LPPL Insurance Situations

Recently, our Health Minister launched four short social media clips to educate the public about health insurance, in particular riders for IP policies. The take-home message is that riders are expensive and get more expensive as the policyholder gets older. It may be better, especially for an older policyholder, not to buy riders or to buy cheaper riders. Of course, cheaper riders mean less coverage and more deductibles and co-payment. All very sensible. I urge you to watch the clips.

At about the same time, Singapore’s “Blogfather”, aka “MrBrown” aka “Kim Huat” also posted two clips to explain what some colloquial short forms mean. In the second of 2 posts so far, he explained what “LPPL” stands for¹.

According to him, LPPL stands for “Laugh Please, Please Laugh”. It can also stand for Log-Periodic Power Law in the field of economics and finance.

To this hobbit, it can also mean a certain location in the human body, namely “Longitudinal Perineum Permanent Location”.

For example, the government introduced the Cancer Drug List (CDL) in 2022. This was introduced ostensibly to empower the government to negotiate for better prices from drug companies and to discourage the use of certain cancer drugs for non-mainstream indications so as to curb rising costs of cancer treatment.

However, many IP insurers then quickly introduced riders to cover for the use of non-CDL drugs. Of course, such riders², while generating more work and income for some medical oncologists in the private sector, has the downstream effect of encouraging what the introduction of the CDL was meant precisely to discourage – more use of such drugs which will lead to an unnecessary and avoidable rise in prices and overall healthcare consumption and expenditure

The quick introduction of non-CDL riders by IP insurers effectively negates the policy intent of CDL. And we are back to square one and the government is caught in an LPPL situation. The only consolation is that such riders must be paid with cash.

Why does this happen and why do we allow it? This hobbit doesn’t have the answer. Or even if he thought he knew, he won’t say it here, that’s for sure.

The first thing to know is that we often (if not always) buy insurance because we want peace of mind. Peace of mind is a wonderful thing. But really, if you think about it, the flip side of peace of mind is fear. Fear and peace of mind are but two sides of the same coin. We buy riders for peace of mind, and we buy riders out of fear. The fear that in case we need these non-CDL drugs, we have no access to them and even if we had access, we can’t pay for them. So we buy these riders.

The IP insurers are making lots of money selling these LPPL non-CDL riders in return for giving us peace of mind, or feeding on our fear (depending on one’s perspective).

And as any psychologist will tell you, fear is a great driving force for animals with some intelligence (and that includes humans). The response to fear is a primal one, hard-wired into the human condition through hundreds of thousands of years of evolution, or adaptation, call it what you may.

While this hobbit really likes the Health Minister’s video clips on riders and that he is a great communicator, this hobbit is not sure the clips can countervail the power of fear and the natural response to fear. Especially when this fear and the response to it is also being actively cultivated and reinforced by many insurance companies and insurance agents who get to make a buck or two out of selling such LPPL riders.

Let us move on to another insurance-related matter that has garnered many eyeballs recently. While this matter is about a motor insurance claim, it is nonetheless medically-related.

It was reported that the Courts awarded $417,000 in damages in a traffic accident case. Unfortunately, this decision was arrived at some 5 years after the accident occurred, and only after the traffic accident victim had passed away. The son of the victim, who is his main caregiver for the many years the victim was incapacitated until his death, was the plaintiff.

The sheer callous temerity of the insurance company was most telling. In the opening paragraph of the Judgment³ given by the District Judge, it was stated, “This is a judgment that documents NTUC Income’s wholly unreasonably behaviour”. This hobbit has read quite a few Judgments before, but none has come close to such a resolutely damning statement right at the start of a Judgment document.

In summary, the case involved a person who was seriously injured by a traffic accident. This victim then made a claim against the driver that caused the accident.

It was noted by the Judge that NTUC Income effectively took over the defence of the case because it would have to foot the bill should the courts decide in the plaintiff’s favour.

NTUC Income efforts to deny the claim was akin to “the sort of casually impersonal stonewalling that some would associate with the worst administrative processes” (Judgment, para 3).

