clause 18B only applies if the Policyholder is a business or commercial establishment
b) Notwithstanding anything herein contained but subject to clause 18B(c) hereof, it is hereby agreed and declared that if the Period of
Insurance is 60 days or more, any premium due must be paid and actually received in full by us (or the intermediary through whom
this Policy was effected) within 60 days of the:-
i. inception date of the coverage under the Policy, Renewal Certificate or Cover Note; or
ii. effective date of each Endorsement, if any, issued under the Policy, Renewal Certificate or Cover Note.
c) In the event that any premium due is not paid and actually received in full by us (or the intermediary through whom this Policy was
effected) within the 60-day period referred to above, then:-
i. the cover under the Policy, Renewal Certificate, Cover Note or Endorsement shall be deemed to be cancelled immediately after the
expiry of the said 60-day period;
ii. the deemed cancellation of the cover shall be without prejudice to any liability incurred within the said 60-day period; and
iii. we shall be entitled to a pro-rata time on risk premium subject to a minimum of S$50.00.
d) If the Period of Insurance is less than 60 days, any premium due must be paid and actually received in full by us (or the intermediary
through whom this Policy was effected) within the Period of Insurance.
19. Condition Precedent
The validity of this Policy is subject to the condition precedent that:
a) for the risk insured, the named insured has never had any insurance terminated in the last twelve (12) months due solely or in part to
a breach of any premium payment condition; or
b) if the named insured has declared that it has breached any premium payment condition in respect of a previous policy taken up with
another insurer in the last twelve (12) months:
i. the named insured has fully paid all outstanding premium for time on risk calculated by the previous insurer based on the customary
short period rate in respect of the previous policy; and
ii. a copy of the written confirmation from the previous insurer to this effect is first provided by the named insured to us before cover
incepts.
20. Cancellation
You may at any time prior to commencement of the Period of Insurance cancel the Policy by giving written notice of cancellation to us. In
that event, We will be entitled to retain a minimum premium of S$50.00. You will not be entitled to any refund of premium if the Period
of Insurance has commenced, or any claim is made under the Policy.
21. Conveyance Limit
The total liability payable in respect of accidental death or accidental permanent disablement occurring whilst a number of insured persons
are together shall not exceed $3,000,000.00 per event and/or conveyance.
In the event the maximum liability should exceed $3,000,000.00 per event and/or conveyance limit amount will be apportioned among the
insured persons, but the sum will not be greater than the maximum sum insured of each insured person.
6. Claims
CHAPTER 6
CLAIMS
CHAPTER OUTLINE
1. Introduction
2. General Claims Procedures
3. Onus Of Proof
4. Duties Of The Insured After A Loss
5. Use Of Loss Adjusters & Other Claims Professionals
6. Average And Other Claims Conditions
7. Insurance Fraud
8. Claim Settlement Options
9. Reinstatement Of Sum Insured
10. Rights Of The Insurer After A Claim
11. Claim Disputes
Appendix 6A – Sample Property/Liability Claim Form
LEARNING POINTS
 acquire some basic knowledge of the general claims procedures
 know how claims are reported or notified
 know how claims investigation and assessment are done
 understand what is included in a plan of investigation
 understand what goes into preparing a proof of loss
 determine with whom the onus of proof of a loss/damage rests
 understand the duties of the insured after a loss
 recognise the role and functions of loss adjusters and other claims professionals
 identify how the following claim conditions operate to affect claims:
- average
- contribution
- limitation period
- reinstatement
 understand what is insurance fraud and industry’s efforts to combat insurance fraud
 describe the various claim settlement options available
 know the working on the reinstatement of sum insured
 know the rights of the insurer after a claim
 explain the common methods of settling claim disputes
1. INTRODUCTION
1.1 The basis of insurance is risk pooling which carries the obligation of paying
losses. Therefore, claims must be paid promptly and fairly. A poor claims
handling service can result in an insurer gaining an unfavourable reputation. As
such, an insurer that does not pay its valid claims will soon be without
customers. Hence, prompt and equitable claims handling is an important aspect
of the insurance service.
1.2 The claims handling process may vary for different classes of insurance. Each
and every insurer has its own methods and procedures of administering claims.
However, the approach to claim handling is generally very similar among all
classes of insurance.
1.3 In this chapter, we will examine the basic claims procedures covering the
notification of loss, the investigation and assessment, and the preparation of
proof of loss. We will also look at the legal requirements and conditions for a
valid claim, the duties of the insured after a loss, claim conditions, the claim
settlement options, rights of the insurer after a claim, and claim disputes.
2. GENERAL CLAIMS PROCEDURES CLAIM
A. Notification Of Loss
2.1 The first and most important point to make is that the notification of a claim is
the responsibility of the insured. The insurer will want speedy notification of the
claim and will often lay down a time limit (notification period) within which a
claim must be reported to insurers.
2.2 Prompt notification is important because the sooner the insured notifies the
loss, the sooner the insurer can make any investigation. It will also enable the
insurer to suggest measures to be adopted, in order to minimise the loss and to
take steps to salvage the loss.
2.3 Upon receipt of the notice of the loss or damage, the insurer will record and
register the claim in its computer system. This serves as a record of the claim
registered in the system. In a manual system of work, this will be known as a
“claim register”. The register serves to hold a central record of all claims lodged
with the insurer. This will enable the insurer to access the claim history of a
customer, when underwriting new business and processing claims. It is also for
the purpose of checking the claim history of a particular policyholder, or for
checking on the possibility of fraud.
2.4 Although most computer systems will have built-in self-checks, the insurer will
also perform a preliminary validation based on the following checklist:
 Has the policy been issued and whether it is still in force at the material time
of the loss or damage?
6. Claims
 Is the loss the result of an insured peril? Is the loss covered?

 Is the property covered by the policy?
 Is the claimant entitled to the payment?
 Did the loss occur in a place covered by the policy?
 Has notice of the loss been received by the insurer without undue delay (i.e.
within the notification period as specified)?
 Is there any other claim evidence and information required?
2.5 The means by which claims are normally reported is the claim form. An example
of the claim form is shown in Appendix 6A at the end of this chapter. This is for
a property/liability policy, and you can see the kind of questions that are being
asked.
2.6 While the claim form (together with the relevant supporting documentary
evidence), which collects pertinent information on the loss is the main means
by which the insurer receives notification of a claim, other forms of notification
are also acceptable to the insurer e.g. by phone, e-mail, etc. It is prudent to
follow up a phone call to the insurer with a written notification. In the event of a
claim in which the loss is large or involves more details, the insurer (at its own
expense) will appoint a loss adjuster. We will look at the role of the loss adjuster
later in this chapter.
B. Investigation & Assessment
2.7 On receipt of the claim form from the insured, the claims officer will have to
decide on whether further investigation and assessment are required. Usually
with a very small loss, where fraud is not suspected, detailed investigation is
generally waived, and the valid loss is settled on the basis of information
submitted in the claim form by the insured or claimant.
2.8 Claim investigation involves ascertaining the existence of loss, assessing

whether actions by the insured have invalidated the claim, as well as
determining the amount of the loss.
2.9 Small claims are usually investigated and verified by the insurer’s in-house
claims officer, while large or complicated losses are normally handled by an
independent loss adjuster appointed by the insurer, at its own expense.
C. Plan Of Investigation
2.10 The experienced loss adjuster will plan his investigation of loss in an orderly
manner in the following sequence:
 check coverage;
 meet with the insured;
 inspect the property;
 protect property from further damage;
 determine the cause of loss;
 determine the value of the loss and/or damage;
 determine the insurer’s liability; and
 determine recovery possibilities.
2.11 The pattern of investigation and areas of enquiry listed above are matters
common to the adjustment of all property losses. It applies equally to the
investigation and adjustment of third-party property losses under any Liability
Insurance, or loss of cargoes under a Marine Cargo Insurance policy.
2.12 For property claims, one of the important items which the loss adjuster always
takes into account when investigating and compiling the report is to ascertain
whether the sum insured of the policy is adequate, i.e. the value of the property
at the time of the loss does not exceed the sum insured. If the sum insured is
not adequate and if the loss is partial, the insurer will not pay the claim in full.
Thus, the insured will have to bear the loss in respect of the uninsured
proportion of the loss. The application of the average condition has been
explained earlier.
D. Preparation Of Proof Of Loss
2.13 Once the investigation is complete and the coverage is established (i.e. a liability
has arisen and it falls within the scope of the policy), the loss adjuster will submit
a final report to the insurer. This report summarises the on-site findings and
recommendations concerning the loss settlement. If the insurer accepts the
recommendations and the claimant agrees to the amount of compensation, a
Form of Acceptance is usually executed by the claimant and submitted to the
insurer for effecting the payment of the claim under the relevant policy.
2.14 Before effecting payment, it is important to confirm once again that the claimant
is legally entitled to receive the claim payment. For example, for payment of a
death claim under a Personal Accident Insurance policy, a grant of probate or
letter of administration will have to be submitted by the legal representatives,
unless there is a nomination of beneficiary or beneficiaries in accordance with
Section 49L or 49M of the Insurance Act (Cap. 142). A Marine Cargo Insurance
claim is paid to the claimant only when the original policy is produced or
endorsed in his favour.
2.15 The claims officer must ensure that a proper discharge under the policy is
obtained, so as to avoid any dispute in the future, before making a payment
under the policy. When the insured gives his consent or signs the discharge
form or cashes the cheque, further rights to pursue the claim are waived.
6. Claims
3. ONUS OF PROOF
3.1 In the event of loss or damage forming subject of a claim, the onus of proving
that a loss has occurred rests with the insured. Thus, it is usually the insured’s
responsibility to prove:
(a) that an insured peril has arisen : The insured must prove that he has
suffered a loss directly caused by a
peril which is insured by the policy; and
(b) the amount of the loss : The insured must also prove that he
has suffered a financial loss and
identify the amount of financial loss
suffered. The insured cannot simply
claim for a lost or damaged item,
without proving the value of the item.
This proof may take the form of a
purchase receipt, a repair account, or a
valuation. It is not for the insurer to
prove the value of the loss.
3.2 The insurer has responsibilities of its own too. It has to ascertain that:
 the loss has occurred or a claim is made during the period of insurance;
 the insured is the correct insured as named in the policy;
 the peril that has caused the loss is covered by the policy;
 the insured has taken reasonable steps to minimise losses;
 the policy conditions and warranties have been complied with;
 no exclusion or exception is applicable;
 no non-disclosure of material facts or misrepresentation of facts has been
committed by the insured; and
 the claim is legitimate, not a fraudulent one, and the value of the loss is
reasonable.
3.3 The above list contains the legal requirements for a valid claim. Therefore, in
effect, a claim is invalid if the above conditions are not complied with, or if fraud
can be proved. An insurer may provide less than a full indemnity, either as a
result of the insured’s choice of the type and extent of insurance cover, or owing
to poor insurance arrangements, e.g. under-insurance.
4. DUTIES OF THE INSURED AFTER A LOSS
4.1 The duties of the insured following a loss can be divided into the following two
categories:
 implied duties; and
 express duties.
A. Implied Duties
4.2 These are duties imposed by Common Law and not written into the insurance
policy. For example, the law requires that the insured should act as if he were
uninsured and take all reasonable steps and precautions to minimise his loss or
damage. As such, in taking steps to minimise the loss or damage in the event of
a loss occurrence, it may be implied that the insured should advise the
appropriate authorities, e.g. advising the fire service in the event of a fire as soon
as the fire starts - this will also help to prevent the loss from spreading, or
reporting to the police in the event of a theft.
B. Express Duties
4.3 Express duties are duties written into the contract and are usually found as the
conditions in the policy. A breach of such conditions allows the insurer to
repudiate liability or to reject the claim.
4.4 In most policies, there are a number of conditions and some of these relate to
claims. In particular, one sets out the duties of the insured upon the happening
of the event insured against. This condition is often entitled “claims procedures”
or “actions by the insured”.
B1. Notification Condition
4.5 This condition identifies the actions required of the insured, namely:
 give prompt notification to the insurer;
 submit the claim in writing with full details of loss or damage and supporting
documentary evidence within a certain period of time, e.g. 21 or 30 days
(notification period);
 bring the motor vehicle (whether damaged or not) to the insurer’s approved
reporting centre or authorised workshop within 24 hours or by the next
working day, in the event of a motor accident claim.
5. USE OF LOSS ADJUSTERS & OTHER CLAIMS PROFESSIONALS
5.1 As previously mentioned, large or complicated losses are normally handled by

independent loss adjusters. The idea of an independent loss adjuster is based
on the principle that, since both the insured and the insurer are interested
parties, it is essential to have the opinion of an independent professional person
who is acceptable to both parties, as well as a Court of Law, in the event of a
dispute. Although it is common for the loss adjuster to be appointed by the
insurer, it is the duty of the loss adjuster to act and adjust the loss impartially
and professionally, based on the actual findings during the loss investigation.
A. Loss Adjusters
5.2 Loss adjusters are independent claims specialists whose function is to assist in
validating claim settlements quickly and fairly. Usually appointed by the
6. Claims
insurers, they investigate large and complex claims on the insurers’ behalf and
will be remunerated with fee payments by the insurers concerned. As loss
adjusters are usually highly qualified individuals, with vast experience in claim
settlement and insurance, they are able to investigate claims for accident, fire,
theft, storm, flood, explosion, earthquake, business interruption, engineering
etc. They can help the policyholders in contacting relevant specialist services,
getting repairs done and can also ensure that the eventual claim settlement
recommended to the insurers is fair to both parties, within the terms of the
relevant insurance policy.
5.3 On receiving instructions from the insurer, the loss adjuster will visit the
claimant and assess the scene of the loss. He may also arrange with the insured
for the necessary protection of the undamaged property. An initial report will
then be submitted to the insurer setting out the brief details of the claim and the
circumstances, together with an estimate of the likely cost. A final report will be
submitted when negotiations are completed. Once the insurer accepts the
negotiated settlement, payment will be made to the insured.
5.4 If the loss adjuster suspects that a claim is fraudulent, he may have to carry out
a further detailed investigation. In some cases, this may require the involvement
of the police, private investigators and, in exceptional cases, forensic experts.
B. Other Claims Professionals
5.5 Other than loss adjusters who are most commonly used, there are other experts
or specialists who can be appointed (if necessary), to carry out investigations
into a claim.
5.6 There are claims inspectors who are essentially in-house claims investigators
(they can also be known as claims assessors or managers), and there are other
external experts, such as the ones mentioned below:
 Forensic scientists – to establish cause of fire;
 Medical practitioners – to determine if a claimed medical condition is
genuine;
 Engineers – to investigate and establish cause of engineering loss;
 “Restoration” specialist – engineers to perform such “restoration” activities
like dehumidification, in case of water damage and reinstatement of
machinery to operational condition.
 Loss Assessors – appointed by the insureds to prepare and negotiate claims
on their behalf, unlike loss adjusters, whom are usually appointed by the
insurers. The insureds will have to pay the fees for appointing loss assessors.
 Surveyors – appointed by insurers to assess property damage e.g. motor
vehicle damage. They will inspect the damaged vehicles and negotiate with
the insurers’ authorised workshops regarding repair costs (i.e. labour
charges, spare parts costs, etc) on behalf of the insurers.
 Claims Recovery Agents – appointed by insurers to effect recovery from third

parties responsible for the loss of or damage to property, cargo, etc.
C. Approved Reporting Centres
5.7 Following a motor vehicle accident, the Motor Insurance policyholder is

required to make an accident report at one of the Approved Reporting Centres
(including approved motor repairers and authorised workshops) as determined
by the insurer, within 24 hours, or latest by the next working day. This is not
only in accordance with the GIA’s Motor Claims Framework, but clearly
stipulated as a condition in the policyholder’s Motor Insurance policy.
6. AVERAGE & OTHER CLAIMS CONDITIONS
6.1 In this section, we will examine the principles concerning the operation of other
policy provisions affecting claims, namely the operation of the following policy
provisions:
 average;
 contribution;
 limitation period;
 reinstatement; and
 fraud.
A. Average
6.2 The application of the average clause has been explained earlier in this Study
Guide.
B. Contribution
6.3 The principle of contribution has been explained earlier in this Study Guide.
Here, we will show you two ways in which the “rateable share” to be paid by
the respective insurers may be calculated.
(a) Respective Sums Insured
This is the traditional way of calculation with contribution. Here, the
insurers contribute to the loss payment in the proportion to which they
contribute to the total amount of coverage purchased.
(b) Independent Liability
Under this method, the amount payable under each policy is calculated,
and the loss will be shared in proportion to the independent liabilities of
the two policies.
Sometimes, the two methods of calculation will produce the same result,
but a simple example will illustrate the difference between the two
methods (see Example 6.1).
6. Claims
Example 6.1: Difference Between “Respective Sums Insured” And

“Independent Liability” Methods
Assume the following:
An insured has a policy with Insurer A for S$75,000 and Insurer B for
S$25,000.
Both policies are subject to average.
A loss arises to the sum of S$40,000 (for ease of calculation, ignore any
question of under-insurance).
(i) With “Respective Sums Insured”, the insurers contribute as

follows:
Sum Insured by Individual Insurer

x Loss = Insurer’s Liability
Total Sum Insured
i.e. Insurer A pays:
S$75,000
x S$40,000 = S$30,000
S$75,000 + S$25,000
Insurer B pays:
S$25,000
x S$40,000 = S$10,000
S$75,000 + S$25,000
Total = S$40,000
(ii) With “Independent Liabilities”, the insurers contribute as follows:
Insurer A (if the only insurer) will pay S$40,000.

