Contributed By Gurbani & Co
Primary Legislation and Regulation
In Singapore, the Insurance Act (Chapter 142) is the primary legislation that regulates and deals with insurance and reinsurance activities, including insurance intermediaries and related institutions. Aside from the Insurance Act, there are also other relevant legislative regulations regarding specific areas of insurance, such as work injury compensation insurance, marine insurance, and motor vehicles insurance:
The above-mentioned statues govern contracts of insurance and reinsurance. They impose particular requirements on certain types of insurance policies and regulate claims and payments under these policies. Furthermore, the Road Traffic Act (Chapter 276) provides specific requirements for liability insurance cover for autonomous vehicles. An insurance contract may also be subject to the Consumer Protection (Fair Trading) Act (Chapter 52A) if an insured is a consumer. In the absence of express statutory provisions, insurance and reinsurance contracts are governed by common law through the Application of English Law Act 1996 and Singapore Case Law.
Parent legislations are usually supplemented by subsidiary legislations such as directives, codes, guidelines and notices issued by the relevant regulatory authorities, all of which have the force of law.
In Singapore, the Monetary Authority of Singapore (MAS) is the main body that supervises and regulates insurance and reinsurance activities under the Monetary Authority of Singapore Act (Chapter 186) and the Insurance Act.
The following associations also play an essential role in the regulation of insurers and insurance intermediaries by issuing internal codes of conduct and guidelines to regulate the conduct of their members:
The Financial Industry Disputes Resolution Centre Ltd (FIDReC)
MAS formed an Integration Steering Committee in May 2004 to discuss the creation of a one-stop centre for all retail disputes resolution with financial institutions. As a result, the committee proposed the setting-up of the Financial Industry Disputes Resolution Centre Ltd (FIDReC), which was launched on 31 August 2005. It is an independent and impartial alternative dispute resolution (ADR) institution that offers services to resolve disputes between consumers and insurers in an amicable, expeditious and affordable manner. It is also a non-profit company that aims to provide consumers with a one-stop centre for resolving disputes in the banking, insurance and capital market sectors. FIDReC’s role is to administer the FIDRec-NIMA Scheme under the Pre-action Protocol for Non-injury Motor Accident Cases (Appendix C of the State Courts Practice Directions) issued by the state courts.
Non-injury Motor Accident (NIMA) disputes between consumers and insurance companies have to be first heard by the FIDReC (which is known as the FIDReC-NIMA) before court proceedings can commence, unless exempted by the FIDReC pre-action protocol. The scheme applies to NIMA claims below SGD3,000, where consumers claim against an insurance company which is not their own insurer.
If a consumer is dissatisfied with an insurer’s service, a complaint may be lodged/filed with FIDReC, instead of commencing legal proceedings directly. The process of FIDReC dispute resolution comprises the following stages:
When cases proceed to adjudication, consumers have to pay an adjudication case fee.
A consumer who is not satisfied with the outcome of the hearing can commence legal action against the insurer. Consumers should note that the Singapore courts actively encourage parties to attempt alternative means of dispute resolution and will likely require parties to attempt mediation while court proceedings are pending (unless such mediation has already been attempted).
There are no special court procedures for dealing with commercial insurance or reinsurance disputes. An insurance contract is governed by the terms therein. The court will construe the terms in accordance with general contractual rules of interpretation. Contractual interpretation is aided by the Evidence Act which allows for evidence to be adduced in order to shed light on the parties’ intentions.
Filing a Complaint with the GIA or LIA
An insured who wishes to bring a claim against an insurer can file a complaint with the GIA (www.gia.org.sg) or the LIA (www.lia.org.sg) if the insurer is a member of the GIA or LIA. Most (if not all) major insurance providers in Singapore are members of the GIA.
Singapore’s judiciary has a reputation for world-class efficiency, competence and integrity. To deal with specific areas of law, there are specialist courts such as the Syariah Court, the Singapore International Commercial Court, and the family justice courts. Civil proceedings may either be instituted in the state courts (consisting of the magistrates’ court and the district court) or the High Court. In a civil action, any party that is not satisfied with any judgment, order or decision:
As for the monetary jurisdictional limits of the court, see 2.3 Unique Features of Litigation Procedure.