Some particularly galling examples of this impersonal stonewalling –

Claims for pain and suffering and amenities was denied because the victim was comatose and could not have appreciated any pain and suffering at all, even though the victim was intermittently conscious until his death (Paras 14 and 17, Judgment)
Claims for loss of income was denied, even though the victim was working at the time of the accident (Para. 34)
Claims for ambulance-related expenses was denied (Para. 36 of Judgment)
Claims for milk powder for the patient was denied because it was too expensive as the patient could have used a cheaper brand such as “Ensure”. (Para. 61 of Judgment). This hobbit is not so sure if “Ensure” appreciates such publicity from NTUC Income.

And if you think this unreasonable behaviour was arrived at because NTUC Income received poor legal advice, the judge made it clear that the lawyers were merely conveying their clients’ instructions. The judge added that the lawyers’ “advocacy was candid, well-organised and fully in line with their duties to the court”.

Against the backdrop of the furore that ensued, the CEO of NTUC Insurance (NTUC Income was rebranded as NTUC Insurance recently) issued an internal memo addressed to “colleagues”. This hobbit obtained a screenshot of this memo, in which he explained the company’s position and then signed off with “Cheers”.

This hobbit must say he has no clue what is there to be cheerful about.

I think the incident shows publicly that the local insurance sector is truly now in a new era of American-style climate of “delay, deny, defend”, which many doctors are already familiar with while caring for IP policyholders in the private sector. So far, the private patients in A1 and B1 class have largely been spared of such agony because IP insurers generally do not question or apply friction to claims for care delivered in restructured hospitals. But who knows what will happen in the future? This may occur sooner than we think.

This case also illustrates the inadequacy of scope in what is offered by the financial and insurance industry to adjudicate claims before it reaches the courts in the form of civil suits. Today, if someone is aggrieved by an insurer, he can take up his case with the Financial Industry Disputes Resolution Centre (FIDReC) which is a platform to adjudicate disputes involving financial institutions (which includes insurers).

However, this is a platform that is only open to the insured (i.e. policyholders who make claims) and their beneficiaries as well as to those parties who have a “customer relationship” with the insurers

It also only covers disputes of up to $150,000.

In this case, neither the victim nor the plaintiff (the victim’s son) is the insured. They don’t have a customer relationship with NTUC Income either. Strictly speaking the plaintiff is not even a beneficiary of the policy as well. What is more, the amounts accumulated over a four-year period far exceed $150,000. So he can’t use FIDReC and so, he has no choice but to sue. But not many people have the financial resources to mount a civil suit. And of course, there is a lot to lose if he does not win the suit. The plaintiff’s legal costs may be easily six-figures if the suit is protracted, and in a worst-case scenario, costs may be awarded against him, i.e. he has to pay for the other party’s costs too.

The plaintiff in this case has obviously weighed his chances, examined his financial resources and then decided to pursue the civil suit route.

As for healthcare-related or IP-related matters, the situation is even worse off in at least three ways.

FIDReC is not open to service providers that provide a service or goods to the insured. So, hospitals and doctors who experience unreasonable delays and denials of claims cannot use FIDReC.
FIDReC also only handles complaints when a claim has been made, and not before. So FIDReC does not handle issues such as pre-authorisation or how doctor panels are constructed, because no claim has been made.
FIRDeC also only handles disputes that are clinical in nature on a voluntary basis. When such a dispute occurs, IP insurers can choose NOT to participate, even if the policyholder has lodged a complaint with FIDReC.

To use a partially real-life example. A patient has an anal fistula abscess. The panel doctor seeks pre-authorisation but is denied. Inexplicably, the case manager suggests that he tries to manage the anal fistula abscess “conservatively” (doctors and nurses reading this, please don’t laugh). This advice to treat an abscess conservatively is not made-up. It actually happened.

If you think the insurer’s case manager should and could be held accountable for making medically unsound and unsafe suggestions and recommendations, you are wrong. Insurers and their employees are not regulated at all for making recommendations and decisions that impact on the clinical aspects of healthcare delivery to their policyholders. For all you know, the case manager has a degree in art history and has recommended the use of Chlorox bleach to treat strangulated piles, and he can get away with such an unsafe recommendation with no consequences to himself or the insurer that he works for. Actually, I exaggerate. I know a few art history graduates who know more about healthcare and medicine than many IP insurers’ case managers. Let’s not unjustly belittle art history grads. They are good people doing good work, which is more than what I can say for many case managers.