Insurer B (if the only insurer) will pay S$25,000.
Since the insured must receive indemnity only, the two amounts are
scaled down, so that:
Insurer A pays: S$40,000 x S$40,000 = S$24,615

S$40,000 + S$25,000
Insurer B pays: S$25,000 x S$40,000 = S$15,385

S$ 40,000 + S$25,000
Total = S$40,000
When both insurers fully cover the loss, this method results in an equal
split.
(c) Which Is The “Correct” Method?
For Liability Insurance, contribution is likely to be dealt with on the

independent liability basis, following a legal decision in the United
Kingdom (UK) to that effect.
For property and other insurance subject to indemnity, the traditional
basis of respective sums insured may be applied in Singapore, but it
should be noted that in the UK, independent liability is the norm (especially
for members of the Association of British Insurers), because it is felt that
this is fairer, especially where average may be involved.
C. Limitation Period
6.4 An action against another party must be brought under the law within a
prescribed time frame. If not, the action will become time barred. This simply
means that, if legal action is not brought within the time allowed under the law,
then the courts will not consider the action. The limitation period is that time
during which legal action may be brought and, once it is over, all further legal
actions are barred.
6.5 However, limitation of actions is not part of Common Law, but is set by statute
to regulate actions under Common Law. All legal actions pertaining to damages
for negligence, nuisance or breach of duty must commence before the
expiration of the applicable statutory limitation period. In Singapore, this is set
out in Section 24A of the Limitation Act (Cap. 163), which provides that damages
for negligence, nuisance or breach of duty actions in respect of latent injuries
and damages:
 in respect of personal injuries – three years from the date on which the course
of action accrued;
 in respect of those other than personal injuries – six years from the date on
which the course of action accrued.
6.6 A limitation period may also be inserted outright in the policy itself. For
example, a Fire Insurance policy may insert a clause which states: “In no case
whatever shall the Company (insurer) be liable for any loss or damage after the
expiration of 12 months from the happening of the loss or damage, unless the
claim is the subject of pending action or arbitration.”
D. Reinstatement
6.7 Reinstatement refers to the situation when the insurers decide to exercise their
option to reinstate, instead of paying cash as an indemnity. See later section of
this chapter for further discussion on reinstatement.
7. INSURANCE FRAUD FRAUD
7.1 Insurers cannot avoid paying some claims and, in a mechanism

which is designed to pool the premiums of the many in order to settle the claims
of the few, it is perhaps not surprising that the opportunities for fraud may be
exploited by some members of the pool.
6. Claims
7.2 The following examples illustrate what insurance fraud is:

 inventing a loss event which in reality never took place, e.g. a robbery;
 exaggerating the number of items stolen during an otherwise honestly
reported break-in;
 deliberately creating an insured event, e.g. throwing paint over an insured
carpet at home; or
 exaggerating the effects of an insured event, e.g. pretending that a personal
injury is more serious than it really is, in order to receive higher
compensation.
7.3 A fraudulent claim is a breach of the duty of utmost good faith. There is usually
a condition in the policy to state that any benefit shall be forfeited if:
 the claim is in any respect fraudulent, including inflating or exaggerating the
claim, or submitting forged or falsified documents;
 any fraudulent means or devices are used to obtain any benefit or payment
under the policy;
 the loss, damage or destruction is caused by the wilful act (e.g. arson) of the
insured, or anyone acting on behalf of, or in the collusion or connivance with
the insured; or
 the claim has been rejected and, within three months, no action or suit is
taken against the insurer.
7.4 If the insurer wishes to avoid a payment under the policy on grounds of fraud,
it must have adequate proof beyond reasonable doubt, as this is a serious
allegation.
A. Industry’s Efforts To Combat Insurance Fraud
7.5 In March 2019, the General Insurance Association of Singapore (GIA) introduced
the GIA Insurance Fraud Tip-off (GIFT) scheme which rewards individuals up to
S$10,000 - based on the equivalent value of the fraudulent claim - for reporting
insurance fraud cases that lead to successful prosecution and conviction of
offenders. If there is more than one informant for a case, the panel of
investigators will decide on the reward allocation to each informant.
7.6 The most common insurance fraud cases in Singapore are from the motor,
travel and personal accident insurance segments.
7.7 GIFT is part of GIA’s efforts to increase participation of all stakeholders -

including general insurers, regulators, and members of the public - to
collectively combat insurance fraud and mitigate claims costs inflation.
7.8 GIA introduced this scheme to encourage members of the public to play a more
pro-active role in tackling this problem together so that insurance in Singapore
remains accessible. Members of the public who have been approached to get
involved in insurance fraud or are currently holding relevant evidence of others

committing fraud should participate in the scheme.
7.9 To qualify for the reward scheme, individuals are required to provide
documentary evidence such as detailed descriptions of how the fraud was
conducted, electronic document trails, actual copies of forged or tampered
documents, or any another physical evidence that can prove the suspected
fraud.
7.10 The GIFT scheme builds on the success of the GIA Fraud Management System
(FMS) which employs data analytics and artificial intelligence to detect fraud
cases for motor and travel insurance. The system which was implemented in
2017 has since played a key role in helping the industry mitigate underwriting
losses for the motor insurance segment.
8. CLAIM SETTLEMENT OPTIONS
8.1 After the insurer has admitted the claim and the insured has agreed
on the compensation amount, it is time to consider the settlement
options available. There are basically four methods of settlements, namely:
 repair;
 replacement;
 reinstatement; and
 cash payment.
8.2 We shall go through each in turn, and then take a brief look at the Claim
Settlement Agreements.
A. Repair
8.3 Insurers paying for the cost of repair is common in a Motor Insurance claim.
Usually, the insurer will request that the insured submits a written estimate of
the cost of repair. Depending on the amount of estimate, the insurer may
appoint a motor claim assessor to assess the extent of damage and recommend
an estimated repair cost. Thereafter, the insurer will authorise the repair and
bear the repair cost, paying the authorised workshop or repairer directly, except
that the insured is to pay the excess (if any) to the workshop.
B. Replacement
8.4 Replacement can be arranged for lost or damaged goods or property.

Replacement is often seen in some Motor Insurance claims, such as the
replacement of a broken windscreen. However, replacement is more commonly
used in Glass Insurance claims, where insurers can get favourable discounts
from glaziers. Replacement might also be used as a settlement option for a
household property loss, where the lost item was new, or unlikely to have
depreciated in value (e.g. new television set or jewellery).
6. Claims
C. Reinstatement
8.5 The term “reinstatement” is often associated with property claims, particularly
buildings. When a building is severely damaged by fire, the insurer can arrange
to indemnify the insured by reinstating the building, if the insurer feels that it is
the most equitable way of settling the claim. This means to rebuild the existing
building to its immediate “pre-loss” condition. The rebuilt building will be the
same as the original building in terms of its size, design and material used, and
the reinstatement can be carried out on another site. Reinstatement work must
also be carried out and completed within a stated period of time (e.g. 12
months).
8.6 The extent to which reinstatement is to be carried out is usually stated in some
form in the operative clause. However, a condition may be inserted in the policy
requiring that the insured will give the insurer all assistance in obtaining the
information needed to carry out such reinstatement. It may also state that the
insured will provide such assistance at his own expense.
8.7 It should be noted that replacement is distinct from reinstatement in that the
replacement of a building can be done by:
 erecting a new building using modern materials; or
 purchasing an existing building.
D. Cash Payment
8.8 The easiest and usual way of settling a valid claim is to make cash payment
directly to the claimant. This form of settlement provides flexibility in the way in
which the claim payment will be used.
8.9 The selection of these settlement options depends on the type of policy, its
stipulated terms and conditions, and the negotiations between the claimant and
the insurer. In practice, more than one option is often adopted with some classes
of business, particularly with property damage claims. This is because property
damage claims can range from small amounts (where a repair may be suitable)
to a total destruction (where a cash settlement may be more appropriate). In the
case of liability claim, payment is usually made to the wronged party (i.e. third
party), not the insured.
Claim Settlement Options
Repair Replacement Reinstatement Cash Payment
Example 6.2: Combination Of Repair, Replacement & Cash Payment

Options
Kenny’s car had a head-on collision with Lenny’s car while on the way to work.
Kenny’s car was severely damaged. Its windscreen was smashed, the bonnet
was badly dented, and both the front fenders were crushed and buckled.
Lenny’s car windscreen was smashed, headlights were broken, and the
bonnet was slightly dented. Both Kenny and Lenny submitted their claim
estimates to their respective insurers. In turn, they appointed their motor
claim specialists to examine the damaged cars.
After having examined the badly damaged car, the claim specialist of Kenny’s
insurer was satisfied that Kenny’s car was damaged beyond economic repair.
He recommended that the insurer settled on a cash basis and paid Kenny the
market value of the car.
The claim specialist of Lenny’s insurer, after having examined the car, judged
that the damaged bonnet was repairable. Hence, he authorised Lenny to have
the repairs carried out. He also ordered the windscreen and the two headlights
to be replaced as they were broken.
E. Claim Settlement Agreements
8.10 There are claim settlement agreements relating to claim settlement options.
E1. Barometer Of Liability Agreement (BOLA)
8.11 All motor insurers in Singapore use the Barometer Of Liability Agreement
(BOLA) to determine how much each party is liable for, in the event of a motor
accident, through the use of predetermined charts of various motor accident
claims scenarios in which the apportionment of liability has been agreed by all
motor insurers. However, BOLA does not diminish the right to contest liability
under the law.
8.12 The policyholder’s No Claim Discount (NCD) may not be affected if a driver is
found totally not at fault in an accident involving another vehicle. In all other
cases, the NCD may be affected
E2. Treasury Agreement
8.13 This is an Agreement 1 made between the Government of the Republic of

Singapore and all motor insurers in Singapore (each insurer enters into a
separate, but similar agreement with the Government), which specifies the
damage treatment, as a result of collisions occurring between:
 a Government-owned motor vehicle; and
1
The full title of the agreement is “Collision Agreement between the Government and the Insurer”.
6. Claims
8.14 Essentially, this Agreement spells out how the cost of damage (material damage
to the motor vehicle or its accessories, including towing charges, but excluding
survey fees) to the two motor vehicles involved in a collision are to be borne by
the Government and the insurer, regardless of who is to be blamed for the
accident. For example, if the cost of damage to either motor vehicle does not
exceed S$500, each party shall bear its own loss.
8.15 The damage treatment differs according to the type of policy insured by the
insurer (i.e. Comprehensive or Third Party), the monetary amount, and various
other factors. Collisions involving more than two motor vehicles are not within
the scope of this Agreement. Claims involving damages for personal injury or
monetary damages exceeding S$10,000 also do not fall within the scope of this
Agreement.
9. REINSTATEMENT OF SUM INSURED
9.1 This should not be confused with the “Reinstatement” condition mentioned in
the earlier sections of this chapter.
9.2 When a total loss is declared or the total sum insured is paid under a policy, the
insurer’s obligations under the insurance contract are clearly extinguished by
performance. Where payment is made in respect of a partial loss, the policy may
specify its position concerning the amount of cover for the remaining period of
insurance. With some classes of insurance (e.g. Fire Insurance), a partial loss
payment reduces the sum insured by the amount paid, and an extra premium is
required to reinstate the amount of cover for the remaining period of insurance.
9.3 On the other hand, partial loss payments for some classes of business (e.g.
Marine Insurance) do not reduce the subsequent amount of cover.
10. RIGHTS OF THE INSURER AFTER A CLAIM
A. Right To Salvage The Property
10.1 Insurers are interested in the question of salvaging the property whether it is
lost or damaged. This aspect of salvage 2 does not only apply to the perils of fire,
but also to all losses or damage regardless of their cause. For example, in Motor
Insurance, in the event of a serious accident (e.g. head-on collision or total
wreck), the insurers are very interested in whether the motor vehicle can be
repaired, or whether it is to be treated as a total loss, and if the latter, the value
that can be obtained for the salvage.
2
Under maritime law, “salvage” or “salvage charges” also means the charges incurred to save property
at sea. Such salvage charges can be covered under Marine Insurance. See Section 65 of the Marine
Insurance Act (Cap. 387).
A1. Salvage Condition
10.2 The importance of this question of salvaging the property can be seen by the
fact that insurers normally have a condition in the policy document, which
allows the insurer to deal with the salvage in a “reasonable manner”.
A2. Abandonment
10.3 In Marine Insurance, there is a long established principle that, where the insured
(usually known as the assured in Marine Insurance) has been paid for a total
loss, the insurer is entitled to claim for its own benefit, anything that remains of
the insured subject matter. The action of giving up the subject matter by the
insured to the insurer is referred to as abandonment. This is specified under
Sections 62 and 63 of the Marine Insurance Act (Cap. 387).
10.4 Abandonment is particularly important in Marine Insurance, because it

recognises not only “actual total loss” (where the subject matter is completely
destroyed), but also “constructive total loss”, i.e. where the subject matter is not
destroyed, but the insured is deprived of the possession of his ship or goods,
and:
 it is unlikely that he can recover the ship or goods; or
 the cost of recovering the ship or goods will exceed their value when
recovered.
10.5 In the case of a “constructive total loss”, the insured must serve a notice of
abandonment to the insurer if he wishes to be paid for a total loss3.
10.6 Unlike Marine Insurance, in Property Insurance, it is usually not permitted for an
insured to abandon his property and then claim for a total loss. The insurer is
liable for loss by a peril only to that part of the property that is damaged or
destroyed.
A3. Total Loss & Salvage
10.7 An insurance loss normally arises as a result of an injury to the insured or to a

third party, or damage to the insured's own property or a third-party property
brought about by an insured peril that results in a claim. Every loss is either
“total” or “partial”. A total loss may be “actual” or “constructive”. Under an
“actual total loss” in respect of a property insurance claim, the insurer will pay
the full sum insured, or the market value of the property, depending on the
terms of the policy. The insurer will be entitled to any salvage value realised
from the wreckage under such circumstances. However, the insurer may decide
not to deal with the salvage on some occasions, because there may be little or
no value remaining.
3
There are situations, where the insurer does not accept or agree to the notice of abandonment. However,
when this happens, the insured’s rights under the policy will not be prejudiced.
6. Claims
10.8 An “actual total loss” occurs when the whole subject matter of insurance is
completely destroyed by an insured event or peril. For example, this can happen
when an insured building is totally burned to the ground, or when an insured
vessel sinks into a deep ocean and cannot be completely retrieved or salvaged.
10.9 On the other hand, a "constructive total loss" describes a situation in which the
subject matter of insurance is not completely destroyed but is damaged beyond
economical repair. What this means is that it will cost more to repair than to pay
the sum insured to the insured, as if it is a total loss. For example, a motorcycle
insured under the comprehensive cover of a Motor Insurance policy is damaged
in a head-on collision and wrecked, such that the total repair cost will exceed its
sum insured or market value. Rather than repair the motor vehicle, the insurer
can choose to pay the replacement value to the insured. Any salvage value to
be realised from the wreck is for the benefit of the insurer. In essence, the subject
matter is not totally and physically destroyed, but the replacement value is paid
out, and hence, the term "constructive total loss” is used to describe such a
situation.
10.10 A “partial loss”, is any loss or damage short of, or not amounting to a total loss.
In this instance, a loss covered by a policy does not totally destroy or render
worthless the insured property. Where the insurance is subject to "average" and
there is under-insurance, the insured will be paid only a proportion of the
“partial loss”.
B. Subrogation
10.11 At Common Law, the insured has certain rights to recover the losses or damages
from the parties at fault. The insurer can take over these rights and take any
action in the name of the insured against the wrongful parties, after having fully
indemnified the insured under the policy. If the insurer has taken over these
rights, the insured will have to give all necessary cooperation to the insurer for
the latter to recover the losses or damages.
10.12 Subrogation has become a contractual matter after a modification of the

