'Social enterprise model alone cannot shoulder' growth of Income Insurance, NTUC Enterprise says in new statement

A "social enterprise model alone cannot shoulder" the growth of an insurance company in the current "competitive environment", NTUC Enterprise, which is a majority shareholder in Income Insurance, said in a statement on Jul. 30.

The additional clarification came five days after the initial Jul. 25 statement to address concerns that Allianz, a German company, will become a majority stakeholder of a homegrown outfit with about 2 million customers in a proposed acquisition.

Tap expertise after Allianz deal

The first statement assured the public that Income Insurance will continue to offer affordable insurance for lower-income customers after having 51 per cent of its shares acquired by Allianz.

In the latest statement, NTUC Enterprise explained that more than 40 global, regional and local insurers are fighting for growth in a mature Singapore insurance market, which is described as "highly competitive and open".

The proposed deal with Allianz would allow Income Insurance to tap the global company's expertise in asset management and technology and product development, the statement added, highlighting that continuous capital support was necessary.

But the Singapore insurance company will still cater to those it has pledged to help.

“Income Insurance remains firmly committed to delivering the social outcome of protecting families financially against key risks in life," NTUC Enterprise Chairman, Lim Boon Heng, said.

"This social objective remains unchanged since its founding in 1970 by the NTUC."

A stronger Income Insurance, anchored by both Allianz and NTUC Enterprise as institutional shareholders, can better offer competitive and affordable products, including those for the masses and the lower income, he added.

NTUC Enterprise's role

In its statement, NTUC Enterprise provided examples of how it protected the interests of Income Insurance policyholders over the years.

NTUC Enterprise said it converted its shares to irredeemable ones in 2012 so that they could count towards Income Insurance's capital adequacy ratio and issued a letter of responsibility for Income Insurance to the Monetary Authority of Singapore.

Income Insurance was then a co-operative society.

As the majority shareholder, NTUC Enterprise also injected around S$630 million into Income Insurance when the economy experienced downturns, such as during financial crises and the Covid-19 pandemic.

NTUC Enterprise said it supported the corporatisation of Income Insurance, as this was in line with its aim as majority shareholder to provide strategic flexibility and further strengthen the entity's long-term competitiveness.

Lim also said the circumstances in which Income Insurance was founded in 1970 are "vastly different" from the landscape today, but the company remained committed to protecting families financially against key risks in life.

Moreover, social enterprises and co-operatives are no longer unique in doing good as more businesses are embracing stakeholder capitalism in their corporate purposes, Lim also said.

Lost contracts

NTUC Enterprise, which currently holds 72.8 per cent of Income Insurance's shares, revealed that it lost contracts because it was not competitive enough.

"Despite putting in very competitive bids, Income Insurance lost out on several key contracts to its global and regional competitors, such as in bancassurance, the Dependants' Protection Scheme and group insurance for a large public organisation," said NTUC Enterprise.

Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base.

The statement said: "It proves that strong and continuous capital support and resilience is a prerequisite for growth in this competitive environment, which a social enterprise model alone cannot shoulder."

The stronger Income Insurance is, the more competitive it can be, with the ability to offer better prices to consumers, Lim told The Straits Times separately.

He also said NTUC Enterprise is expected to get about S$1 billion if the deal between Allianz and Income Insurance goes through, and this will be put into “possible ventures in education and health, particularly in services for the elderly”.

First and only co-op society in Singapore

Income Insurance was set up in 1970 by the labour movement and was previously known as NTUC Income Insurance Co-operative.

It is the first and only co-operative society in Singapore.

Its social mission was to provide affordable insurance to workers and families, offering life, health and general insurance, as well as investment-linked products.

Top photo via Google Maps