OK, this is where the real part ends. We go on to the hypothetical part.

Suppose the surgeon and patient agrees to surgically drain the abscess anyway (because as any 2^nd year medical student will tell you, abscesses must be drained – just in case any case manager is reading this and is confused). However, for reasons beyond anyone’s control, the 70 year-old patient with well-controlled diabetes gets pneumonia post-op and gets hospitalised for longer than expected, and the hospitalisation includes 2 days in the ICU.

The claim for the hospital stay is denied because the doctor and patient did not first try “conservative” treatment. The patient/policyholder then files a complaint before FIDReC. The insurer declines to take part in the FIDReC process citing that this is a clinical matter.

What is the patient, surgeon or hospital now to do? The total bill could be say, about $30,000. The aggrieved parties may think that well, the legal fees for bringing this to court alone could well be close to or exceeding $30,000. The surgeon may be fearful that should he pursue the civil suit route, the insurer may well remove him from the insurance panel after this. After all, no reasons need to be given for selecting or removing a doctor from the panel.

And so, all the other stakeholders are again stuck in a LPPL situation, with the insurer being the only party to benefit from such LPPL situations.

Whether we want to admit it or not, “Delay, Deny, Defend” works most of the time. Such is life. LPPL.

1 https://www.youtube.com/shorts/RCSvZUgOCgM

2 https://www.singsaver.com.sg/blog/best-ip-riders-and-supplementary-coverage-for-cancer-protection

3 https://www.elitigation.sg/gd/s/2025_SGDC_150

How You Pay Affects How Much You Pay (and How Much Taxes We Pay)

Last month, DPM Gan Kim Yong and Health Minister Ong Ye Kung gave an interview to The Straits Times’ Ms Salma Khalik (Healthcare financing in Singapore: 10 Questions for DPM Gan and Health Minister Ong, 10 April 25). These are two persons who collectively have run MOH for 14 years and they really know what they are talking about.

But for the avoidance of doubt, the serious smart money is on the interviewer, Ms Salma Khalik, who has been covering health for ST since BC times (Before Clustering) and possibly even before there was Internet and the smartphone. This hobbit thinks only Senior Consultants can safely claim they were already born when she started covering health matters for ST.

A few things struck me in that interview, which includes lightning, since it was so near to the General Elections 2025 when the interview was given. The first notable point is that by 2030, the MOH Budget likely to approach the eye-popping figure of $30B. To revisit the first of Minister Ong’s two truisms of healthcare which he mentioned last year in Parliament (6 March 24) – the people always pay. This $30B will be paid by the taxpayers, since MOH Budget is mainly funded by government revenue.

Another important point made in the interview and also previously on other occasions is that one in two persons with Integrated Shield Plans (IPs) and riders opt for subsidised care.

These two points are worth mulling over especially in the context of Minister’s Ong’s second truism – How you pay affects how much you pay.

Personally and selfishly speaking, I do hope that people with IPs and riders do not opt for subsidised care. The logic is simple: – subsidies are always paid by every taxpayer, and that includes me. But if folks use more insurance to pay for their healthcare expenses, then the taxpayer pays less. It’s almost literally a zero-sum game because insurance is funded by policyholders and returns from investments by insurance companies using the premiums collected.

However, whenever folks do NOT utilise their IP entitlement and go to the subsidised classes, taxpayers end up paying most of the bill. Even for B1 class, taxpayers pay because B1 class is subsidised a bit. Only A class is unsubsidised.

The next question to ask is then why are so many people with IPs and riders opting for subsidised care? There are many reasons but one of the most often quoted reason is that they worry about difficult access to subsidised care after a hospitalisation or procedure. Current IP plans all cover the patient at the outpatient level only for a very limited period after a hospitalisation or a procedure. After the coverage expires, the patient has to pay the expenses himself. And once a patient opts for private hospital care or A or B1 care in the restructured hospitals, he will continue outpatient follow-up care with either private specialists or the private (unsubsidised) clinics in the restructured hospitals. Many such conditions are chronic ones and they require a long, if not life-long, outpatient follow-up and many people need subsidies due to the high cost of such long-term follow-up.