Common Law position. In any insurance policy, except for a Marine Insurance
policy, there is an express condition stating that an insurer may take over the
rights of an insured, before or after any payment is made by the insurer. In other
words, the insurer can immediately pursue action against the wrongful parties,
without having to wait for the claim to be settled. For example, if an insured is
involved in a motor accident caused by the negligence of another driver, the
insurer may immediately take action against the negligent driver (even before
any claim payment has been made to the insured), holding him responsible for
the damage to the insured motor vehicle.
10.13 However, this is not the case for Marine Insurance claims. It is upon settlement
of a claim that the insurer is entitled to any sums received from negligent third
parties only up to the amounts paid by them. This is stated under Section 79 of
the Marine Insurance Act (Cap. 387). This principle, in turn, is clearly reinforced
in Marine Insurance policies. Nevertheless, Marine Cargo Insurance policies will
provide that the insured is required to hold the carrier liable upon a loss
occurring to the cargo.
C. Right To Investigate & Enter Premises
10.14 This condition relates to the insurer’s investigation and attempt to ascertain the
extent and value of the claim being made by the insured. It is often impossible
for the insurer to decide whether to contest the validity of a claim until all the
circumstances of the loss have been investigated. Decisive evidence of fraud,
for instance, may not be forthcoming until after a prolonged examination of the
debris. The insurer, having the right to investigate, must ensure that any action
taken in accordance with the condition will not prejudice its rights of denying
the claim if the insurer subsequently wishes to deny liability.
10.15 In many cases, the insurer will appoint a loss adjuster to deal with the claim
intimated, and this condition gives the loss adjuster the right to enter the
premises to investigate and adjust the claim.
D. Recovery Of Lost Property
10.16 When the insured property is lost or stolen, the insurer may give the insured a
full indemnity. When that property is later recovered, the right to the property
will vest with the insurer. Depending on the policy terms, the insurer may
compel the insured to take back the property and return the claim amount to the
insurer. However, in practice, when a considerable time has elapsed or passed
before the recovery, or if the recovered property is damaged, the insurer cannot
force the insured to take back the property, because the insured may not have
any more use for the item.
E. Insurers Must Act Reasonably
10.17 The insurer must be careful in the way that it exercises its rights. The insurer
must act in a reasonable way, as otherwise, it may lose its rights. This can be
illustrated in the cases as mentioned below:
 Cumberland v. Albert Insurance Co (1866)
When the insurer occupied the premises for what was considered an
unreasonable length of time, it was held that the insurer was liable for
trespass.
 Ahmedbhoy Habbibhoy v. Bombay Fire & Marine Insurance Co (1912)
After occupation of the premises by the insurer, the insured’s machinery
suffered through lack of maintenance, and it was held that the insurer was
liable for the resultant depreciation.
11. CLAIM DISPUTES
11.1 Claim disputes between the insured and insurers may arise, because the insured
is dissatisfied with the insurer with respect to the quantum of loss, or if the
6. Claims
insurer denies liability for the loss. Although court proceedings may be
instituted to settle such disputes, they can be expensive and time consuming.
Hence, other means of settlement, such as mediation, arbitration and having the
Financial Industry Disputes Resolution Centre Ltd (FIDReC) involved in settling
such disputes are considered, instead of seeking a legal resolution through court
proceedings which invariably involves onerous court procedures and legal
expenses.
11.2 We shall examine these three basic types of claim dispute settlements.
A. Mediation
11.3 Mediation is a common and effective form of alternative dispute resolution in

which the parties agree to submit any dispute to a neutral mediator, whose
purpose is to achieve a mutually acceptable settlement and compromise of the
dispute, rather than issue a formal ruling and decision on the merits, as occurs
in arbitration. Depending upon the parties' agreement, the results of mediation
can be binding, or non-binding. It is a voluntary process in which an impartial
third party, namely a mediator, assists parties involved in a dispute to resolve
their differences in an amicable manner. Lawyers may represent the parties
during the process. The mediator’s opinion is strictly on a without-prejudice
basis. More details on mediation are available from the website of Singapore
Mediation Centre at: www.mediation.com.sg
Arbitration
B.
11.4
Arbitration
If the dispute concerns only the amount of compensation (called “quantum”),


arbitration may be resorted to as a means of resolving the dispute. If the dispute
is regarding the denial of claims by insurers, FIDReC may well be involved.
11.5 Insurance contracts have provisions in them for parties to refer to arbitration in
the event of “all disputes”, or the clause may specify that the dispute must be
one in respect of “quantum”.
11.6 More details on arbitration are available from the website of Singapore
International Arbitration Centre at: www.siac.org.sg
C. Litigation
11.7 Despite attempts at negotiation and alternative forms of dispute resolution, such
as mediation and arbitration, there will be occasions when a claims handler is
unable to negotiate an amicable solution to a claim. In these circumstances, a
claimant may have to resort to litigation.
11.8 Litigation is the word used to describe the use of the courts by parties in a
dispute to hear, and to obtain a ruling on their differences of opinion.
D. General Differences Between Mediation & Arbitration
11.9 In a mediation process, the mediator helps the parties to settle their disputes by
discussing and narrowing differences. The mediator helps the parties to arrive
at an agreed and negotiated solution. He does not decide on the dispute. A
successful mediation results in an agreement signed by the parties. An
arbitration process involves both parties setting out to an arbitrator and results
in a binding decision by the arbitrator himself, without the agreement of the
parties concerned. In mediation, there is no such thing as a winning or losing
party, because there is no binding decision, without both parties agreeing to
one.
11.10 In an arbitration process, the arbitrator looks into the legal rights and wrongs of
a dispute and makes a decision. Once the arbitrator has arrived at a decision, it
is usually binding on the parties whether or not they may agree with it. It is very
much like the way a court case is decided by a judge, except that the process
does not take place in a court room, and it is not open to the public. As in a court
case, there is usually a winning and a losing party in an arbitration process.
11.11 Arbitration is a less formal procedure than court litigation, and it is conducted
in private, away from the glare of the media and the public. Parties are free to
appoint their own arbitrators and can choose more practical procedures and
rules for the conduct of arbitration. Generally, arbitration can also be more cost-
efficient and speedier than court litigation in which the proceedings involved
can be expensive and time consuming.
11.12 A typical Mediation/Arbitration clause appearing as a condition in a policy reads

as follows:
“All disputes arising out of this Policy may be submitted to the Singapore
Mediation Centre for settlement by mediation in accordance with the
mediation procedure for the time being in force, if the parties so agree.
The parties agree to take part in the mediation in good faith and undertake
to honour the terms of any settlement reached. If any dispute is not
referred to mediation or if mediation fails, the dispute has to be referred to
arbitration. Arbitration shall be conducted in accordance with the
Arbitration Rules of the Singapore International Arbitration Centre.”
6. Claims
Appendix 6A
ABC INSURANCE COMPANY (SINGAPORE) LTD

Tel: (65) 6789 8181 Fax: (65) 6789 8282
PROPERTY/LIABILITY CLAIM FORM

IMPORTANT: This form must be completed and returned to us AS SOON AS POSSIBLE. No liability is admitted by us by the issue of this form.
NOTE: Sections I & II must be completed.
(I) PERSONAL PARTICULARS

Name of Insured NRIC No. (For Individuals)
Address Tel No. Fax
Policy Type Policy No.

Postal Code
Business / Occupation For company/business/organisations - Are you GST-registered?
E-mail Address
(II) DETAILS OF OCCURRENCE

Date & Time Place
Please give an account of how the incident occurred.
Please give particulars of person responsible for the loss/damage/injury.
Have you made a claim upon the person responsible for the loss/damage/injury?
If claim for damage/loss is arising from theft/malicious act, please give us details of where and when the police report was made.
How was entry into premises gained? Was there any signs or evidence of forcible and violent entry?
Was the premises occupied at the time of the occurrence? If not, when was it last occupied?
Particulars of eyewitnesses, if any.
Please give us particulars of persons other than yourself who have any interest in the property concerned and state the nature of their interest.
If there are other insurance covering the property concerned, please state the names of the insurers and their policy numbers.
Please state the current total value of all the property insured under the policy.
Please give details of your claim in Section (IV).
(III) LIABILITY CLAIM

This section should be filled only if a claim is being made against you.
When were you first notified of the incident?
If loss/damage/injury is attributed to defects in your Premises, equipment or plant, please give us details.
If anyone has been injured, please give:

(a) full particulars of person injured
(b) details of injuries sustained
Has any intimation of claim been made against you? If so, by whom? (Please give details of the claim amount in Section IV)
NOTE: No payment, offer or promise of any payment or admission of any liability should be made. All letters from third parties should
be forwarded to us immediately upon receipt.
(IV) DETAILS OF CLAIM

Please give details of your claim below:
Description of Item Details of Date Purchased/Date Incurred Cost Amount Claimed
damage/loss
NOTE: Relevant invoices and other documents to support your claim should accompany this form.
I/We hereby declare that the statements and particulars given by me/us in this form are true and correct.
Signature of Insured & Company stamp Date
7. Reinsurance and Co-Insurance
CHAPTER 7
REINSURANCE AND CO-INSURANCE
CHAPTER OUTLINE
1. Introduction
2. Objectives Of Reinsurance
3. Methods Of Reinsurance
4. Co-Insurance
5. Settlement Of Claims Under Co-Insurance Policies
6. Comparison Between Reinsurance & Co-Insurance
LEARNING POINTS
 define reinsurance and describe the cedant and the reinsurer
 understand the reinsurance transaction process in general
 understand the objectives of reinsurance
 discuss the various methods of reinsurance:
- facultative reinsurance
- treaty reinsurance
 explain co-insurance
 understand how claims are settled under co-insurance
 explain the differences between co-insurance and reinsurance
1. INTRODUCTION
1.1 Reinsurance is an extension of the fundamental concept of insurance, namely

the sharing of risks. It is a risk transfer mechanism, whereby the original insurer
(called the reinsured, cedant or ceding company) cedes or transfers part of a
single risk or several risks to another insurer or insurers. The company that
accepts the transfer of risks is known as the reinsurer.
1.2 As we have discussed earlier in this study guide, insurance is ‘a risk transfer
mechanism’. As it can be seen from above, reinsurance is also a risk transfer
mechanism. This is because reinsurance is purchased by insurers to protect
them against certain types of claims. Reinsurance can be defined as “insurance
of risks assumed by an insurer”, or simply put as “insurance of insurance”. It is
best thought of as “insurance for insurance companies”, a way for an insurer
to protect against catastrophic or extraordinary losses, so for the purposes of
this study text we shall define reinsurance as:
Reinsurance: ‘’Insurance for insurance companies’’.
1.3 Let us now consider the reinsurance transaction process in following Diagram
7.1:
Diagram 7.1: REINSURANCE TRANSACTION PROCESS
1.4 Note: Intermediaries (reinsurance brokers) are usually but not always involved
in the process.
1.5 A contract of reinsurance is strictly between the direct insurer and the reinsurer.
The original insured is not a party to any reinsurance agreement that the direct
insurer enters into. The direct insurer remains liable to the original insured for
the whole risk that is accepted. If the insurer has purchased reinsurance, then
the insurer will seek recovery from the reinsurer separately. When an insurer
purchases reinsurance we refer to the insurer as the ‘ceding insurer’ because
the insurer is passing some of the risk to one or more reinsurers; we might say
that the insurer is ceding some of the risk to one or more reinsurers.
1.6 There is no communication or any contractual relationship between the original

insured and the reinsurer.
1.7 It is also common for reinsurers themselves to transfer risks. In other words,
reinsurers also purchase reinsurance. When this happens, the act of the
reinsurer passing risks to other reinsurers is called a retrocession. The
assuming reinsurer is the retrocessionaire, and the ceding reinsurer is the
retrocedent.
Diagram 7.2: RETROCESSION TRANSACTION PROCESS
2. OBJECTIVES OF REINSURANCE
2.1 Think about why insurers might want to buy reinsurance. To help you answer
this question, think about the reasons you might buy insurance to protect your
own possessions. If you owned a business, why would you want to buy
insurance?
2.2 If you were sitting on the board of an insurance company then you would be
asking yourself the same questions about buying insurance. But, as we have
already seen, when an insurer buys insurance this is called ‘reinsurance’. So,
why do insurers buy reinsurance?
A. Security & Confidence
2.3 Like insurance, reinsurance aims to reduce or eliminate the uncertainty of

losses and provides peace of mind, and confidence to the direct insurer.
B. Stability
2.4 Reinsurance helps to stabilise the direct insurer’s losses by smoothing the
fluctuations of the losses from year to year. The profitability of the direct insurer
will then fluctuate less drastically, and this will help to stabilise the direct
insurer’s financial performance.
C. Capacity
2.5 Owing to its financial limitation, the direct insurer may not be able to accept
risks that are beyond its underwriting capacity. By transferring part of the risks
to the reinsurer, the direct insurer will be able to increase its capacity to accept
more or larger risks for its own portfolio.
D. Catastrophe Protection
2.6 In the event of a catastrophe, which can result in large volumes of claims and
expensive individual claims, the financial resources of an insurer may be
severely strained. By way of reinsurance, the effects of a catastrophe can be
cushioned for the insurer.
2.7 In addition, reinsurers and/or reinsurance brokers also provide advisory

services to ceding insurance companies by:
 defining their reinsurance needs and devising the most effective reinsurance
programme, so as to better plan the capital needs and solvency margin of
the ceding insurer;
 supplying a wide array of support services, specifically in terms of technical
training, organisation, accounting and information technology for the ceding
insurer;
 providing expertise in certain highly specialised areas, such as the analysis
of complex risks, risk modelling and risk pricing; and
 enabling ceding insurance companies to build up their business, even if they
are temporarily under-capitalised, particularly in order to launch new
insurance products that require capacity.
2.8 Note: Reinsurance does not discharge the ceding insurance company from its
liability to its policyholders.
3. METHODS OF REINSURANCE
3.1 There are basically two methods of reinsurance, namely facultative and treaty.
A. Facultative Reinsurance
3.2 Under this arrangement, the ceding insurance company reinsures or cedes each
risk or policy on an individual basis. The ceding insurance company is at liberty
to decide which risk that it wants to reinsure, how much it wants to be reinsured,
and how much it will retain for itself. It also has the freedom to offer reinsurance
to any reinsurer that it wishes. Similarly, the reinsurer is under no obligation to
underwrite the risk being offered, i.e. it is at liberty to decline the risk, or write
a share, if it sees fit.
3.3 To place facultative reinsurance, the ceding insurance company must make
available to the reinsurer all the relevant underwriting details. As such, this
method of placement is generally time-consuming and costly to administer
both for the ceding insurer and reinsurers. It is usually sought for risks that are
considered more complex or hazardous and/or those that are beyond the
insurer’s financial capacity.
3.4 Facultative reinsurance may be placed on a proportional basis (also called