General Rules on Limitation
Pursuant to the Limitation Act (Chapter 163), claims under insurance/reinsurance contracts must be brought within six years from the date on which the claim accrues. In addition, claims for personal injuries must be made within three years of the date of injury or the earliest date on which the claimant had knowledge of the injury.
An insured may also be barred from making a claim if they do not meet the deadline for giving notice or submitting claim documents under the policy. Some insurance policies also provide for short deadlines for the commencement of proceedings under the insurance policy if the insured disagrees with the insurer's refusal of a claim.
In Singapore, ADR is a prevalent alternative to litigation. The Singapore courts actively support and encourage the use of ADR and there are several alternative channels of dispute resolution available to parties.
The popular ADR methods in Singapore to settle disputes are mediation, arbitration and neutral evaluation.
Generally, insurance contracts will include clauses that provide for the choice of court and law. The court will give effect to such a clause and hence, disputes in insurance law over the proper forum or governing law are rare. This was further affirmed by the passing of the Choice of Court Agreements Act 2016. In particular, Section 9(6) of the Choice of Court Agreements Act 2016 affirms that a proceeding under a contract of insurance and reinsurance is not excluded from the application of the Act by reason only that the contract relates to a matter to which the Act does not apply.
Contract with No Choice of Law
In the event that the contract does not include a choice of law clause, the court will examine a variety of factors, including the commercial purpose of the transaction, the places of residence of the contracting parties, the choice of jurisdiction and other factors in determining the implied law of the contract. If the courts find that there was no implied choice of law, the courts will then determine the objective proper law, which is the law with the closest and most real connection with the contract.
Contract with No Choice of Jurisdiction
In the event that the contract does not include a choice of jurisdiction clause, the court will examine whether Singapore is forum conveniens, by examining if there is a serious question to be tried on the merits of the claim and if there is a good arguable case that has sufficient nexus to Singapore. Paragraph 63 of the Supreme Court Practice Directions 2021 sets out the non-exhaustive list of factors.
Singapore is a contracting party to the 2005 Hague Convention on Choice of Court Agreement. To give effect to this, the Choice of Court Agreements Act 2016 was passed. Accordingly, judgments obtained from the Singapore courts may be recognised and enforced in the courts of other contracting states. Section 18 of the Choice of Court Agreements Act 2016 specifically provides that the High Court may not limit or refuse the recognition or enforcement of a foreign judgment of liability under the terms of a contract of insurance or reinsurance on the ground that the liability under the contract includes liability to indemnify the insured or reinsured in respect of a matter to which this Act does not apply, or an award of damages that will not be recognised or enforced under Section 16 of the Act.
The Reciprocal Enforcement of Commonwealth Judgments Act (Chapter 264) (RECJA) and Reciprocal Enforcement of Foreign Judgments Act (Chapter 265) (REFJA) will not apply to any judgment which may be recognised or enforced in Singapore under the Choice of Court Agreements Act 2016. The RECJA is intended to facilitate the reciprocal enforcement of judgments and awards in Singapore and other Commonwealth countries, subject to the restrictions provided in Section 3. The REFJA allows for the recognition and enforcement of judgments of a foreign country that gives reciprocal treatment to judgments obtained from the Singapore courts.
By virtue of the existing Choice of Court Agreements Act, RECJA and REFJA, foreign judgments obtained from the following countries may be registered in Singapore:
In the event that the judgment was not obtained from a country listed above, the court will refer to common-law principles, ie, it will need to be shown that the judgment is on the merits, it is a judgment for a sum of money, the foreign court has international jurisdiction according to Singapore conflict rules, and the judgment is final and conclusive.
Any application for registration of a foreign judgment in Singapore must be done within six years of the date of the judgment; or where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings.
In Singapore, the appropriate courts for commercial disputes depend on the value of the dispute:
Moreover, in 2005, the Singapore International Commercial Court (SICC), a division of the General Division of the High Court and part of the Supreme Court of Singapore, was established to deal with transnational commercial disputes. Generally, the SICC has the jurisdiction to hear and try an action if:
The SICC may also hear cases that are transferred from the Singapore High Court.
Civil proceedings may be initiated by a writ of summons (if a substantial dispute of fact is likely to arise) or by originating summons (generally appropriate for disputes concerning matters of law).