The end result is that many people then opt for subsidised care despite having bought IPs and riders so that they can avail themselves to these subsidies during follow-up.

To better understand this flight to subsidy safety among IP policyholders with riders, we can conceptually divide policyholders into three groups:

• Group 1: Folks who will always use private sector services for inpatient and outpatient care
• Group 2: Folks who will select between private sector and subsidised services depending on insurance coverage and subsidy policy
• Group 3: Folks who will always use subsidised care (basically, they didn’t really know what they were buying when they bought an IP)

For the avoidance of doubt, “private sector services” refer to services that are completely unsubsidised – private sector hospitals and clinics and also A class inpatient and private (unsubsidised) specialist clinics in restructured hospitals (RH) since the latter do not consume government subsidies.

The 2nd group is what concerns us today. As aforesaid, because of the bundling of subsidised inpatient care with subsidised outpatient care, many policyholders forgo the use of private inpatient services so that they can enjoy subsidised care during follow-up. And as our population ages, the follow-up of chronic conditions discovered during before or during an inpatient episode can be for a long time, if not life-long.

This results in unnecessary consumption of the MOH Budget (i.e. taxpayers money).

This policy has been in place for a long time because policy wonks are worried that folks will game the system. I.e. these folks want the best of both worlds: by consuming inpatient services paid for insurance and then using subsidised services when insurance coverage ceases. But in reality, as we shall see, this worry has been downgraded somewhat in recent years.

If one thinks about this again, by continuing with this policy or practice, many people end up using subsidised, inpatient services unnecessarily which generally speaking, are a lot more expensive to the taxpayer than outpatient services. Again, we have to remember it is better if policyholders finance their healthcare needs with insurance monies than with tax revenue.

However, if we truly allow patients to cherry-pick (by using insurance-funded inpatient services and taxpayer-funded subsidised services), then a problem will arise with the first and second groups. The attraction of subsidies is so great that some folks in these groups will migrate towards outpatient subsidised services.

There is already some pre-existing friction put in place to discourage this because one cannot choose the specialits of his choice in subsidised services, whether inpatient or outpatient. Also, appointment times for private SOCs are significantly shorter than subsidised SOCs. But this hobbit readily admits this friction or obstacle is not really big enough to prevent overconsumption of subsidised services. Further trade-offs may be therefore necessary.

Moreover, access to subsidised specialist outpatient clinics (SOCs) and services have been made much easier in recent years with the CHAS, Pioneer and Merdeka Generation benefits. It used to be that only polyclinics and A&E referrals will give a patient access to the subsidised SOCs. But now any Healthier SG family physician can make referrals to the subsidised SOCs and their patients will enjoy subsidy levels according to their CHAS, Pioneer, Merdeka Generation card status. This is what I mean when I say the worry of overconsumption of subsidised services have been downgraded somewhat in recent years.

This hobbit doesn’t have the data, but it would be good if someone with the data does a simulation on how much of the MOH budget is used to finance subsidised inpatient cases that come from IP policyholders who voluntarily downgrade at the inpatient level. These are the potential savings from that could have been realised if inpatient subsidies were not doled out to this group.

This hobbit would like to suggest that to reduce the number of IP policyholders voluntarily downgrading to subsidised services without using their IP benefits, it is worthwhile to just allow IP policyholders to choose a private service for an inpatient stay and then let them have the option of choosing subsidised SOC services when they go for follow-up. If the policy wonks are worried that this would lead to everyone choosing subsidised SOCs, then we can perhaps strike a compromise – we would limit this option to conditions that had been newly diagnosed (i.e. just before or during the inpatient stay) for the purposes of this inpatient or procedural episode.

For example, if a patient goes for a Total Knee Reconstruction (TKR) at a private hospital or as a Class A patient in a RH, but is diagnosed to have diabetes just before admission as he is being assessed by the anaesthetist, then he should be given the option after the operation to be followed up at the subsidised SOC at a RH. The subsidised SOC can then decide to follow-up this patient or discharge him to the polyclinic when his diabetes stabilises.