Proportional Facultative Reinsurance), or on a non-proportional basis (usually
known as Facultative Excess of Loss) – see later sections of this chapter.
3.5 Let us consider an example. An energy company in Singapore, SG Energy Ltd,

wishes to insure its assets. So, SG Energy Ltd approaches its insurance broker
and asks the broker to arrange insurance. A local insurer, Insurer X underwrites
the risk 100%. However, the risk is very large and so Insurer X arranged
facultative reinsurance with 3 different reinsurers. In this example, Insurer X is
the ceding insurer. The reinsurers agree to underwrite the following amounts
of reinsurance:
Reinsurer 1: 25%
Reinsurer 2: 15%
Reinsurer 3: 10%
3.6 So, Insurer X will keep 50% of the risk and has arranged facultative reinsurance
for 50% of the risk which can be seen in the following Diagram 7.3:
Diagram 7.3: FACULTATIVE REINSURANCE PROCESS
B. Treaty Reinsurance
3.7 This is an agreement by which one or more reinsurers will automatically accept
all reinsurance risks which fall within the pre-determined terms and limits. Most
treaties are “blind”. This means that the reinsurers are bound to accept risks,
without prior knowledge. The reinsurer cannot decline the risks that fall within
the treaty, nor can the insurer select which risks that it can retain for its own
account.
3.8 This method of placement is administratively less cumbersome and less costly,
as compared to the facultative method.
3.9 Treaty reinsurance can be divided into two categories called ‘Proportional
Reinsurance’ and ‘Non-Proportional Reinsurance’ which we shall now consider:
B1. Proportional Treaty Reinsurance
3.10 In proportional treaty reinsurance, the ceding insurer agrees to pass x% of all
premium relating to a class of business to one or more reinsurers and the
reinsurers agree to accept x% of the entire book of business.
3.11 Let us consider an example. Insurer X underwrites property, motor and liability
insurance. Insurer X decides to enter into a proportional treaty reinsurance
agreement with Reinsurer Y in relation to their motor account. Insurer X agrees
to cede 30% of all premium to Reinsurer Y and Reinsurer Y agrees to accept
30% of all premium and pay 30% of all claims.
3.12 There are different types of Proportional Treaty Reinsurance, the most common
of which we have described in our example above: this type of Proportional
Treaty Reinsurance is called ‘Quota Share’ treaty reinsurance.
Diagram 7.4: PROPORTIONAL REINSURANCE: QUOTA SHARE PROCESS
B2. Non-Proportional Treaty Reinsurance
3.13 Before we consider Non-Proportional Reinsurance let us remind ourselves

about an important concept of insurance. It is common within insurance for
policyholders to carry an excess. If you own a car and drive on the roads, then
you must purchase motor insurance by law. Your motor insurance policy may
carry an excess of, say S$500 and this means that if you have a claim then you
must pay the first S$500 of each claim. Insurers impose an excess to encourage
good risk management; in this example the policyholder has a vested interest
in driving carefully and avoiding accidents as he will have to pay the first S$500
himself if he causes an accident.
3.14 Similarly, Insurer X may wish to protect itself against large claims and it might
want to purchase reinsurance to help with this. This type of reinsurance is
available, but reinsurers will impose an excess to encourage good risk selection
on the part of the insurer. Insurance companies purchasing Non-Proportional
Reinsurance will need to pay the first S$x themselves. Some larger insurers
may pay the first S$50 Million themselves before purchasing Non-Proportional
Reinsurance (i.e. their excess is S$50 Million). Smaller insurers may have an
excess of S$500,000.
3.15 Let us imagine that Insurer X wants to protect itself against all claims in excess
of S$1 Million. Insurer X is likely to purchase a type of Non-Proportional
reinsurance called ‘Excess of Loss’ meaning that the reinsurer(s) pay all
amounts above the excess. So, if there is a claim for S$900,000 then insurer X
must pay S$900,000. However, if there is a claim in excess of S1 Million then
Insurer X pays S$1 Million and the reinsurer(s) pay all amounts above S$1
Million. If there was a valid claim of S$3 Million, then Insurer X would initially
pay S$3 Million to the policyholder but could recover S$2 Million from the
reinsurer(s).
3.16 There are different types of Non-Proportional Reinsurance, the most common
of which we have described in our example: ‘Excess of Loss’ reinsurance.
3.17 Let us look at an example where the use of a diagram will help to illustrate the
concept. In the example below, Insurer X has selected an excess of S$1 Million
in relation to its motor book. Insurer X has received 5 claims which it has paid
the amounts stated below:
Claim 1: S$400,000
Claim 2: S$1,400,000
Claim 3: S$2,000,000
Claim 4: S$2,500,000
Claim 5: S$3,000,000
B3. NON-PROPORTIONAL REINSURANCE: EXCESS OF LOSS
Diagram 7.5: EXCESS OF LOSS
3.18 In these examples, Insurer X is obliged to pay the claims in full, but can they
recover anything from their Non-Proportional Excess of Loss reinsurer(s)? The
answer is shown in the following table and illustrated by the diagram above.
Claim 1 S$400,000 Claim falls within the excess so Insurer X cannot

recover anything
Claim 2 S$1,400,000 Claim exceeds the excess of S$1,000,000 by
S$400,000 so Insurer X can recover S$400,000.

S$1,000,000 so Insurer X can recover S$1,000,000.
S$1,500,000 so Insurer X can recover S$1,500,000.
Claim 5 S$3,000,000 Claim exceeds the excess of S$1m by S$2,000,000 so
Insurer X can recover S$2,000,000
4. CO-INSURANCE
4.1 Co-insurance usually occurs when the insurer finds that the sum insured is
above its normal acceptance limit or that the broker decides it wants to place
the risk with several insurers. Sometimes, the insurance market uses the term
“collective policy” to describe a co-insurance policy.
4.2 Under a co-insurance agreement, rather than each insurer issuing its own
policy, one insurance policy will be issued to the policyholder. One insurer is
nominated as the “leading office” or “leading insurer” of the panel of insurers
covering the risk. Usually, the insurer with the largest percentage of the risk is
nominated to be the leading office.
4.3 The leading insurer will assume responsibility for all negotiations regarding the
insurance cover. This includes the arrangement of any required survey, the
calculation of the premium, and the issue of the production of the policy and
any subsequent endorsements.
4.4 The panel of insurers will verify that the premium charged and policy terms
match those that they would have offered should they have been the leading
office.
4.5 The leading office and panel of insurers will share the premium and any
subsequent claims in proportion to their percentage share of the risk.
A. Relationships In Shared Insurances
4.6 Insurance, co-insurance, and reinsurance create different relationships between

the parties involved in them.
4.7 Where there is only the involvement of the insured and the insurer there is a
direct relationship. Within this relationship the insured must reveal to the
insurer all material facts relevant to the risk to allow the insurer to correctly
assess the risk and decide whether it is to be accepted, develop the terms and
conditions for the risk, and calculate the premium. The insurer also has a duty
of disclosure and should advise the proposer if they are unable to underwrite
the risk or that there is any other difficulties in providing insurance cover, for
example, if the insurer is not authorised to write that class of business.
4.8 Under a direct insurer and insured relationship, the insurer is entirely
responsible to pay any claim under the insurance arranged.
4.9 Under a reinsurance arrangement, the insurer and its reinsurer have a direct
relationship. Therefore, under a reinsurance arrangement the insurer must
advise the reinsurer of any facts that are relevant to the risk to be reinsured.
This is to allow the reinsurer to evaluate whether to accept all or part of the risk
offered. The reinsurer will make similar decisions on the acceptance of a risk
that an insurer would make, including:
 Whether the rates and terms are adequate?
 What acceptance class applies to this risk?
 What limits can be written?
4.10 The question of the reinsurer’s solvency is key to the insurer as they rely on the
solvency of the reinsurer to allow the payment of any future claims. The
importance of this issue is that if the reinsurer goes out of business, the
reinsurer will be unable to pay their proportion of the claim to the insurer. This
would mean that the insurer could have to pay an amount which they had
anticipated would be reinsured. As shown in the diagram above, Insurer X
expects to collect S$400,000 in respect of claim 2, plus S$1 Million in respect of
claim 3, S$1.5 Million in respect of claim 4 and S$2 Million in respect of claim
5. In total, Insurer X expects to recover S$4.9 Million in respect of these claims.
However, if the reinsurer goes out of business then Insurer X will be unable to
recover this amount of S$4.9 Million.
4.11 There is no direct relationship between an insured and a reinsurer. The insured
has no legal entitlement on any outstanding loss payment due from the
reinsurer to the insurer if the insurer goes out of business before a claim is paid.
In such a situation, the insured would need to seek recovery of its claim
payment as a creditor during the process of winding up the insurer.
4.12 There is a direct relationship between the insured and the co-insurer. In fact, the
relationship is no different to that of an insured and insurer. However, the limit
of the co-insurers liability to the insured is its percentage of the co-insurance
written.
4.13 Therefore, if a co-insurer goes out of business and cannot fulfil its claims
obligations, then their portion of that policy effectively “dies”, and the
remaining co-insurers have no responsibility for the share of that co-insurer. An
example will better illustrate this concept.
4.14 Example: An insurance broker arranges a policy on behalf of its policyholder,

which is co-insured by five insurers. The insurers co-insure in these
proportions:
Insurer Co-insurance Share Share of Claim of

S$1,000,000
A 50% S$500,000
B 30% S$300,000
C 10% S$100,000
D 7% S$ 70,000
E 3% S$ 30,000
Total 100% S$1,000,000
4.15 This can also be illustrated diagrammatically as follows:
Diagram 7.6: EXAMPLE OF CO-INSURER PROPORTIONS
4.16 If the policyholder has a valid claim in the sum of S$1,000,000, then the amounts
recoverable from each insurer are shown in the table above.
4.17 If Insurer C goes out of business before the claim is paid, then the policyholder
will be unable to recover that proportion of the claim amounting to S$100,000.
In such circumstances the policyholder will only recover S$900,000 rather than
the agreed settlement amount of S$1,000,000.
5. SETTLEMENT OF CLAIMS UNDER CO-INSURANCE POLICIES
5.1 At times, owing to the size of the sum insured or complexity of the risk involved,
it may be necessary to place insurance with two or more insurers. As this
chapter discussed earlier, one method of achieving this is via co-insurance, or
issuing a collective policy.
5.2 Co-insurance is where a substantial insurance is shared among several different

insurance companies. A single policy is prepared which shows the different
companies, described in the document as co-insurers, and the percentages for
each co-insurer’s share of the risk. Each insurer is responsible only for its agreed
percentage of any loss and liability is several but not joint. This is in contrast to
reinsurance where the insurer is still liable to the insured even if the reinsurer
should go into liquidation.
5.3 The “leader”, usually the insurer with the largest percentage, assumes
responsibility for correspondence, surveys, rating and the preparation of the
closing instructions and specification which are despatched to co-insurers. So,
in our example above, the leading insurer would be Insurer A.
5.4 The closing instructions carry details of the sum insured and premium to enable
the co-insurers to place the insurance on their books.
5.5 The co-insurers signify their agreement to the terms of the policy by returning
a “signing slip” authorising the leader to sign the policy on their behalf.
5.6 Following a loss, the leader usually appoints a loss adjuster who issue either a
preliminary advice or a brief preliminary report to all co-insurers. The loss
adjuster will send the final report to the leader for approval when the loss
adjustment has been completed. If everything is in order, the leader authorises
the loss adjuster to issue copies of the report and apportionment to the co-
insurers, and to tell them the date on which they should all simultaneously pay
the insured or the intermediary, if one is involved.
5.7 Each co-insurer has a separate contract with the insured. Should a co-insurer
disagree with the leader’s recommendations, it may voice its concerns and raise
points which it considers relevant.
5.8 When a claim is agreed, co-insurers usually make their own individual
payments at a date specified for payment detailed in the loss adjuster’s report.
5.9 It is possible that a co-insurer declines to follow the leader’s recommendations

for payment of a loss. In this situation, the insured can proceed against the
relevant co-insurer to obtain payment. However, where the loss adjusters feel
that the loss is not payable or there is some issue with the loss in question, the
leader will often seek the views of the co-insurers.
6. COMPARISON BETWEEN REINSURANCE & CO-INSURANCE
6.1 Co-insurance is a method, whereby one insurer (known as the leading office or
primary insurer) shares direct responsibility for a risk with one or more
insurance companies (known as co-insurers) on a proportional basis. As such,
several insurers are usually involved, each taking a stated proportion of the risk,
each receiving that proportion of the premiums, and each being responsible for
that proportion of any claim made under the policy. The lead insurer
administers the co-insurance arrangement.
6.2 Co-insurance is fairly common for large risks. The method of operating co-
insurance procedures is straightforward and suitable for many risks. However,
there are some drawbacks. The first concern is that, in the event of a large loss,
all the co-insurers make their individual payments at different times. This can
be cumbersome if many insurance companies are involved.
6.3 The second disadvantage is that a broker, in placing a very large or complicated
risk, will need to approach many different insurers to complete the placement.
As discussed earlier, the concept of reinsurance is different from the concept of
co-insurance. Table 7.1 below summarises the main differences.
Table 7.1: Differences on Reinsurance & Co-insurance

Reinsurance Co-insurance
 Reinsurance involves one insurer  Co-insurance implies that two or
covering the risk and insuring more insurers directly insure the
again (“re-insuring”) part or parts risk, so that the insurers share
of it with reinsurer(s). As the risk.
mentioned before, the insurance
contract is between the insurer and
the insured with the reinsurer(s)
not being a party to this insurance
contract.
 The reinsurance contract is  The insured will have a separate

between the insurer and the insurance contract with each co-
reinsurer with the insured not insurer, albeit there is only one
being a party to it. This means that insurance policy issued by the
if a reinsurer fails, the insurer is leading office, with the
still liable to the insured under the identities and respective
terms of the insurance contract, percentage shares of each co-
notwithstanding that the insurer is insurer indicated. Therefore, the
unable to recover the share of the insured has a direct relationship
loss from the reinsurer. with each insurer for its share of
the risk. Should any of the co-
insurers fail, the other co-
insurers are liable to the insured
only for their respective
proportionate shares of the
loss. They are not liable for the
failed co-insurer’s share.
6.4 The following diagram 7.7 illustrates the difference between co-insurance and
reinsurance:
Diagram 7.7: DIFFERENCE BETWEEN CO-INSURANCE AND REINSURANCE
6.5 You will see that, in each case, the leading office or primary insurer holds 40%
of the risks – the difference arises in the relationship among the parties.
8. Ethics, Professionalism, Data Protection And Cyber Hygiene
CHAPTER 8
ETHICS, PROFESSIONALISM, DATA PROTECTION AND CYBER HYGIENE
CHAPTER OUTLINE
1. What Is Ethics?
2. Ethics Is Not Compliance
3. Why Ethics Is Important To The Insurance Industry
4. General Ethical Principles
5. Courage
6. Benefits Of Ethical Behaviour
7. Unethical Acts
8. Professionalism
9. Requirements For A Profession
10. Responsibilities Of Professionals
11. The Singapore General Insurance Code Of Practice
12. Code of Practice For Agents
13. Personal Data Protection And Cyber Hygiene
Appendix 8A - The Singapore General Insurance Code Of Practice
Appendix 8B - Data Loss Protection Guidelines For Insurance Agents
Appendix 8C - FAQ On Data Loss Protection Guidelines
LEARNING POINTS
 understand what ethics is and why ethics is not compliance
 understand why ethics is important to the insurance industry
 understand the general ethical principles that agents and brokers should adhere to
 recognise the importance of courage in adhering to the ethical principles
 know the benefits of ethical behaviour and be mindful of some unethical acts
 identify the characteristics of professionals and the requirements for a profession
 know the responsibilities of professionals
 outline the Singapore General Insurance Code Of Practice and the Code of Practice
For Agents
 know the Personal Data Protection Act 2012, its provisions and enforcement
 understand the requirements of Notice No: MAS 132 on Cyber Hygiene
 know the Data Loss Protection Guidelines (DPL) For Life & General Insurance Agents
 know the essentials and nature of risk management frameworks
 understand the role of compliance
 understand the role of audit
1. WHAT IS ETHICS?
1.1 Ethics is both a field of study and a skill. As a field of study, it is a branch of
philosophy that investigates how we should behave. Specifically, people who
study ethics focus on three questions:
 What does it mean to characterise an action as “good” or a person as
“good”?
 What do we owe to other people?
 How should we respond when the obligations which we owe to others (and
ourselves) come into conflict? In other words, which obligation takes
priority?
1.2 Applied ethics, or ethics as a skill, is the ability to apply our moral beliefs of
what is “good” and “bad” to situations that we face each day. Ethics, in the
business arena, is about how people conduct business. Ethics is the strong base
that holds the entire economic and free enterprise system together. Without
ethical behaviour, business deals will collapse, the working environment will be
intolerable, and trust will be non-existent. In business activities, we act based
on trust that our business associates will act ethically. To be an ethical person,
one must not only think ethically but must also act in this manner. Ethical
behaviour implies doing what is right, and that is sufficient justification.
1.3 Law and ethics are both standards of conduct that govern a country, the
morality of an organisation and the moral actions of individuals. However, in
the next section, we outline why ethics is not compliance.
Insurance
2. ETHICS IS NOT COMPLIANCE
2.1 Ethics, however, is not compliance. Fulfilling legal obligations does not exhaust
moral obligations. Ethics requires more than compliance with a set of rules and
regulations. An ethical person is one who applies his moral beliefs, in the form
of principles and values, to his business practice, because he believes that it is
good to do so; and the right thing to do.
3. WHY ETHICS IS IMPORTANT TO THE INSURANCE INDUSTRY
A. Insurance Business Is Based On Trust
3.1 The insurance industry is one that is based on trust. Insurance products, unlike
consumer products, are intangible and carry benefits that may not be apparent
until a covered risk occurs. One cannot enjoy or display “financial security” or
“risk protection” in the way that one can with a new house or a new car.
3.2 The client cannot always measure the value and suitability of the insurance
products and advice that they purchase. They are not sure whether the advice
that they are paying for is necessarily all that good, or that the products that
they purchase are the best fit. This is because insurance products are complex,
and policy wordings are hard to understand. As a result, policy benefits may be

