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.