Today, certain RHs already allow for downgrading to subsidised SOCs after B1 or A class inpatient episode. But to further discourage unnecessary downgrading, we should maybe allow private hospital inpatients (not just RH’s inpatients) to use subsidised SOCs as well after IP coverage expires.

If the patient or IP policyholder is given this optionality of delinking outpatient subsidy from the inpatient episode, we can perhaps get more IP policyholders to use their IP benefits at the inpatient level and rely less on funding via subsidy, i.e. how much the government or taxpayer pays.

What Our Healthcare Can Learn From DeepSeek

This hobbit came along this article in The Straits Times recently, “How did DeepSeek build its AI with less money?” by Cade Metz. The original article was first published in New York Times on 12 Feb 25.

Some points mentioned in this article hold lessons for us working in healthcare and is certainly worth mulling over by the big shots who design and implement our health care systems and policies.

The overarching theme of DeepSeek’ success was that it achieved just as much by using less. The big American AI companies typically used 16,000 specialised chips (i.e. Graphics Processing Units, or GPUs, produced mostly by Nvidia) to train their LLM (Large Language Model) chatbots. DeepSeek only used about 2000. In doing so, it saved on a lot of resources, including not just chips, but energy as well, because these chips consume a fiendish amount of energy and sending data between these chips consumes even more energy. Such activities release a huge amount of heat in the process. These chips are housed in huge data centre buildings that produce so much heat that they need another building to cool the data centre building.

The article claimed that DeepSeek’s “engineers needed only about US$6M in raw computing power, roughly one-tenth of what Meta spent in building its latest AI technology. It is no exaggeration to say that DeepSeek has demonstrated a quantum leap in efficiency that has completely changed the game in town. Here are a few lessons we can learn from the development of DeepSeek that we can perhaps consider for healthcare:

Lesson 1 – Spread out the work, pair the expert with the generalist

The first strategy and technology DeepSeek employed was to use a method called “mixture of experts”.

“Traditional” (if there is such a word) AI companies employed a single neural network to learn literally everything under the sun. This monolithic approach takes many chips, time and energy. The designers of DeepSeek split the system into many neural networks, each learning one area of expertise. Each smaller neural network concentrated on one particular field. In itself, this is nothing special. What made DeepSeek special was the designers then paired these specialist neural networks with a “generalist” system. This generalist system then helped to coordinate interactions between the many expert neural systems.

Now, it is not uncommon for a single patient, whether inpatient or outpatient, to generate several referrals to other specialists in the hospital or specialist outpatient clinics. There is no generalist involved. Once the polyclinic or family physician makes a referral to the specialist or hospital care system, the patient is then often stuck in the environment for a long time, if not forever. There is no generalist coordinating care there or interactions between specialists. The family physician or generalist only coordinates care when the patient leaves the hospital system. Perhaps we can consider having generalists in the hospitals and specialist outpatient clinics to coordinate care and cut down on unnecessary processes that consume lots of time and resources.

Lesson 2: Do not aim for perfection

We are told that the training of AI neural networks basically relies on multiplication of numbers: “months of multiplication across thousands of computer chips”. These chips pack their numbers into 16 bits of memory. But DeepSeek developers managed to squeeze these numbers into only 8 bits of memory, thereby lopping off “several decimals from each number” and saving a lot of memory space in the process. The answer so produced was less accurate but it did not matter. The article stated that “the calculations were accurate enough to produce a really powerful network”.

But that’s not the end of this story. One now has to multiply all these 8-bit numbers together. DeepSeek now stretched the multiplication answer across 32 bits of memory, and in doing so, made the answer more precise. Which is why DeepSeek performed just as well if not better in certain areas that other AI platforms consuming far more resources.

In healthcare, doctors and other healthcare professionals are reminded that we owe the patient a duty of care. Arising from this duty is the concept of standard of care. What is the standard expected of us in every instance of care we deliver? This used to be determined by our peers, but somewhere along the way, the concept of “best practice” crept in.

Best practice is laudable and of course something we should aspire to give. But does the required standard of care necessarily equate to best practice? This hobbit thinks not but many others think so. When a doctor is found wanting in a disciplinary inquiry, the standard of care quoted is often best practice. And when what was done does not quite qualify as best practice, the doctor can be found to be guilty of negligence or professional misconduct etc.