misrepresented, the products sold may not meet the needs of the clients, and
the clients may not fully understand what they are buying. The clients may
suffer financial distress if they do not receive proper advice. Increasingly more
and more insurers are using simple layman’s English in their policy wordings.
This is an important part of ethical sales behaviour, which is extremely crucial
for the insurance sector.
B. Ethics Affects the Industry’s Public Image
3.3 Insurance is a public-interest industry, meaning that the insurance industry is

not just in business for itself – the public obtains substantial benefit from the
availability of insurance. The unethical behaviour of a few can tarnish the image
of the industry and cause a loss of public confidence. The reputation of an entire
industry is at stake if we tolerate unethical sales behaviour or unethical business
practices. E-xcellence
T-rustworthiness
H-onesty
I-ntegrity
4. GENERAL ETHICAL PRINCIPLES C-aring
S-elflessness
4.1 Obviously, the specific applications of ethics will be varied, but there are certain
general ethical principles that can be borne in mind, whether one’s code of
ethics is internally generated or externally prescribed by a recognised authority.
4.2 It may be helpful to consider these general principles by looking at each of the
letters in the word “ETHICS” and making an appropriate application (of course,
not necessarily in order of importance).
A. E - Excellence
4.3 Excellence is the quality of being outstanding. To excel, to be the best that one
can be, will certainly require ethical behaviour.
4.4 Gains obtained through unethical actions are lost eventually, and along with
them reputation, self-esteem and trust. Perhaps the means of making one’s
livelihood will also be lost. On the other hand, ethical actions generate respect
and confidence from clients and colleagues. In the general insurance business,
ethical behaviour and excellence certainly go hand in hand.
B. T - Trustworthiness
4.5 To be a responsible agent/broker, one must be reliable and trustworthy. This is

an essential element in the ethics of the professional general insurance
agent/broker because, as we have said before, the general insurance business
is built on trust.
4.6 The general insurance agent/broker possesses specialised technical knowledge

of insurance products that an average insurance buyer does not usually
possess. As a result, insurance buyers must rely on agents/brokers for their
professional expertise. General insurance agents/brokers have ethical
obligations to accept and fulfil their responsibilities to the best of their abilities.
C. H - Honesty
4.7 Honesty is a cornerstone of ethical behaviour and means “telling the truth.”
Someone who is honest takes care not to deceive others, either by what they
say, or what they fail to say.
4.8 For example, suppose an agent has told a client that the policy covers accidental
death on a 24-hour worldwide basis, we will not consider that agent honest, if
the policy excludes accidents occurring in the United States of America and
Canada, since the agent has not clearly made known the exclusions to the client.
The statement may have been accurate as far as it goes, but the agent has
withheld a material fact which will likely result in a misunderstanding on the
part of the client. Honesty requires telling the whole truth.
4.9 Besides being truthful, honesty also means being fair. Honesty means making
sure that others receive what they are entitled to, and not accepting things to
which one is not entitled. Clients pay for an objective evaluation of their general
insurance needs, for an objective recommendation about what will best meet
their needs, and for ongoing service to ensure that their needs are continually
met, and they should get nothing less.
4.10 Being honest is essential to creating the kind of trust in the agent-client
relationship that allows the client to make an affirmative and informed buying
decision. Clients are not going to buy general insurance from an agent whom
they think has been dishonest with them, nor will they refer that agent to other
people whom they know. At the same time, clients are eager to work with
agents whom they know have made a competent evaluation of their general
insurance needs, as well as an objective recommendation on how they should
meet those needs.
4.11 In addition, agents/brokers who handle themselves in an honest and

professional manner have no trouble in obtaining referrals to other high-quality
prospects.
D. I - Integrity
4.12 Integrity is similar to honesty, but integrity carries with it the connotation of
being incorruptible, no matter how great the temptation is to be dishonest. A
person who has integrity does the right thing, regardless of the consequences.
Some people only want to be honest, as long as it does not cost them too much.
4.13 The price which these people are willing to pay varies. For example, for the sake
of being honest, some may be willing to risk losing a small sale, but not a large
one. Some may be willing to risk losing sales of any size, but not their job.
4.14 The higher degrees of honesty may be more commendable, but the highest
degree of honesty, and the most commendable, is being willing to risk anything
and everything for the sake of being honest. That is integrity.

4.15 In the short term, fraud, deception or theft may lead to greater profits than
honesty and truthfulness. However, agents/brokers who are involved in illegal
schemes, because they opt for short-term profits at the expense of the long
successfully insurance careers and can tarnish the image of the insurance
community. Those who lack personal integrity will not last very long in the
business.
E. C - Caring
4.16 Having a caring attitude is the motivation behind the work of the professional
general insurance agent/broker. No amount of money or recognition is
rewarding enough for the challenges that general insurance agents/brokers
must face day after day and year after year in their careers.
4.17 The real payoff is knowing that they have helped people with their business,
managed risks and kept their financial houses in order: that individuals will have
resources upon which they can count on when they are hospitalised or
disabled; that there will be monetary compensation to help keep the businesses
operating during disasters and catastrophes; that the community can continue
to provide jobs and services to the society and benefit the economy as a whole,
because the risks are contained through adequate and appropriate insurance.
4.18 Being caring also enables professional general insurance agents/brokers to act
in their clients’ best interests. For, if agents/brokers care about their clients, they
would do for their clients what they would do for themselves, as if they were in
the clients’ situations.
F. S - Selflessness
4.19 Selflessness is the opposite of selfishness. Selfishness is concerned only with

oneself and a disregard for others. One should readily see that the general
insurance business is no place for the selfish person. General insurance
agents/brokers have to put others first, because the purpose of the general
insurance business is to be of service to others, to identify the risks, and to
obtain and provide adequate cover for the risks which the client is facing.
General insurance agents/brokers succeed the most by putting others first. By
directly serving others’ best interests, the agents/brokers indirectly serve their
own interests.
4.20 Agents who feel a sense of service towards their customers and principal
companies, put someone else’s interest before their own. They set aside their
own interests and concentrate on doing what has to be done in the best interest
of their customers or prospective customers. In the long term, this will pay off
for the agent in both material and non-material outcomes or results.
5. COURAGE
5.1 Besides the above six ethical principles, it also takes courage to be ethical. The
right thing may always be the best thing in the long term, but in the short term,
there may be a price to pay.
5.2 To be ethical, individuals may find that they have to stand up to a client, or to a
colleague, or to a superior, or even to their family members, who do not want
to risk the material loss upon coming to toe the ethical line. It takes courage to
stand up to those persons whose expectations that we are ordinarily eager to
meet.
5.3 All the good intentions in the world will not amount to anything, unless one
acts on one’s principles. Courage is the quality that converts ethical intention
into ethical action.
5.4 On the positive side, courage is a universally admired trait. When individuals
demonstrate that they have the courage to stand up for their principles, they
win the respect of their peers, their superiors, their clients, and their family
members. Individuals who at first feel alone, when faced with an ethical
situation requiring courage, often end up finding a great deal of support for
having done the right thing.
5.5 One situation which takes courage for an insurance agent/broker is declining to
work with a party with whom the insurance agent/broker feels that he cannot
establish a mutually beneficial professional relationship. For example, an
insurance agent/broker may be introduced to a client who does not value ethical
behaviour. It is hard to turn down the possibility of making a sale. However,
insurance agents/brokers must keep in mind that clients are likely to provide
referrals to other people like themselves. It is better to give up one sale than to
try to build a career out of ethically compromised actions. It is easier and more
profitable for insurance agents/brokers to work with ethical people who will
appreciate the value of their services, as well as their ethical orientation, and
who will refer them to more people whose values that they share.
6. BENEFITS OF ETHICAL BEHAVIOUR
6.1 A truly professional insurance agent/broker will want to exhibit ethical

behaviour, because he is convinced that the benefits of demonstrating ethical
business behaviour far outweigh the costs of not doing so. What then are the
benefits of ethical behaviour?
A. Self-Respect
6.2 To people with high ethical standards, self-respect is more important than any
reward that someone else can offer. The fact does not change even when
unethical people seem to benefit from their behaviour, or when ethical
behaviour goes unrecognised. Ethical people do the right thing, because to
them, it is the right thing to do.
B. Freedom From Fear Of Discovery
6.3 The honest man never needs to fear an audit. The dishonourable one lives in a
state of constant worry that he will be found out and exposed.

C. Prestige & Esteem
6.4 Knowing that people trust you and rely on you for accurate advice, and act
according to your advice, pertaining to their financial needs, has an enormous
psychological influence, not to mention boosting one’s self-
esteem.
D. Respect From One’s Peers & Associates
6.5 The true ethical professional will obtain recognition from his profession. This
may manifest itself in the insurance agent/broker’s increased profile in
professional gatherings, or in being asked to assume office in professional
associations, societies or clubs. All these will contribute to an increased
awareness of your standing, which can only be to your professional advantage.
E. Continuity Of Business
6.6 It is a fact that people like to do and continue to do business with someone
whom they trust. A long-standing client is an automatic advertisement for the
insurance agent/broker. If the client is satisfied with your service for the
particular policy, you will well be the first in his thought, if he has other
insurance needs that come to his mind.
6.7 Additionally, the client will not be slow in recommending family members,
business associates, colleagues and friends to place their required insurance
covers through you. The importance of repeat and growth business stemming
from a satisfied client cannot be over-estimated. An insurance agent/broker
rarely builds a successful career out of making one-time sales to strangers.
Insurance agents/brokers need referrals, and repeat sales come only when a
relationship of trust has been established between insurance agents/brokers
and clients. Trust and reputation are built over time.
F. Boosting The Image Of The Insurance Community
6.8 By demonstrating ethical behaviour and building up a good reputation for

himself, the insurance agent/broker also helps to develop the public’s sense of
respect and trust for the insurance community. This will, in turn, make it easier
for the insurance agent/broker to do business in the future. The insurance
agent/broker will not be met by an air of scepticism to whatever he says. The
regulatory authorities will also not necessarily respond to unethical behaviour
of insurance agents/brokers, by imposing new rules or tightening current ones.
Thus, as a whole, the insurance industry will have more flexibility in doing
business.
7. UNETHICAL ACTS
7.1 It is not possible to give a complete list of acts and omissions which will
constitute unethical behaviour. Nor will it be wise to attempt to do so. With
questions concerning ethics or morals, as soon as any written criteria are made
known, there will immediately be “grey areas” or borderline cases, with a
temptation to apply legalistic rigidity to an area in which such an approach is

just not appropriate. However, it may be helpful to mention some obvious
examples of unethical behaviour, with a view to avoiding such lapses. Hence,
the following maybe considered unethical.
A. Misrepresenting Cover
7.2 A client will probably have little or no insurance knowledge, so it will be easy
to give assurances, which in fact are untrue. Sometimes, insurance
agents/brokers do this, because they themselves do not understand what they
are selling. Such cases are a “double” breach, in that they represent an
ignorance which the professional should not have, and a dishonesty which an
ethical person should not practise.
B. Unfairly Criticising Competitors Or Colleagues
7.3 Sometimes great liberties are taken with the truth, directly or indirectly, in an
attempt to belittle others or justify oneself. In a moral sense, another quotation
may help: “I do not make myself big by trying to make you look small”.
C. Unauthorised Alteration Of Proposal Forms
7.4 The insurance agent/broker may well assist the client in completing a proposal
form. He must not tell the client what to say, he must not “doctor” the
information given in any way, with or without the consent of the proposer. He
must get the client to review or go through what he has filled in the proposal
form, before requesting the client to sign it. Also, the insurance agent/broker
must not sign the proposal form on behalf of the client.
7.5 The insurer relies upon the integrity of the information supplied (in some cases
exclusively) to underwrite the risk. Any such interference or undue influence
upon the information supplied is, in fact, committing fraud.
7.6 The insurance agent/broker must be aware of the important implications of

Section 25(5) of the Insurance Act (Cap. 142). This section provides that:
“No Singapore insurer shall, use in the course of carrying on insurance
business in Singapore, a form of proposal which does not have
prominently displayed therein a warning that if a proposer does not fully
and faithfully give the facts as he knows them or ought to know them, he
may receive nothing from the policy.”
7.7 In the interest of any of his clients, the insurance agent/broker should explain
the importance of this warning, which is in the proposal form, to the client who
is proposing for the insurance. This also reinforces the principle of utmost good
faith and its importance.
D. Fraud
7.8 It goes without saying that any cheating, stealing or otherwise illegal act on the
part of the insurance agent/broker is unacceptable. This may range from failing
to pass on premiums, to dishonest involvement and conspiracy with the

policyholder to defraud the insurer.
E. Motivated Primarily By Commissions To Be Earned
7.9 In suggesting an insurance policy or programme, the question of the insurance

agent’s/broker’s remuneration must always be subordinate to the needs and
wishes of the client.
F. Exaggerated Advertising & Promotional Activity
7.10 While marketing is an essential element of the insurance agents/brokers, all

advertising and other promotional endeavours must be consistent with the
truth and reasonable belief by the insurance agents/brokers making them.
Misleading, as well as outright dishonest selling, is certainly unethical.
G. Mixing Clients’ Money With One’s Own
7.11 This is normally expressly forbidden in an agency contract. However, even if it

is not specifically stated in the agency contract, it is not a good practice to do
so.
7.12 Every insurance agent/broker must be sure to comply with all laws and rules
governing the handling of premiums, because any violation is a breach of the
insurance agent/broker’s fiduciary duty, even if no harm is done to the existing
or prospective client.
7.13 Accounting of all clients’ financial transactions involving money transmissions

in respect of insurance arrangements must be properly documented and kept
at all times by the insurance agent/broker.
H. Inappropriate Replacement Of Existing Insurance
7.14 Unless the insurance product offered is clearly more suitable for the client’s
needs, no attempt should be made by the insurance agent/broker to persuade
the client to cancel and replace an existing insurance cover. True and fair
competition is perfectly legitimate in a free market, but business growth must
not be achieved at the expense of truth and the client’s interests.
I. Failure To Disclose Material Information
7.15 The insurance agent/broker has an obligation to disclose all material facts
relevant to the client’s decision to purchase. In addition, it is also unethical not
to reveal all pertinent information that has a bearing on the placement of an
insurance policy to the insurer. The insurance agent/broker must not withhold
facts that the insurer needs to know, in order to underwrite prudently. At the
time of application, the client must first fully understand the importance of
providing accurate information, and the serious consequences of not doing so.
J. Failure To Maintain Confidentiality
7.16 Agents/brokers gather a great deal of personal, corporate and financial
information about their clients. Such information may be of a highly sensitive

nature. Other than to provide underwriting information to the insurer,
agents/brokers should make it a rule never to discuss business or personal
matters of a client with anyone, but the client. The trust relationship between
an agent/broker and client will be damaged if the agent/broker fails to keep
sensitive information confidential. To violate the trust that clients place in them
will be a breach of ethics.
K. “Padding” The Premium Quoted & Keeping The Difference
7.17 “Padding” the premium quoted and keeping the difference means that the
agent actually quotes to the policyholder a premium above the premium as set
by the agent’s principal (the insurer), and then pockets the difference.
7.18 “Padding” is tantamount to cheating and it is a criminal offence. The ARB under
the GIA takes a very serious view of this malpractice and will not hesitate to
suspend or cancel the registration of any insurance agent/broker who is guilty
of such misconduct. Likewise, the MAS will not hesitate to suspend or cancel
the licence of any insurance agent/broker being guilty of such misconduct.
L. Sub-Agency Practice
7.19 An insurance agent must not engage in sub-agency practice. He must not allow
anyone (unless he is a Nominee Agent registered with the ARB) to act on his
behalf, to solicit any general insurance business, or to carry out any general
insurance selling or advisory activity. The practice of using a sub-agent to
distribute any part of its business is unacceptable. Such malpractice will
constitute a breach of the provisions of the GIARRs and will result in suspension
or termination of the registration with the ARB under the GIA.
8. PROFESSIONALISM
A. Characteristics Of Professionals
8.1 Using doctors, lawyers, teachers and others as models of what professionals
should be, Dr Solomon Huebner, the founder of The American College, in 1915
cited four characteristics of the professionals, being still remain relevant today:
“▪ The professional is involved in a vocation that is useful and noble enough
to inspire love and enthusiasm in the practitioner.
 The professional’s vocation requires an expert’s knowledge in its practice.
 The professional should abandon the strictly selfish commercial view and
ever keep in mind the advantage of the client.
 The professional should possess a spirit of loyalty to fellow practitioners,
of helpfulness to the common cause they all profess and should not allow
any unprofessional acts to bring shame upon the entire profession.”

