Corporate & Securities Singapore 1 MediShield Life is a basic health insurance, covering subsidised treatment in Class B2/C wards of public hospitals. All Singapore citizens and permanent residents will be automatically covered under MediShield Life for life. Pre-existing conditions will also be covered by MediShield Life, up to the agreed level of benefit coverage. Client Alert May 2015 Consultation Paper on Review of Accident & Health Insurance Regulatory Framework The Monetary Authority of Singapore (MAS) recently issued a Consultation Paper on Review of Accident & Health Regulatory Framework (P008-2015) further to its joint review (together with the Ministry of Health) of the regulatory framework for accident and health (A&H) insurance. The review proposes changes to the regulatory framework for A&H insurance introduced in 2004 to govern the underwriting and distribution of insurance policies that contain A&H benefits, and seeks to: improve clarity of communication between insurers and policyholders; and develop industry-wide tools and efforts to improve professional conduct of A&H insurance intermediaries. To this end, the proposals are recommended to: (i) enhance disclosure; (ii) strengthen protection measures for policyholders; and (iii) improve the quality of intermediaries' conduct. The thrust of the proposed changes concern Medisave-approved Integrated Shield Plans (IPs), which are hospitalisation insurance plans that comprise: (i) the basic MediShield portion (which will become MediShield Life1 in end 2015); and (ii) an additional private insurance coverage portion, although some of the proposed changes are of general application. (I) Enhance Disclosure Requirements Restriction on use of the term "Shield" As consumers often mistakenly assume that a policy with "Shield" in its name is approved and endorsed by MOH, MAS proposes that the term "Shield" is only allowed to be used in the names of A&H policies that are Medisave-approved. This proposal will apply: to new A&H products that are not Medisave-approved and are launched after 1 November 2015; and for existing A&H products that are not Medisave-approved, including IP riders, insurers will be given a 2-year transition period from 1 November 2015 to effect the change. Standardised disclosures for MediShield Life and IPs In response to complaints that many policyholders are unaware of the risks of upgrading or switching their IPs, MAS proposes to enhance disclosure requirements for IPs to highlight clearly, where appropriate: For further information please contact Stephanie Magnus +65 6434 2672 firstname.lastname@example.org Selwyn Lim +65 6434 2653 email@example.com Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com 2 Client Alert May 2015 the distinction between premiums payable to MediShield Life and the additional private insurance coverage; the distinction between claims paid out from MediShield Life and the additional private insurance coverage; the risks and limitations of upgrading or switching; the option for policyholders to downgrade their existing IP policies should the premiums become unaffordable; the universal coverage under MediShield Life that would continue should the policyholders decide not to take up or renew the IP; and the applicable free look and reinstatement period for IPs. Consequently, MAS proposes to amend MAS Notice 120 on Disclosure and Advisory Process Requirements for Acident and Health Insurance Products (MAS Notice 120) to require insurers that offer IPs to adopt a list of standardised disclosures for the IPs, the form of which is set out in Appendix A of the Consultation Paper. Additionally, MAS proposes that all insurers should be required to include a statement in the acceptance letter clarifying that acceptance does not constitute start of policy coverage and indicating the policy inception date. If the inception date is dependent on the successful deduction of Medisave monies, the insurer should state that the policy inception date will be reflected in the policy schedule, which will be sent after a successful deduction. Proposed enhanced disclosure requirements for other A&H policies In respect of individual medicial expense policies, MAS proposes the inclusion of standardised disclosures for greater transparency to consumers: A statement that coverage under MediShield Life continues should the policyholder decide not to take up or renew the individual medical expense policy in the conditional letter of offer; and A statement that coverage under MediShield Life continues in the termination letter. It is also proposed that these disclosures should be exempt for individual medical expense policies that are sold only to non-Singapore citizens/permanent residents. MAS also suggests that for A&H policies that are not Medisave-approved, insurers should be required to set out clearly in the product summary that the premium for the product is not payable using Medisave monies. Standardised disclosure statement for short-term A&H policies In relation to short-term A&H policies (A&H policies that are not guaranteed renewable with a duration greater than 5 years), MAS proposes that MAS Notice 120 be amended to include a standardised disclosure statement in the Product Summary and Premium Notification Letter of the short-term A&H policy that the plans are not guaranteed renewable and that the policyholder may be subject to additional underwriting at renewal. Such a standardised disclosure statement is set out in Appendix D of the Consultation Paper. Alignment with changes to the Financial Advisers Act (FAA) Given the similarities in market conduct risks between long-term A&H policies with investment products and life policies, MAS proposes to align disclosure Baker & McKenzie.Wong & Leow requirements of the long-term A&H policies to that which are applicable to investment products under the FAA, including the following: Insurance intermediaries are expected to review the documents given to the insured at least annually; A&H insurance intermediaries are required to provide information on their remuneration upfront; Additional disclosures are required on free look period, termination or claim, warnings, exclusions and disclaimers; and A&H insurance intermediaries are required to disclose in writing any switching fee or charge. (II) Strengthen Protection Measures For Policyholders Proposed amendments to the Insurance (General Provisions) Regulations The current free look period of 14 days does not allow the insurer the flexibility to give a longer time. It is proposed that the provision under the Insurance (General Provisions) Regulations be amended to state a minimum free look period of 14 days for the issuance of a life policy or an A&H policy with duration of one year or more. (III) Improve Quality of Conduct of Intermediaries Selling A&H Insurance Information to be obtained to provide financial advice In order to identify a client's needs, MAS proposes that A&H insurance intermediaries should be required to collect information on the client's financial commitment and affordability consideration, as well as his/her preference for wards for hospital stays. The intermediary should also give clear explanation to the client on the costs and subsidies of varying ward classes. Only insurer-approved marketing materials to be used Currently, intermediaries acting for a life insurer to promote IPs may use their own marketing materials in their promotion. To ensure that clear and accurate information is disseminated about the IPs being marketed, MAS proposes to impose the requirement that intermediaries may only use marketing materials approved by the insurer of the IPs. Conduct during telemarketing MAS also proposes that in the context of telemarketing, intermediaries arranging long-term A&H policies should follow a script approved by the insurer, which includes a statement that no advice was provided and the policyholder may wish to seek advice accordingly. Continuous training for intermediaries selling IPs Currently, A&H insurance intermediaries are required to pass a one-off Health Insurance module prior to selling A&H policies. MAS proposes that A&H insurance intermediaries selling IPs should undergo minimum 2 hours of training pertaining to MediShield Life and IP annually to keep abreast of latest developments. For A&H intermediaries selling IPs that are licensed or exempted under the FAA, it is proposed that such time may be deducted from the 30 hours of mandatory Continuous Professional Development required under the FAA. ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.