For example, should a doctor be punished when he did not see the patient personally but relied on his registrar’s assessment, (even though he did see the patient eventually, albeit 12 hours later), or when he did not order a CT scan one day earlier than when he actually did, and relied on blood tests and an erect Chest x-ray in the meantime to detect an intestinal perforation? Somehow along the way, our medico-legal environment has conflated required standard of care with best practice, the equivalent of the 16-bit number, when what is needed (or what we can afford) is really the 8-bit product.

We need to learn that “good enough” care is what we should be delivering most of the time, especially in situations where resources are limited and public funds are used. Of course, when one is paying for their own care out of their own pockets and if they can afford it, they can ask for best practice care all the time. Elon Musk and Jeff Bezos can ask for and pay for best practice care all the time. But in reality, most of the time and for most people, “good enough” care is all that the person or the system can afford.

This can also be seen in how we choose our healthcare IT systems. Do we have to choose the most comprehensive (read: expensive) system with all the bells and whistles that costs not just an arm and a leg but all four limbs to implement and maintain? When most of the time, these additional features are either not required or used at all? Why should we choose the most “perfect” IT system for our hospitals? Could we not have settled for less, i.e. settled for an 8-bit product and not 16, and maybe tried to stretch the output to a 32-bit after we are familiar with the system? Could we not have chosen a good-enough system instead of the best system?

Lesson 3: Prioritise your work

Not mentioned in the aforesaid NYT or ST article but mentioned elsewhere is that DeepSeek uses a new way of prioritizing data which uses far less memory space than older methods. This is known as Multi-head Latent Attention (MLA) as opposed to the traditional Multi-head Attention (MHA) method. MLA has been demonstrated to use only 5 to 13% of what MHA uses and in doing so, allows for far more efficient training and deployment. The multiplications we mentioned earlier results in much data produced. These data are stored in the form of fundamental data structures known as Key-Values, (KVs) which are then stored in the memory cache.

MLA allows for low priority KVs to be compressed into what is known as latent vectors and in doing so, MLA reduces the KV cache size dramatically. When these low priority KVs are needed, they are decompressed again for use.

Sometimes in healthcare, we attempt too many things at once. Our in-trays (physical or virtual) are loaded to the brim with different things that demand our attention at the same time. They can range from service requirements to teaching responsibilities to research projects. The myriad of demands we make on the system and on our healthcare professionals, in the end creates so much complexity and consumes so much attention that the system slows down or even gets paralysed.

Another good example is how we structure our subsidy system with layers and layers of schemes that makes things so complex that our hospitals’ IT and billing systems cannot cope. The result is slower and unsatisfactory performance of both the staff and the IT systems.

We could perhaps look at all the balls we are trying to juggle in the air and prioritise the work. Schemes that have marginal impact would be merged or even dispensed with altogether. Focus on only the few things that matter. Often, a person or an institution cannot be good at all things all at once. Less important things need to be compressed and cached, maybe even disposed.

If your institution’s waiting time is now a year, perhaps it is time to focus on service delivery and minimize other non-essential stuff. Getting your doctors to run ad-hoc clinics can help in the short run, but it may not help in the long-term, as job satisfaction decreases and more people quit, leaving the organization in a vicious cycle of attrition and more work. It is far better to prioritise your work (and your people) and cut back on the non-service delivery work. Compress and cache these non-essential work for now.

The above are just three simple examples of how we can learn from DeepSeek. There are many others. The underlying principle of why DeepSeek is revolutionary is that its developers experimented with solutions to real problems and obstacles. The solutions they tried are not just incremental in nature or doing more of the same thing. By many accounts, most of the folks who worked on DeepSeek were young people fresh out of college and they looked at things with a fresh perspective. They undoubtedly experimented many times and failed but by thinking out of the box, they came up with something that was faster, better and far cheaper that what had come before them.

Likewise, healthcare system planners should be bold and not think of doing more of the same, because seeking out and getting incremental change is just not good enough anymore.