9. REQUIREMENTS FOR A PROFESSION
9.1 These are:

(a) Possess A Body Of Specialised Knowledge
 Any profession that has at its core a body of subject matter which must
be sufficiently technical, so that the average layperson cannot readily
understand it.
(b) Entry Barriers Into The Profession
 An individual cannot be a self-declared professional. A profession
needs to have, as one of its hallmarks, a barrier to entry. This frequently
involves examinations on the technical subject matter through which
the prospective professional demonstrates his competence and
expertise.
(c) Continuing Education
 As knowledge keeps evolving, professionals will continue to keep their
professional knowledge and skills up to date through continuing
education.
(d) Governed By A Society’s Code Of Ethics
 Professionals belong to professional bodies and are guided by a
professional code of ethics.
10. RESPONSIBILITIES OF PROFESSIONALS
10.1 Being a professional demand increased responsibilities to clients:

 responsibility for delivering high quality informed service to clients;
 responsibility to be aware of ethical and compliance issues, and to act
ethically in compliance; and
 fiduciary responsibility.
11. THE SINGAPORE GENERAL INSURANCE CODE OF PRACTICE
11.1 The GIA has developed a General Insurance Code of Practice, which came into
effect from 1 June 2004. The latest revised version has taken effect since 1 July
2016 (see Appendix 8A).
A. Introduction
11.2 The aim of the Code of Practice (the “Code”) is to provide clear and consistent
standards for the general insurance industry, so that a better and more
informed relationship between general insurers and their policyholders can be
established, thereby improving policyholders’ confidence and trust in the
general insurance industry.
11.3 It also seeks to establish transparency in the insurance products, as well as

insurance practices, so that policyholders are able to make informed choices
when making purchasing decisions. Insurance products and services covered

under the Code encompass all general insurance policies issued to an
individual.
11.4 The Code advises on the dispute resolution mechanisms and procedures in
relation to complaints and disputes between insurers and their policyholders.
The revised Code applies only to general insurers and does not attempt to set
the standards for intermediaries.
11.5 All members of the GIA adopt the Code. It operates alongside the various rules
and regulations governing the conduct of the general insurance industry.
11.6 If insurers fail to meet with any standards under the Code, policyholders may
lodge complaints against them in accordance with established procedures. The
Code does not provide anyone with the right to take legal action against any
insurer.
B. Insurers’ Commitments
11.7 The Code outlines insurers’ commitments in the areas as described below:
(a) Business Practice
For example, insurers undertake to act fairly and reasonably when they
deal with policyholders.
(b) Advertising
For example, insurers will withdraw any advertising and promotional
materials if they become aware that the information provided is not
accurate, not clear, or misleading.
(c) Protecting The Policyholder’s Interest
An example is advising policyholders to deal with registered agents or
brokers.
(d) Confidentiality
For example, insurers will undertake to safeguard policyholders’ data and
comply with the Personal Data Protection Act (2012).
(e) Conflicts of Interest
For example, in circumstances where avoidance of conflicts of interest
may not be practicable, the insurer’s employee and/or intermediary will
disclose to the policyholder the conflict of interest arising from the
relationship with the insurer, including any material information or facts
that may compromise his objectivity, before the insurance is arranged.
C. Buying Insurance
11.8 Where the policyholder buys the insurance directly from the insurer, the Code
details insurers’ commitments in the following areas:
 Providing policyholders information about products and services;
 Matching the individual policyholder’s requirements;
 Providing policyholders with information on costs (this includes fees,
commissions, incentives or other charges); and
 Giving policyholders a “Free Look” (see section below).

D. “Free Look”
11.9 For policies which offer a “Free Look” feature, policyholders are given a “Free
Look” period of at least 14 business days from the date that they receive the
policy document.
11.10 Should policyholders decide not to continue with the insurance purchased, they
can cancel their covers within this period and get all their money back, if they
have not made a claim. Insurance cover will deem to have attached, and no
benefits shall be payable under the policy. An administration charge may be
imposed by insurers.
11.11 However, this benefit does not apply to:

 Motor Insurance;
 Travel Insurance;
 Domestic Maid Insurance;
 Short-term insurance with a term less than one year
 Policy renewal; and
 Any other compulsory insurance stipulated by law.
E. Service Standards of Insurers
11.12 The Code also outlines the insurers’ commitment of service standards in the
areas of:
 Documentation;
 Policy Servicing;
 Claims; and
 Complaint Management.
11.13 More details concerning these service standards can be found in Appendix 8A.
12. CODE OF PRACTICE FOR AGENTS
A. Introduction
12.1 The Code of Practice for Agents issued by GIA is part of the General Insurance
Agents’ Registration Regulations (“GIARR”).
12.2 This Code sets out the minimum standards of conduct and the duties required
of an Agent in the conduct of an Agent’s general business as an Agent
representing a Member or Members (“Members”) of the GIA.
12.3 This Code shall be observed and complied with by all Agents in addition to the
provisions of GIARR as may be amended by Agents’ Registration Board
(“ARB”) from time to time. This Code including subsequent amendments,
alterations and additions shall be observed and complied with by all Agents,
Nominee Agents and Trade Specific Agents (TSA).
B. Areas Covered By The Code
12.4 This Code covers:

(a) General Sales Principles
For example, the Agent is to ensure as far as possible that the policy
proposed is suitable to the needs and resources of the prospective
policyholder and he is to give advice only on those insurance matters in
which the Agent is knowledgeable and shall seek or recommend specialist
advice when necessary.
(b) Explanation Of The Contract
An example is the Agent is to explain all essential provisions of the cover
afforded by the policy or policies which he is recommending so as to ensure
as far as possible that a prospective policyholder understands what he is or
may be buying and to draw attention to all restrictions, exclusions and
conditions applicable to the policy.
(c) Disclosure Of Underwriting Information
An Agent shall, in obtaining underwriting information or the completion of
the proposal form or any other material:
(i) avoid influencing a prospective policyholder and shall make it clear that
all the answers or statements given are the prospective policyholder’s
own responsibility; and
(ii) ensure that the consequences of non-disclosure and inaccuracies are
pointed out to a prospective policyholder.
(d) Accounts And Financial Aspects
An Agent shall, if authorised to collect moneys in accordance with the terms
of his agency appointment:
(i) keep a proper account of all financial transactions with a prospective
policyholder which involve the transmission of money in respect of
insurance policy;
(ii) record receipt of all money received in connection with an insurance
policy and shall distinguish the premium from any other payment
included in the money; and
(iii) remit any money so collected in strict conformity with the terms and
conditions of the Agent’s agency appointment and the provisions of
GIARR.
(e) Documentation
An Agent shall not withhold from a policyholder any written evidence or
documentation relating to the contract of insurance.
(f) Claims
For example, if a policyholder informs an Agent of an incident which might
give rise to a claim, the Agent shall inform the Agent’s Principal concerned
without delay and, in any event, within 3 working days and thereafter give
prompt advice to the policyholder of the requirements of the Agent’s
Principal concerned relating to the claim, including the provision, as soon
as possible, of information that may be required to establish the nature and
extent of the loss. Information received by an Agent from a policyholder
shall be passed to the Agent’s Principal concerned without delay.

(g) Rates Fixed By An Agent’s Principal

With the exception of Agents with binders, all rates of insurance shall be
fixed by an Agent’s Principal. An Agent shall not quote to a policyholder a
rate above or below the rates set out by the Agent’s Principal concerned.
As discussed in Section7K of this chapter, “Padding” is tantamount to
cheating and it is a criminal offence.
(h) Publicity
No advertisements and no printed matter concerning an Agent’s Principal,
or its products or services shall be published, circularised or distributed by
an Agent unless a copy thereof has first been approved by a duly authorised
official of the Agent’s Principal concerned.
(i) Premium Refund
An Agent shall, upon the refund of any premium due under a contract of
insurance, promptly remit the full refund to the policyholder without any
claims, set-off or deduction whatsoever unless a claim, set-off or deduction
has been pre-agreed by the policyholder.
(j) Agency
No policy shall be sold by an Agent except within the terms of the Agency
Agreement entered into between the Agent and the Agent’s Principal
concerned.
(k) Sub-Agency
An Agent shall not enter into any agreement or arrangement whatsoever
for the appointment or engagement of any sub-agent.
(l) Conflicts Of Interests
For example, in circumstances where avoidance of conflicts of interest may
not be practicable, the insurer’s Agent, Nominee Agent or TSA should
disclose to the customer the conflict of interest arising from the relationship
with the insurer, including any material information or facts that may
compromise his objectivity, before insurance is arranged.
(m) Dispute Resolution, Mediation, Arbitration Or Legal Proceedings
An Agent shall not (unless the Agent’s Principal otherwise agrees in
writing) institute or defend or take part in any dispute resolution, mediation,
arbitration or legal proceedings in connection with any matter relating to
the business of the Principal.
12.5 A copy of the entire Code Of Practice for Agents can be found at:
http://gia.org.sg/pdfs/GIARR/AMF_CodeOfPractice.pdf
13. PERSONAL DATA PROTECTION
A. What Is Personal Data?
13.1 Personal data refers to data, whether true or not, about an individual who can
be identified from that data; or from that data and other information to which
the organisation has or is likely to have access. Personal data in Singapore is
protected under the Personal Data Protection Act 2012 (PDPA), which has been
in force since 2 July 2014.
B. What Is The Personal Data Protection Act?
13.2 The PDPA establishes a data protection law that comprises various rules
governing the collection, use, disclosure and care of personal data. It recognises
both the rights of individuals to protect their personal data, including rights of
access and correction, and the needs of organisations to collect, use or disclose
personal data for legitimate and reasonable purposes.
13.3 The PDPA provides for the establishment of a national Do Not Call (DNC)
Registry. The DNC Registry allows individuals to register their Singapore
telephone numbers to opt out of receiving marketing phone calls, mobile text
messages, such as SMS or MMS, and faxes from organisations.
C. How Does The Personal Data Protection Act Work?
13.4 The PDPA will ensure a baseline standard of protection for personal data across
the economy by complementing sector-specific legislative and regulatory
frameworks. This means that organisations will have to comply with the PDPA,
as well as the common law and other relevant laws, that are applied to the
specific industry that they belong to, when handling personal data in their
possession.
13.5 The PDPA takes into account the following concepts:

 Consent – Organisations may collect, use or disclose personal data only with
the individual's knowledge and consent (with some exceptions);
 Purpose – Organisations may collect, use or disclose personal data in an
appropriate manner for the circumstances, and only if they have informed
the individual of purposes for the collection, use or disclosure; and
 Reasonableness – Organisations may collect, use or disclose personal data
only for purposes that will be considered appropriate to a reasonable person
in the given circumstances.
D. Enforcement Of The Data Protection Provisions
13.6 If the Personal Data Protection Commission Singapore (PDPC) finds that an
organisation is in breach of any of the data protection provisions in the PDPA,
it may give the organisation such directions that it thinks appropriate to ensure
compliance. These directions may include requiring the organisation to:
 stop collecting, using or disclosing the personal data in contravention of the
Act;
 destroy personal data collected in contravention of the Act;
 provide access to or correct the personal data; and/or
 pay a financial penalty of an amount not exceeding S$1 million.
13.7 Insurers and intermediaries (insurance agents and brokers) frequently collect a
number of personal facts of customers (prospective clients and existing
policyholders) arising from quotations, applications, supplementary
questionnaires and claims processes, including information on the medical
conditions, family history and lifestyle of the applicants or proposers. Insurers
and intermediaries have to be fully aware of the restrictions imposed on the use

of personal data under the PDPA. Customers expect insurers and intermediaries
to respect the confidentiality and privacy of their personal data.
13.8 Beyond the PDPA requirements, organisations will also have to ensure that
corporate data must also be protected from industrial espionage, malicious
alterations, as well as deliberate destructive acts, such as cyber-attacks.
Personal data need to be protected from being used for any blackmail and
unauthorised disclosure.
D1. MAS NOTICE 132 (NOTICE ON CYBER HYGIENE)
13.9 MAS Notice 132 (Notice On Cyber Hygiene) [“the Notice”] was issued on 6
August 2019. It was issued pursuant to section 64(2) of the Insurance Act (Cap.
142) (the “Act”) and applies to -
(a) all licensed insurers; and
(b) all insurance agents
13.10 This Notice takes effect on 1 Aug 2020.

The Notice does not apply to:
The following persons –
(a) an individual; and
(b) a person exempted from holding a financial adviser’s license under section
23(1)(f) of the Financial Advisers Act (Cap. 110); and
(c) such persons or class of persons as may be exempted from section 6(1) of
the Financial Advisers Act (Cap. 110), under section 100(1) or (2) of the
Financial Advisers Act (Capt. 110) (each a “relevant entity”)
13.11 Under the Notice, a relevant entity must ensure that every administrative
account in respect of any operating system, database, application, security
appliance or network device, is secured to prevent any unauthorised access to
or use of such account. The following requirements are extracted from MAS
Notice 132, Section 4.
4.2 Security Patches:

(a) A relevant entity must ensure that security patches are applied to
address vulnerabilities to every system, and apply such security
patches within a timeframe that is commensurate with the risks
posed by each vulnerability.
(b) Where no security patch is available to address a vulnerability, the
relevant entity must ensure that controls are instituted to reduce
any risk posed by such vulnerability to such a system.
4.3 Security Standards:

(a) A relevant entity must ensure that there is a written set of security
standards for every system.
(b) Subject to sub-paragraph (c), a relevant entity must ensure that
every system conforms to the set of security standards.
(c) Where the system is unable to conform to the set of security

standards, the relevant entity must ensure that controls are
instituted to reduce any risk posed by such non-conformity.
13.12 In addition, a relevant entity must implement controls at its network perimeter
to restrict all unauthorised network traffic. It must ensure that one or more
malware protection measures are implemented on every system, to mitigate
the risk of malware infection, where such malware protection measures are
available and can be implemented.
13.13 The following contents in regard to “Multi-factor Authentication” has been

entirely extracted from “Notice 132” from the MAS website:
4.6 Multi-factor Authentication: Subject to paragraph 4.7, a relevant entity

must ensure that multi-factor authentication is implemented for the following:
(a) all administrative accounts in respect of any operating system, database,
application, security appliance or network device that is a critical system;
and
(b) all accounts on any system used by the relevant entity to access customer
information through the internet.
4.7 (a) Paragraph 4.6 shall not apply to a relevant entity for the period
between 6 August 2020 and 5 February 2021 (both dates inclusive), if the
relevant entity meets all of the following conditions:
(i) the relevant entity identifies all the risks or potential risks posed by its
noncompliance with paragraph 4.6 during that period;
(ii) the relevant entity implements controls to reduce the risks identified in sub
paragraph (i);
(iii) a committee of the relevant entity, or a member of the senior management
of the relevant entity—
(A) agrees with the risk assessment in sub-paragraph (i); and
(B) is satisfied that the controls to be implemented in sub-paragraph (ii)
are adequate to reduce the risks identified in sub-paragraph (i).
D2. DATA LOSS PROTECTION GUIDELINES (DLP) FOR LIFE & GENERAL
INSURANCE AGENTS
13.14 As mentioned before, the MAS Notice 132 (Notice On Cyber Hygiene) shall take
effect on 6 August 2020. Both LIA & GIA have developed the Data Loss
Protection Guidelines (DLP) For Life & General Insurance Agents dated 1
September 2019 [“the Guidelines”] in order to comply with the Notice.
13.15 This is the work of the Joint LIA-GIA Insurance Standing Committee on Cyber
Security (ISCCS), which was formed in 2015, with the Monetary Authority of
Singapore (“MAS”) as an Observer.
13.16 The Guidelines were first introduced on 6 February 2017 as “industry best
practices”.

