Insurance law and regulation in Singapore

The Insurance Act 1966 is the governing legislation that regulates insurance activities in Singapore, including as between insurers, insurance intermediaries and related institutions. As a regulated business, all insurers must apply in writing to the Monetary Authority of Singapore (“MAS”) for a licence. Other statutes governing contracts of insurance in Singapore include the Policies of Assurance Act 1867, the Marine Insurance Act 1906 and the Motor Vehicles (Third Party Risks and Compensation) Act 1960.

Insurance and reinsurance activities are regulated by the MAS in Singapore. The MAS is empowered to enforce the provisions in the Insurance Act and relevant subsidiary legislation (i.e. regulations arising from the Insurance Act). The General Insurance Association and the Life Insurance Association are some of the trade associations that represent the interests of their members in Singapore.

Apart from statute, the common law is another source of law that governs the development of insurance law in Singapore.

A material misrepresentation and/or non-disclosure can lead to the avoidance of an insurance policy altogether ab initio. An insured has a positive duty to disclose all material facts and information and to avoid any misrepresentations and non-disclosure of material facts when negotiating the insurance contract. 

Whether a non-disclosure is determined to be material would depend on (i) whether it relates to circumstances that a prudent insurer would objectively have wished to know; and (ii) whether it would have subjectively induced the insurer to enter into the insurance contract with the insured.

Most insurance policies also contain a general disclosure clause requiring the insured to disclose all material facts and information to the insurer, the failure of which could lead to non-coverage of a claim or the avoidance of the policy altogether. 

Under common law, a duty of utmost good faith (uberrimae fidei) is implied into all insurance contracts. A failure by the insured to adhere to this duty may lead to the insurer avoiding the insurance contract, and returning all the premiums paid by the insured.

The duty of utmost good faith originated from the English case of Carter v Boehm (1766) 3 Burr 1905 and has since been codified in section 17 of the Marine Insurance Act. The duty is imposed upon both the insured and the insurer, and is considered as applicable to all types of insurance contracts and not just marine insurance policies at common law.

There are certain differences between a non-disclosure and a misrepresentation. A non-disclosure is based on the failure to reveal certain material facts or circumstances while a misrepresentation is based on an untruth found in a positive statement. A representation as to a matter of expectation or belief is deemed to be true if it is made in good faith.

Warranties in a contract of insurance are construed very differently from warranties in a general contract. A warranty under a contract of insurance is characterised by its draconian nature, as it requires strict and exact compliance with a condition. 

Warranties are broadly defined as promises that certain statements of fact are accurate and that they will remain accurate for the duration of the insurance cover and may relate to whether a particular thing will or will not be done, or that some condition will be fulfilled. A warranty may be express or implied. The breach of a warranty in an insurance policy entitles the insurer to be wholly discharged from all liabilities under the policy as from the date of the breach of warranty. 

On the other hand, the breach of a condition in an insurance contract only entitles the insurer to a claim in damages against the insured.

In general, all procedural requirements stipulated in a policy that are not warranties are construed as conditions precedent. The breach of a condition precedent provides the insurer with a basis for not making payment against an insured’s claim under a policy. Consequently, a condition precedent often operates as a pre-condition to liability for an insurer.

In general, the time limit for an insured to give notice to an insurer of a claim after a loss has occurred will vary from policy to policy. The late notification of a claim by an insured may result in the insurer refusing to cover the insured in respect of the claim, particularly if such late notification prejudices the insurer’s right of recovery under a policy. An insurer may also bring a claim against the insured for any sums rendered unrecoverable from third parties arising from the insured’s late notification of its claim against the policy.

An insured has a general right to bring a claim against an insurer. 

A consumer who is dissatisfied with their insurer can file a dispute with the Financial Industry Disputes Resolution Centre (“FIDReC”). FIDReC is an independent organisation that provides dispute resolution services to consumers and financial institutions (including insurers) by way of relatively inexpensive alternative dispute resolution methods, such as mediation or adjudication.   

Alternatively, an insured may also bring a claim against an insurer directly in the Singapore courts or by way of arbitration or alternative dispute resolution, depending on the dispute resolution mechanism provided for in the contract of insurance. 

An insured who wishes to bring a claim against an insurer may also file a complaint with the General Insurance Association or the Life Insurance Association, as applicable.

The Insurance Act does not contain any provision specifically dealing with an insured’s entitlement to damages from an insurer as a result of late payment of a claim.  This is not an issue that has specifically arisen before the Singapore courts and therefore it has not been determined whether an insured will be entitled to damages due to late payment of a claim by an insurer. 

The Life Insurance Association (“LIA”) provides that, a person making a claim pursuant to a life insurance policy must give the insurer a notice in writing of the claim within 30 days of the event or as soon as possible. Within 14 days of receiving the notice of claim, the insurer will let the person making the claim know whether they require any more information. Within 21 days of receiving full information for a claim assessment, the insurer will let the claimant know of its decision to accept or reject the claim. For straightforward cases, the insurer will pay a claim within 14 days of receiving all requisite documents. For more complex cases, more time may be needed and the insured / person making the claim will be kept informed of the progress. For death claims, the insurer will pay interest if they pay a claim more than two months from the date they receive a written notice of the death. The interest will apply from the date notice was given to the date the insurer make the payment, using the interest rates published by the LIA on its website. The interest will be added to the amount to be paid.

The limitation period for bringing a claim under a contract of insurance is six years from the date on which the claim accrues, as provided in the Limitation Act 1959. An insured may also find its claim rejected by an insurer on the basis of a late submission of a claim, including but not limited to giving late notice of a claim and/or the late submission of claim documents. Certain policies provide shorter timelines in respect of the commencement of legal proceedings under the policy in the event there is a disagreement between the insured and the insurer regarding the rejection of a claim. Claims for personal injuries must be made within three years from the date of the injury, or the earliest date on which the claimant had knowledge of the injury.

Third-party liability insurance is usually triggered by the occurrence of an insured event, typically when an insured is made liable to pay damages to a third party arising from accidental bodily injury and/or property damage to that third party. In the case of Contractors All Risk (CAR) policies, there would typically need to be a direct connection between the insured event and the contract works happening in or in the immediate vicinity of a contract site.

In general, an insurer will bear the costs of legal proceedings commenced pursuant to policy coverage. This includes legal fees and costs payable to lawyers and experts appointed with the consent of the insurer. The insurer’s right of subrogation means that it steps into the shoes of the insured to pursue any right or cause of action available to the insured. These costs are generally borne by the insurer. In the event the insurer instructs solicitors to defend an insured in respect of a third party claim, such defence costs are usually covered under the policy.

In Singapore, insurance policies that provide coverage against penalties and fines are uncommon. Indeed, they may not be recognised by the courts here on the ground of public policy especially if they relate to penalties and fines arising from criminal liability. In cases of civil liability, such as where an employer is found liable for the tortious conduct of its employees or agents, such insurance policies are less likely to be prohibited under the ground of public policy. That said, the award of punitive damages is very rare in Singapore, particularly in the case of contractual disputes. The Singapore courts’ general preference is for parties to a contract to be held to their contractual bargain, and a high threshold must be met before the courts would even consider an award of punitive damages.