Income’s Outcome Is Likely To Be Worrisome

A Brief History of Medical Indemnity Cover in Singapore

Younger doctors may not know this. There was a time when all doctors in Singapore had to buy their own professional medical indemnity plans. MOH or MOHH did not arrange for coverage for public sector doctors. Whether you were a medical officer or private sector specialist, you bought your plans through SMA, who acted as the agent for these providers.

Prior to 1999, there were two providers: MPS (Medical Protection Society) and MDU (Medical Defense Union). There both originated from the UK. They actually were not licensed by the local regulatory authority (i.e. Monetary Authority of Singapore, MAS) to sell policies locally. These medical indemnity plans or policies were issued directly out of UK and SMA was paid some fees in the process for the administrative work done.

MPS still exists today and the arrangement between SMA and MPS is still largely in place. However, in 1999, MDU decided to pull of Singapore for reasons best known to themselves. They had struck an agreement with MPS whereby MPS will continue to offer coverage to ex-MDU customers for a fee. In an article written by Past SMA President Goh Lee Gan in the September issue of SMA News in 2002 titled, “The Inside Story of UMP Singapore”, he said he received the news of MDU’s pulling out and handing over of their business to MDU on the rather auspicious date of 9 September 1999 or 9/9/99.

The SMA leadership then decided that it was imprudent to have only one provider for medical indemnity services in Singapore (and a foreign-based one at that) and decided to introduce another provider. This came in the form of the largest medical indemnity provider in Australia at that time – UMP.

However, UMP’s presence in Singapore was very short-lived because back home in Australia, quite a few court judgments went against doctors (especially in its home state of New South Wales [NSW]) and these cases came with huge damages awarded. UMP was declared insolvent and went into provisional liquidation. It was subsequent revivedly with government funds to the tune of A$260M accompanied by tort reform. But the end result was that UMP could only operate in Australia and UMP’s presence in Singapore lasted only 2 years. It has to be said in that short period, there was no evidence that UMP’s business in Singapore was unviable.

Once again, the Singapore medical profession faced the prospect of having only one foreign-based professional medical indemnity provider. This time, SMA approached NTUC Income. In the aforesaid SMA News article, it was reported, “A/Prof Goh spearheaded the venture with NTUC Income, and held discussions with Mr Tan Kin Lian, CEO of NTUC Income, about providing medical indemnity cover for doctors”.

And so, since 2002, NTUC Income (or should I say, Income, since the prefix of “NTUC” was regrettably dropped in 2022 when NTUC Income was corporatised) has been a medical indemnity provider in Singapore.

The market share of Income in providing medical indemnity cover is probably very small and the profits attributable to this business line, if any, are probably insignificant to Income. Many doctors may not even realise it is a provider, but it’s there: (https://www.income.com.sg/commercial-insurance/medical-indemnity-insurance)

The negotiations between Prof Goh and Mr Tan obviously went well because in 2002, NTUC Income stepped into the breach to ensure that medical profession was not subject to the crutches of a potential monopoly situation. The impact of this strategic move should not be taken lightly, because should the remaining, foreign-based provider also pull out, or raise its premiums to very unaffordable rates, then healthcare provision in Singapore will be at peril. This was the situation NSW faced in 2002 when UMP folded which left thousands of doctors without cover. The NSW government of the day had to use public funds to bail UMP out, so that doctors could continue to be covered and healthcare could continue to be delivered.

In short, NTUC Income did “national service” in 2002 and continues to do so even today.

The Deal

In this historical light, this Hobbit, like many others, received the news that Allianz was buying 51% of Income Insurance for $2.2B with much discomfiture, if not apprehension.

Since then, the Chairman of NTUC Enterprise, Mr Lim Boon Heng has come up with several reassurances that things will be alright. These include “NTUC Enterprise will continue as an active shareholder of Income Insurance to keep it to its purpose and deliver social commitments to its policyholders” (24 July, “Income will still provide affordable insurance for lower-income customers after Allianz deal: NTUC Enterprise chairman”, CNA).