13.17 Insurance agents handle sensitive information such as customers’ personal

information, medical and insurers’ records. It is thus important for insurance
agents to understand the risks of managing and handling such sensitive
information and take steps to manage these risks.
13.18 The purpose of the Guidelines is to establish a minimum-security baseline for

all agents, to be implemented on their endpoint devices (e.g. mobile devices,
laptops, desktops) so as to provide a level of assurance that customers' and
prospects' data are protected.
13.19 Agents are required to adopt the Guidelines in order to comply with the Notice.
13.20 In consultation with MAS, GIA and LIA have decided to fully adopt these
Guidelines as the basic requirements expected of all agents. The requirements
took effect from 1 January 2020.
13.21 All insurers were to inform and educate their agents that it is the agent’s
responsibility to adopt these required DLP practices on their endpoint devices
by 1 January 2020.
13.22 Life insurers are required to obtain from their life agents a signed annual self-
declaration that he or she has complied with the Guidelines’ requirements.
13.23 Agents who are registered with GIA’s Agents Registration Board (ARB) are
required to make a similar declaration.
13.24 Applicability of the Guidelines

 The Guidelines establish standards of industry-required practices for
insurance agents. All agents are expected to abide by the Guidelines.
 The Guidelines apply to all devices (that is not issued by their respective
insurers) used by insurance agents in the sales and servicing of insurance
products or for the collection of customer information.
 If an insurance agent is governed by other DLP requirements, the insurance
agent is advised to comply with the stricter DLP requirements.
 The Guidelines do not recommend specific security solutions or vendors.
For such information, insurance agents are advised to approach their
respective insurers.
 The Guideline apply to all endpoint devices (e.g. laptops, desktops, tablets,
mobile phones) that the agents used to process and store clients’ data. For
network/infrastructure devices and/or servers, agents should seek
professional assistance (be it from their respective insurer or third- party
consultant) to ensure that they comply with the Notice.
D3. Guidelines on Good Cyber Hygiene Practices
13.25 The Notice requires the adoption of 6 basic cyber hygiene practices:
(a) Administrative Accounts
(b) Security Patches
(c) Security Standards

(d) Anti-Virus & Malware Protection
(e) Network Controls
(f) Multi-factor Authentication
E. Administrative Accounts
13.26 It is expected that agents are the administrator of their own personal devices.
13.27 Agents are recommended not to share devices that are used for their agents’
business and/or house clients.
13.28 If sharing of the devices cannot be avoided, e.g. the devices are family devices,
then the agents should set up separate accounts for each individual using the
device. Administrative accounts should not be given to another person.
13.29 Agents are also expected to adopt password best practices including:
 Passwords should not be shared.
 Passwords should be made up of alphanumeric characters. (e.g. S0tj!690a)
 Passwords should be at least eight characters long.
 Passwords should be changed periodically (e.g. every 3 months).
 Previously used passwords should not be reused for a period of time. (e.g. it
is recommended that password should not be reused for at least 10
password change cycle)
F. Security Patches
13.30 Agents are expected to regularly check for security patches that are available
for the Operating System “OS” of their devices as well as any software that are
installed on the devices. (e.g. For laptops and desktops running Windows,
insurance agents can turn on “Automatic update” in the control panel. For
MacBook or iOS, agents can download updates from the AppStore
periodically.)
13.31 Any security patches should be implemented at the earliest possible time.
13.32 Agents should not use OS and software that have reached end of life (i.e. no
longer supported by their manufacturer).
G. Security Standards
13.33 Laptop or desktop hard disk containing customer data should be encrypted (e.g.
Agents can use Windows Bitlocker to encrypt laptop or desktop hard disk.
Alternatively, agents can use third party encryption software recommended by
insurers to encrypt the hard disk.)
13.34 Customer data or payment information should be encrypted before being

transferred to any storage media including portable storage devices and cloud-

based storage. (e.g. Agents can either encrypt the storage media or encrypt
each record or file.)
13.35 Customer data or payment information should be securely erased using data
destruction software before disposal of the devices. (E.g. Agents can use data
destruction software recommended by insurers to erase the data stored on the
hard disk or storage media.)
H. Anti-Virus and Malware Protection
13.36 Anti-virus software should be installed.
13.37 Anti-virus software and virus definition files should be kept up to-date with the
latest signature update. This allows the anti-virus software to detect the latest
known viruses. It is recommended that the agents turn on automatic updates
on their anti-virus software.
13.38 Periodic full scan on system files and folders should be performed. This can be
configured within the anti-virus software to run automatically.
13.39 Agents should exercise caution before opening any email attachments and
clicking on links received in emails, instant messenger or social media websites
as they may be used to compromise the device.
I. Network Controls
13.40 Agents should enable the Firewall features that are normally bundled with their
anti-virus software.
13.41 The default Firewall feature within the OS should also be enabled.
13.42 Agents should not use untrusted public wireless network to send customer data
or payment information as they may not be secured.
J. Multi-factor Authentication
13.43 Although it is not always possible to enable multi-factor authentication on

laptop or desktop, agents should do so where possible to secure the device that
they are using.
13.44 A copy of the entire Data Loss Protection Guidelines (DLP) For Life & General
Insurance Agents can be found at Appendix 8B of this chapter.
13.45 Both LIA & GIA also developed an FAQ on Data Loss Protection Guidelines
dated 4 September 2019 in order to deal with common questions asked by
agents in relation to the Guidelines. A copy of this FAQ can be found at
Appendix 8C of this chapter.
Appendix 8A
THE SINGAPORE GENERAL INSURANCE CODE OF PRACTICE

(“THE CODE”)
[AS AT 1 July 2016]
1. Introduction
The aim of the Code of Practice is to provide clear and consistent standards for the general insurance
industry so that a better and more informed relationship between general insurers and their
policyholders can be established, thereby improving policyholders’ confidence and trust in the
general insurance industry.
It also seeks to establish transparency in the insurance products as well as insurance practices so
that policyholders are able to make informed choices when making purchasing decisions. Insurance
products and services covered under the Code encompass all general insurance policies issued to
an individual.
Mechanisms and procedures for the resolution of complaints and disputes between insurers and
their policyholders will also be made clear.
All members of the General Insurance Association of Singapore (GIA) will adopt this Code. This Code
operates alongside the various rules and regulations governing the conduct of the general insurance
industry.
If insurers fail to meet with any standards under the Code, policyholders may lodge complaints
against them in accordance with established procedures (as laid out under item 7). The Code does
not provide anyone with the right to take legal action against any insurer.
Within the Code, ‘you’ refers to the individual policyholder and ‘we’ and ‘us’ refer to the general
insurer.
2. Our commitments
2.1 Business Practice

All insurers will ensure compliance with existing rules and regulations governing the general
insurance industry. We will also commit to keep ourselves updated with the latest business practices,
corporate governance standards and to have in place internal procedures to ensure compliance to
any changes in legislation, including Monetary Authority of Singapore (MAS) regulations.
We promise that we will:

 Act fairly and reasonably when we deal with you.
 Make sure all the information we give you is clear and not misleading.
 Give you enough information and help so that you can make an informed decision before
committing to buying an insurance policy.
 Handle your claims fairly and promptly.
 Handle your complaints fairly and promptly.
2.2 Advertising
We will make sure that all advertising and promotional materials are clear, fair and not misleading.
Insurers will withdraw any advertising and promotional materials if they become aware that the
information provided is not accurate, not clear, or misleading. [International Association of Insurance
Supervisors (IAIS)
Insurance Core Principle 19.4.2].

2.3 Protecting your interest

To ensure that you obtain suitable general insurance products and services, we advise you to deal
only with:
 Insurers who are members of the General Insurance Association of Singapore (GIA). Refer to
website: www.gia.org.sg for details.
 Insurance agents who are registered with the Agents' Registration Board (ARB).
 Financial Advisers (FAs) who are registered with the Agents' Registration Board (ARB).
 Registered insurance brokers or exempt insurance brokers under the Insurance Act listed in the
Directory of Financial Institutions on the Monetary Authority of Singapore’s website at
www.mas.gov.sg
2.4 Confidentiality
 We will implement and maintain proper procedures to preserve confidentiality of information we
receive from a policyholder or which relates to a policyholder.
 A policyholder’s personal data will not be collected, used or disclosed unless:
(a) the policyholder has given his consent to the collection, use or disclosure; or
(b) the collection, use or disclosure, is required or authorised under any written law.
 We will undertake to safeguard policyholders’ data and comply with the Personal Data Protection
Act (2012) details of which are available at http://www.pdpc.gov.sg/personal-data-
protectionact/overview.
 We will not use concealed numbers when making outbound calls such as for marketing, servicing,
claims or renewals.
 The Personal Data Protection Act (2012) provides for establishment of a national Do-Not-Call
(DNC) Registry. We will take the necessary steps to comply with the DNC provisions.
2.5 Conflicts of Interest

A conflict of interest occurs when an insurer’s employee or the insurance intermediary has a personal
interest that conflicts or might possibly conflict with his role to provide the best possible advice or
service to a policyholder. This may occur as a result of employment / intermediary relationship,
employee’s or intermediary’s family or personal relationships with insurer. In circumstances where
avoidance of such conflicts of interest may not be practicable, the insurer’s employee and/or
intermediary will disclose to the policyholder the conflict of interest arising from the relationship
with the insurer, including any material information or facts that may compromise his objectivity,
before the insurance is arranged.
3 Buying Insurance
3.1 Information about products and services

If you are dealing directly with us, we will provide you with enough advice and information, including
information on our website, printed materials, portals, electronic documents or via our call centres
to help you make an informed decision before committing to buying an insurance policy.
We will explain all the main features of the products and services that we offer, including: -
 Providing a product summary highlighting important details of cover and benefits.
 Any significant or unusual restrictions, warranties or exclusions.
 Any significant conditions or obligations which you must meet.
If we do participate in any independent insurance portal, we will ensure that the above are adhered
to by the independent insurance portal.
3.2 Matching your requirements

We will use the information that we obtained from you:
 to assist you in the identification of your insurance needs.
 to offer products that meet those needs.
3.3 Information on costs

We will provide you with the details of the costs of your insurance, including: -
 Separate insurance premiums for each of the individual products or services we are offering.
 Any fees and charges other than the insurance premium.
 Payment Before Cover Warranty and how it applies to your policy. (Please click on the
Premium Payment Framework:
http://www.gia.org.sg/pdfs/PremiumPaymentFramework.pdf)
 When you need to pay the premium, fees and charges, and an explanation of how you
can pay.
 If requested by you, we will disclose any remunerations such as commissions, fees,
incentives and/or other benefits that the insurance intermediary has received or will
receive that are directly related to the sale of the insurance product.
3.4 “Free Look”

For policies which offer a `Free Look’ feature, we will give you a `Free Look’ period of at least 14
business days from the date you receive the policy document.
Should you decide not to continue with the insurance purchased, you can cancel your cover within
this period, and we will refund you the premium that has been paid, if you have not made a claim.
Insurance coverage would deem not to have attached, and no benefits shall be payable under the
policy. An administration charge may be imposed by us.
However, this benefit does not apply to: -

 Motor insurance
 Travel insurance
 Domestic maid insurance
 Short term insurance with a term less than 1 year
 Policy renewals
 Any other compulsory insurance stipulated by law
4 Documentation
4.1 Confirming your cover

 We will provide an insurance quotation within 7 business days after receipt of the required
information.
 The quotation will provide enough information on the coverage as well as important exclusions.
 We will confirm coverage in writing by the next working day upon receiving instructions from
you to proceed.
4.2 Standards of written information

We will ensure that all the written information and documents we send you are plain and clear.
4.3 Despatch of policy

 We will despatch the policy documents to you within 15 business days from the date of
confirmation of cover.
 The policy can be sent electronically or via hard copy documents.
 Policy document received by your broker is deemed to be received by you.
5. Policy Servicing
We will answer any questions promptly and give help and advice to you whenever needed.
5.1 Changes to your policy

We will deal with any changes to your insurance policy promptly by providing you:-
 Written confirmation of any changes to your policy within 7 business days upon receipt of all
supporting documents.
 Full details of any premiums or charges that you are expected to pay or that will be returned to
you.
 Any certificates or documents that you need to have by law.
 A receipt as proof of payment, if you pay by cash. We may not issue receipt if payment is made
by cheque.

 Refunds of the premiums, fees or charges due to you within 30 business days from the date of
endorsement/cancellation.
 The endorsement / documents can be sent to you electronically or via hard copy documents.
5.2 Notice of renewal

Annually Renewable Policies
We will inform you when you need to renew your policy or when the policy will expire, at least 30
business days before expiry, to allow you to consider and arrange continuing cover. We will also: -
 advise you of any changes to the cover or service being offered.
 bring to your attention the need to disclose material information to insurers.
 inform you and provide you with an explanation if we decide not to renew your policy.
 send you the policy document within 7 business days when your policy is renewed. Please note
that policy document received by your broker is deemed to be received by you.
 The policy / documents can be sent to you electronically or via hard copy documents.
Auto-Renewable Policies
We will inform you at least 30 business days before the end of the period of insurance that your
annual policy will automatically be renewed upon payment of premiums, be it via GIRO or credit
card payments on an annual or monthly basis.
This will not be applicable to monthly auto-renewable policies.
6. Claims
We are committed to handle all claims fairly, reasonably and promptly.
6.1 Making a claim

We will ensure that there are clear instructions on how policyholders can make a claim under their
insurance policy and will explain the claim procedures to you when you first become a customer.
Such instructions can appear in policy documents as well as our website or via our call centre. There
will also be references made to claims management procedures appearing on the GIA website at
www.gia.org.sg.
6.2 Our commitment

Acknowledgement:
 Within 3 business days of receiving your claim, we will send you an acknowledgement.
 We will request for additional documents within 7 business days if claim documents are
incomplete.
 If we appoint a service provider to adjust your claim, we will inform you of the appointment. If a
firm is appointed, we will provide you with details on the name of the firm appointed and where
possible, the name of the individual involved.
 Once we receive all necessary information and have completed a full investigation required to
assess your claim, we will decide to accept or decline your claim and inform you of our decision
within 7 business days.
 We will tell you how the claim is progressing by providing you with updates. The intervals for
such updates may vary from insurer to insurer.
 A reminder will be sent after 30 business days if there is no response from you.
Settlement:
 Once we have agreed to settle your claim and on receipt of all relevant documents, we will
issue the payment within 10 business days.
7. Complaint Management
7.1 If you make a complaint to us

When you first become a customer, we will explain and give you details of our complaints
procedures appearing in our policy or service documentation.
We will handle your complaints in a fair and reasonable manner in accordance with the following
complaint management guidelines:-

 Acknowledge your complaint within 7 business days.
 If we need additional information, we will contact you within 7 business days from the date of
your complaint.
 We will endeavour to resolve all complaints as soon as possible. If your complaint takes longer
to resolve, we will update you within 15 business days of our last communication to you.
 We will assign a complaint officer to handle your complaints.
7.2 Recourse
If the outcome of your complaint is not handled to your satisfaction, you can write to the Chief
Executive of the insurance company to appeal. We will respond to your appeal within 15 business
days.
7.3 Tracking Process

We will maintain a Complaint Register in which complaints will be managed or tracked.
8. Disputes Resolution
8.1 Insurance Disputes Resolution Scheme

If you are still dissatisfied with the Chief Executive’s response, we will refer you to the following
independent dispute resolution organisation
Contact Details:
Financial Industry Disputes Resolution Centre Ltd (FIDReC)
36 Robinson Road #15-01, City House, Singapore 068877
Telephone: +65 6327 8878 Fax : +65 6327 8488 / +65 6327 1089
Email: [email protected] Website: http://www.fidrec.com.sg
8.2 Mediation (Singapore Mediation Centre)

Where claims are small, expensive and prolonged litigation can exhaust time and resources,
mediation may be the solution to take control of the outcome of these disputes in a timely and cost-
efficient manner.
Contact Details:
Singapore Mediation Centre
1 Supreme Court Lane, Level 4, Singapore 178879
Tel: +65 6332 4366 Fax: +65 6333 5085
8.3 Arbitration (Singapore International Arbitration Centre)

Any dispute, difference or question which may arise at any time hereafter in relation to true
construction of the policy or our respective rights or liabilities under this policy, will be referred to
arbitration in Singapore and Singapore laws will apply. The arbitration will be heard by a single
arbitrator to be agreed by your respective insurer and you within 14 business days of the
commencement of the arbitration.
Contact Details:
Singapore International Arbitration Centre
32 Maxwell Road, #02-01, Maxwell Chambers, Singapore 069115
Tel: +65 6221 8833 Fax: +65 6224 1882
9. Other information
9.1 Service Standards of Insurers

We have appended in Annex 1 a summary of the Service Standards of Insurers for ease of
reference.