However, not all are convinced and the logic is simple. A 51% stake is a majority or controlling stake. It is no coincidence that Allianz wants 51% and not 49%. It intends to control the way the acquired entity is run. Unless there is some written contractual term in the acquisition document that enables the minority shareholder to influence or demand that the majority shareholder behaves or acts in a certain way, the majority shareholder will call the shots. These contractual terms are commonly called “reserved matters” in which e.g. despite Allianz having a 51% share of the company, minority shareholder NTUC Enterprise can compel Allianz to manage Income Insurance in such a way that Income Insurance will continue to “deliver social commitments” and “still provide affordable insurance for lower-income customers” beyond the $100M committed for 10 years from 2021 (as stated in the Clarification issued on 25 July 24)? We are already in the second-half of 2024….

The Clarification on 25 July also states that Income Insurance will “provide access to insurance for seniors, people with mental health concerns and those with special needs, such as Down Syndrome and autism”. That sounds good. But it remains to be seen at what price such coverage will be given and if there are any strings attached. The devil is in the details, as the saying goes.

Anyway, if there are such reserved matter clauses in the agreement, let’s see it. If not, this hobbit will take such reassurances with a large pinch of low-sodium chloride (Healthier SG and our Health Minister promotes the use of low-sodium salt, so this hobbit has to follow too).

In any case, this hobbit speculates that should this deal go through, it is unlikely that Allianz-controlled Income Insurance will continue to provide medical indemnity services. I don’t think German-origin Allianz is in the business of doing national service in Singapore, unlike NTUC Income, which has its (although now probably severely-mutated) DNA in Singapore’s labour movement. In any case, Medical Indemnity is not mentioned in the aforesaid Clarification.

Nonetheless, this hobbit declares that he does not obtain medical indemnity cover from Income and so, even if it does cease to cover such services, he will not be adversely affected in the short term.

Me and My Incomeshield

On a personal note, this hobbit is more concerned with his Integrated Shield Plan (IPs), which he had bought from NTUC Income years ago and continues to pay the premiums. This hobbit is probably not alone in the situation he has found himself to be in.

Let’s do another recap of the history of Medishield and IPs. In 1990, Medishield was introduced to cover B2 and C class inpatient bills. In 1994, IPs were introduced. Actually, this hobbit isn’t sure if the term “IP” existed then. But in any case, insurance products providing cover for restructured hospitals’ B1 and A class services were introduced. This happened at about the same time when the government took away inpatient healthcare benefits from civil servants. This was in the Jurassic age when all NUS medical graduates were bonded and employed directly by MOH itself as civil servants (except for a small group of graduates who were directly employed by NUH to serve out their bond).

After our inpatient medical benefits were removed (in return for 1% more CPF employer contribution), many of us bought Income’s Incomeshield products. If my memory doesn’t fail me, there were only two products: Incomeshield A and Incomeshield B. The former covered A class charges while the latter covered B1. An IP product to cover private hospital charges had not been yet created then.

It is important to note that NTUC Income virtually enjoyed a monopoly in this product segment from 1994 to 2000. This hobbit, like many of his contemporaries, did not have a choice between providers. It was either buying NTUC Income’s Incomeshield or self-funding for inpatient services.

It was only sometime between 2000 to 2002, that two other providers were introduced to provide IP or IP-like products: AIA and Great Eastern.

In other words, it is not unreasonable to think that there are now large numbers of people who had bought Incomeshield A and B in those years where NTUC Income was the only provider of IP products and now continue to be their policyholders. They are probably now in their fifties and sixties. If they had not switched out of Income when they were younger, they are probably stuck with Income now, because by now, many of them would have developed medical problems and no other IP insurer will take them as policyholders because of their pre-existing disease(s).

And so, just as you are about to more likely claim from Incomeshield plans when you are now in your fifties and sixties, you are now also faced with the prospect and uncertainly of Income being controlled by a for-profit foreign insurer whose loyalty, and indeed fiduciary duty, is to its shareholders. Post-acquisition, will my Incomeshield premiums still be affordable? Or will they go up significantly, because the majority shareholder needs to recover its $2.2B investment and also to profit-maximise?

It also doesn’t help that Allianz’s record is not entirely spotless. (https://www.reuters.com/business/finance/allianz-pay-6-bln-over-structured-alpha-fraud-fund-manager-charged-2022-05-17/)

In this hobbit’s opinion, in all likelihood, this Income deal will prove to be a bad outcome for many Singaporeans, but a good deal for the investment bankers, management consultants and lawyers paid to see the deal through.