9.2 Copies of the Code

Copies of the General Insurance Code of Practice are available free from the GIA website at
http://www.gia.org.sg or from the General Insurance Association of Singapore.
9.3 More information

If you have any questions about the Code, please contact the General Insurance Association of
Singapore (GIA) at the address below.
General Insurance Association of Singapore

180 Cecil Street #15-01
Bangkok Bank Building
Singapore 069546
Tel: +65 6221 8788
Fax: +65 6227 2051
Email: [email protected]
10. Disclaimer
Nothing in this code shall give any general insurance customer any right or cause of action
whatsoever against GIA or its Members.
Annex 1 Service Standards of Insurers
Item Transactions Response Remarks

Time
(Business
Days)
4 Documentation
4.1 Provide Quotation 7 After receipt of required information
4.1 Confirm Coverage 1 Upon receiving instructions to proceed
4.3 Despatch of Insurance 15 From date of confirmation of cover
5 Policy Servicing
5.1 Changes to policy details 7 Notify you of the changes
5.1 Refunds of premiums, fees or 30 From the date of endorsement or
charges due cancellation or according to your
payment mode
5.2 Renewals
 Annual renewable policy 30 Before Expiry
 Policy document 7 Upon renewal of policy
 Auto-renewable policy 30 Before end of period of insurance of an
annual policy
6 Claims
6.2 Acknowledgement of notice of 3 Upon receipt of your claim
claim
6.2 Request for additional documents 7 If claim documents are incomplete
6.2 Accept or decline claim 7 Upon receipt of all necessary information
6.2 Reminder 30 If there is no response from you
6.2 Agreed to pay 10 Make payment once we agree to settle
your claim
7 Complaint Management
7.1 Acknowledgement of complaint 7 Upon receipt of your complaint
7.1 Request for additional information 7 From the date of your complaint
7.1 Update you on progress 15 From the date of our last communication
7.2 Respond to your appeal 15 Upon receipt of your appeal
Source: General Insurance Association of Singapore
Appendix 8B
The following contents in regard to “Data Loss Protection Guidelines For Insurance
Agents” has been extracted from the LIA and GIA website:
Data Loss Protection

Guidelines
For Insurance Agents
By Insurance Standing Committee for Cyber Security (ISCCS)
1 September 2019

Change History
Version Change Description by Date

1.0 Initial Official release ISCCS 6 Feb
2017
1.1 Amendments of Guidelines from best practice to ISCCS 20 Jun
basic requirements 2018
2.0 Alignment of Guidelines to MAS Notice on Cyber ISCCS 1 Sep
Hygiene 2019
______________________________________________________________________________
1 Sep 2019 1
CONTENTS
Change History .............................................................................................1
1. Introduction ................................................................................................3
2. Applicability of the Guidelines .......................................................................3
3. Guidelines on Good Cyber Hygiene Practices ...................................................4

3.1 Administrative Accounts .........................................................................4
3.2 Security Patches ....................................................................................4
3.3 Security Standards .................................................................................5
3.4 Anti-Virus and Malware Protection ...........................................................5
3.5 Network Controls ...................................................................................5
3.6 Multi-factor Authentication ......................................................................5
4. Appendix ....................................................................................................6
4.1Definition …................................................................................................6
______________________________________________________________________________

1 Sep 2019 2
1. Introduction
Insurance agents1 handle sensitive information such as customer2 personal

information, medical and insurer records. It is thus important for insurance agents to
understand the risks of managing and handling such sensitive information and take
steps to manage these risks.
The Life Insurance Association (“LIA”) and General Insurance Association (“GIA”)
have established the Data Loss Protection Guidelines for Insurance Agents (“the
Guidelines”). The objective of the Guidelines is to provide insurance agents with the
basic requirements for managing and handling sensitive information and promote
the adoption of these requirements.
Agents are required to adopt the Guidelines in order to comply with MAS Notice on
Cyber Hygiene. This guideline will take effect 1 Jan 2020.
2. Applicability of the Guidelines

 The Guidelines are standards of industry best practices for insurance agents.
All agents are expected to abide by the guidelines.
 The Guidelines apply to all devices (that is not issued by their respective
insurers1) used by insurance agents in the sales and servicing of insurance
products or for the collection of customer information.
 If an insurance agent is governed by other Data Loss Protection (“DLP”)
requirements, the insurance agent is advised to comply with the stricter DLP
requirements.
 The Guidelines do not recommend specific security solutions or vendors. For
such information, insurance agents are advised to approach their respective
insurers.
 This guideline applies to all endpoint devices (e.g. laptops, desktops, tablets,
mobile phones) that the agents used to process and store clients’ data. For
network/ infrastructure devices and/ or servers, agents should seek
professional assistance (be it from their respective insurer or third party
consultant) to ensure that they comply with the MAS Notice on Cyber
Hygiene.
___________________
1
For devices issued by the insurers, the insurers will be responsible to ensure security on those devices
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1 Sep 2019 3
3. Guidelines on Good Cyber Hygiene Practices
The MAS Notice on Cyber Hygiene requires the adoption of 6 basic cyber hygiene
practices.
3.1 Administrative Accounts
 It is expected that agents are the administrator of their own personal devices.
 Agents are recommended not to share devices that are used for their agents
business and/or house clients.
 If sharing of the devices cannot be avoided, e.g. the devices are family
devices, then the agents should set up separate accounts for each individual
using the device. Administrative accounts should not be given to another
person.
 Agents are also expected to adopt password best practices including:
• Passwords should not be shared.
• Passwords should be made up of alphanumeric characters. (e.g.
S0tj!690a)
• Passwords should be at least eight characters long.
• Passwords should be changed periodically (e.g. every 3 months).
• Previously used passwords should not be reused for a period of time.
(e.g. it is recommended that password should not be reused for at
least 10 password change cycle)
Additional Notes for Mobile Devices

 Mobile devices should not be shared.
 Device password or biometric authentication (e.g. facial recognition) should
always be enabled on mobile devices.
3.2 Security Patches
 Agents are expected to regularly check for security patches that are available
for the Operating System “OS” of their devices as well as any software that
are installed on the devices. (e.g. For laptops and desktops running Windows,
insurance agents can turn on “Automatic update” in the control panel. For
MacBook or iOS, agents can download updates from the AppStore
periodically.)
 Any security patches should be implemented at the earliest possible time.
 Agents should not use OS and software that have reached end of life (i.e. no
longer supported by their manufacturer2).
____________________

2
Agents should check the manufacturer website on the version of the OS and software that is still
supported.
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1 Sep 2019 4
3.3 Security Standards

 Laptop or desktop hard disk containing customer data should be encrypted4
(e.g. Agents can use Windows Bitlocker9 to encrypt laptop or desktop hard
disk. Alternatively, agents can use third party encryption software
recommended by insurers to encrypt the hard disk.)
 Customer data or payment information should be encrypted before being
transferred to any storage media including portable storage devices and
cloud-based storage5. (e.g. Agents can either encrypt the storage media, or
encrypt each record/file.)
 Customer data or payment information should be securely erased using data
destruction software6 before disposal of the devices. (E.g. Agents can use
data destruction software recommended by insurers to erase the data stored
on the hard disk or storage media.)
Additional Notes for Mobile Devices
 Software with remote wipe capability should be installed and enabled on the
mobile devices (e.g. iPhone users can enable the “find my phone” feature on
iOS; Android users can turn on “Android Device Manager” under device
setting).
 The encryption features should be enabled in the security settings of the
mobile devices if available.
 Mobile devices should not be jail-broken7 or rooted8.
3.4 Anti-Virus and Malware Protection
 Anti-virus software should be installed.

 Anti-virus software and virus definition files3 should be kept up to-date with
the latest signature update. This allows the anti-virus software to detect the
latest known viruses. It is recommended that the agents turn on automatic
updates on their anti-virus software.
 Periodic full scan on system files and folders should be performed. This can
be configured within the anti-virus software to run automatically.
 Agents should exercise caution before opening any email attachments and
clicking on links received in emails, instant messenger or social media
websites as they may be used to compromise the device.
3.5 Network Controls
 Agents should enable the Firewall features that are normally bundled with
their anti-virus software.
 The default Firewall feature within the OS should also be enabled.
 Agents should not use untrusted public wireless network to send customer
data or payment information as they may not be secured.
3.6 Multi-factor Authentication
 Although it is not always possible to enable multi-factor authentication on

laptop or desktop, Agents should do so where possible to secure the device
that they are using.
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1 Sep 2019 5
4. Appendix
4.1 Definition
This section defines some terms used in the Guidelines.
No Term Definition and Comments

1 Insurance As defined in the Insurance Act (Chapter 142) section 1A:
agent
(a) a person who, as an agent for one or more insurers (which
may include a foreign insurer carrying on insurance
business in Singapore under a foreign insurer scheme),
is or has been carrying on the business of —
(i) receiving proposals for, or issuing, policies in
Singapore;
(ii) collecting or receiving premiums on policies in
Singapore; or
(iii) arranging contracts of insurance in Singapore; or
(b) a person who acts for, or by arrangement with, a person

referred to in paragraph (a) in the performance of all or
any of the activities carried out by the person referred to
in paragraph (a),
but does not include such persons or class of persons as the
Authority may prescribe
2 Customer A customer or prospective customer of an insurer or
insurance agent, or an insured or prospective insured of an
insurance policy
3 Virus A file created by the anti-virus vendor to inform the anti-virus
definition file software of new viruses and the detection mechanism
4 Encryption To protect the data by converting the data, using a
mathematically formula, into another form that is not easily
understood to prevent unauthorised access
5 Cloud-based Internet-based storage where the physical location of the
storage storage is not known
6 Data A software or application that is designed and developed for
destruction the objective of securely erasing electronic data
software
7 Jail-broken Typically associated with an iOS device where the software
device and security restrictions imposed by iOS are removed
8 Rooted device Typically associated with an Android device modified to
enable the user to run/operate the device with privileged
rights

9 Bitlocker BitLocker is a full disk encryption feature included with

Windows Vista and later. It is designed to protect data by
encrypting entire disc volumes.
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1 Sep 2019 6
Appendix 8C
The following contents in regard to “FAQ on Data Loss Protection Guidelines” has
been extracted from the LIA and GIA website:
FAQ on Data Loss Protection Guidelines
1. Can the guidelines provide step-by-step guide to

a. encrypt the devices
b. locate remote wipe features on iPhones and Android phones
ISCCS: This guideline is meant to provide the agents with a minimum security
controls for which the agents can implement to secure their devices and data in it.
Member companies are free to implement stringent or tighter security requirements
to their agents.
The “how to” implementation of the security controls was never a part of the
objective of this guideline. Member companies are expected to support their agents
in implementing this guideline.
2. Can provide the list of encryption software or solutions that meet the requirements?
ISCCS: As there are many different methods or means to achieve the objectives. The
team will not dictate the course of action but leave it to the agents and insurers to
explore best suitable solution and software basing on their requirements and cost.
3. Can the guideline recommend not using or prohibiting the use of cloud based
storage?
ISCCS: No. However, member companies can implement stringent or tighter security
requirement to their agents.
4. With reference to the security patching for OS and software, can the guideline be
specific on when patches must be installed?
ISCCS: The timeline to install security patches was not defined so to allow the insurers
and agents time to verify that the patches have no adverse impact to their applications
or software.
Each insurer should define the timeline basing on its patching cycle/period.
5. What about avenue for agents to seek dispensation for not complying with
Guideline?
ISCCS: In the event that a device is compromised, data belonging to the insurer will
be lost and the reputation of the insurer will be affected. As such, the insurer, not
ISCCS, would be the appropriate party to determine if a dispensation should be
granted.
6. Should the FA/FC require clarification on the guidelines or guidance on complying

with the guidelines is there a centre or party that can help the FA/FC?
ISCCS: As member companies are expected to support their agents, it is

recommended that the insurer to setup a communication channel or the existing
communication channel with agents be utilized to address queries on the guidelines.

Basic Insurance Concepts and Principles (6th Edition)
Version Control Record
Version Date of Issue Effective Date* Chapter Section Changes Made
1.0 1 Jul 2020 1 Oct 2020 N.A N.A First release.

Chapter 1 12.4 Work Injury
Compensation Act
Chapter 2 Table 2.1 (Cap. 354)
Chapter 3 2.19 replaced with
1.1 5 Nov 2020 5 Nov 2020 Work Injury
4.9, Compensation Act
Chapter 5 Appendix (No. 27 of 2019) in
5D view of WICA 2019.
*
The relevant amendments will be applicable to examinations conducted after the stated effective date.

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Basic Insurance

Website references (if any) are correct at the time of publication.

WARNING To All Examination Candidates

▪ For Singapore Citizens or Singapore Permanent Residents: NRIC

NO other types of Registration IDs are allowed. Strictly NO soft copy or

Candidates, who are Regulars or Full-time National Servicemen (NSFs) belonging

© 2020 by Singapore College of Insurance Limited. All rights reserved.

No part of this publication may be reproduced, adapted, included as part of a compilation

First Edition published in 2002.

Likewise, the Commercial General Insurance Certification, which comprises

In particular, this BCP module provides a fundamental understanding of the

Copyright reserved by the Singapore College of Insurance Limited [Version 1.1] i

ii Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

iv Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

Chapter 1 Structure Of The Insurance Market 1

Chapter 2 Risks & Insurance 31

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Chapter 3 Principles Of Insurance 55

Chapter 4 Law Of Contract And Agency 83

Chapter 5 Insurance Documents 99

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Appendix 5D – Sample Certificate Of Insurance (Work Injury

Chapter 6 Claims 151

Chapter 7 Reinsurance And Co-Insurance 173

4. General Ethical Principles

VERSION CONTROL RECORD

Copyright reserved by the Singapore College of Insurance Limited [Version 1.1] ix

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1.1 Like any other market, the insurance market comprises:

1.3 Sellers comprise the insurance companies and reinsurance companies.

1.4 Intermediaries refer to insurance agents and brokers, including reinsurance

2. STRUCTURE OF THE SINGAPORE INSURANCE MARKET

Table 1.1: Structure Of General Insurance Market In Singapore

Table 1.2: Structure Of Reinsurance Market In Singapore

3.1 The role of an intermediary is to bring buyers and sellers together. An

2 Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

person, called a “third party”.

 Insurance Brokers; and

3.3 Generally, an insurance agent is a person who is or has been carrying on

A1. Classification of Agent Types

Effective January 2020, the General Insurance Agents’ Registration

As mentioned above, it is no longer required for credit agents to maintain

(b) Corporate agents (generally known as agencies), namely sole

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insurance product (e.g. travel agents selling Travel Insurance) in the

A2. Nominee Agents

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B1. Classification Of Insurance Brokers

3.16 Reinsurance brokers are intermediaries and consultants to insurance companies

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reinsurers on the risk transfer aspects of their insurance or reinsurance

4.1 The sellers of insurance are:

6 Copyright reserved by the Singapore College of Insurance Limited [Version 1.1]

reinsurance intermediaries (reinsurance brokers).

4.7 Lloyd’s is not a single insurance company. Instead, it is a specialist insurance

C1. How Does Lloyd’s Operate?

4.8 The insurance business at Lloyd’s is transacted by thousands of underwriting

Copyright reserved by the Singapore College of Insurance Limited [Version 1.1] 7

4.14 It is common for shipowners or other maritime operators to come together to