Under Singapore law and the Singapore court system, there are various means by which proceedings may be resolved or terminated before trial, for instance:
If the parties are unable to resolve their conflict, they will have to go through the process of production (previously termed "discovery"). Parties are expected to disclose all the documents that the party relies on or will rely on, or documents which could adversely affect their own case, affect another party’s case or support another party’s case, and that are relevant and necessary. Parties can also ask for the specific discovery of documents that a party will rely on, a document which could adversely affect their own case, adversely affect another party’s case or a document which may lead the party seeking discovery of it to a train of inquiry resulting in their obtaining information which may support another party’s case and which is relevant and necessary.
Evidence is also given in the form of affidavits of evidence-in-chief, which are sworn on by witnesses before trial and which the witnesses can be examined on during the trial.
It is noted that the limitation period for contractual claims is six years under the Limitation Act (Chapter 163).
The Singapore courts will respect the existence of arbitration clauses in an insurance or reinsurance contract and enforce such clauses.
The recognition and enforcement of arbitral awards is provided for in the Arbitration Act (Chapter 10) and International Arbitration Act (Chapter 143A). An arbitral award may, by leave of the High Court, be enforced in the same manner as a judgment or an order to the same effect, and where leave is given, judgment may be entered in terms of the award.
As Singapore is party to the 1958 New York Convention, foreign arbitral awards made in another country that is party to the Convention are generally enforceable in the Singapore courts. A foreign award may be enforced in the same manner as an award of an arbitrator made in Singapore.
Arbitration clauses in insurance and reinsurance agreements are enforceable. Where a contract contains an arbitration clause, the matter will be referred to arbitration and any corresponding court action may be stayed where parties to the contract are both domestic under the Arbitration Act (Chapter 10), and will be stayed if either party is foreign under the International Arbitration Act (Chapter 143A) or if the parties have specifically chosen for the International Arbitration Act to apply.
Arbitration clauses that subject arbitration to the rules of an arbitral institution, such as the Singapore International Arbitration Centre or Singapore Chamber of Maritime Arbitration, are also binding on the parties.
The relevant rules that apply depend on what has been provided in the dispute resolution clause of the insurance contract.
Common law implies a duty of utmost good faith (uberrima fides) in all insurance and reinsurance contracts. For marine insurance contracts, this duty is implied by the Marine Insurance Act. The duty requires both parties to act in good faith and with regard to the interests of the other party. It is particularly relevant where the policy requires the insured to provide information and assistance to the insurer in particular circumstances, and where an insurer exercises its right of subrogation and conducts the insured's defence against a third party.
The insured also has an affirmative duty to disclose all material facts and refrain from making untrue statements when negotiating the insurance contract. The insurer may otherwise be entitled to avoid the policy on the ground that it has been induced into entering the contract by the insured's failure to disclose material facts. In such a case, the insurer must also return any premiums paid by the insured as soon as is practicable.
The duty of disclosure is central to the ideal of fair dealing and has been consistently upheld by the courts, although the precise scope and application of the duty may differ depending on the type of insurance. At present, however, Singapore law does not prohibit insurers from relying on "basis" clauses in relation to the assured's declarations in insurance policies to avoid insurance contracts.
The High Court of Singapore in Sumplies Investments Pte Ltd v AXA Insurance Singapore Pte Ltd (2006) 3 SLR(R) 12 considered the assured's duty of good faith in the context of fraudulent devices in advancing claims and referred to AXA v Gottlieb (2005) EWCA Civ 112. However, the Singapore courts may likely be persuaded to reconsider Singapore law following the influential UK Supreme Court decision in The DC Merwestone (2017) AC 1.
Insurance contracts cannot offer coverage for loss or damage caused by the wilful misconduct of the insured.
An insurer has the right to avoid an insurance policy in the event that there was non-disclosure of materials facts on the part of the insured when the insurance contract was written.
A proposer is also entitled to the return of premiums where an insurer has breached its obligation to deal with the proposer with the utmost good faith.
Policy coverage disputes in the last 12 months have included:
There has been clarification on the non-disclosure of material information that has allegedly led to the inducement of underwriters in renewing a policy. This position was clarified in the recent case of Zurich Insurance PLC v Niramax Group Ltd ((2021) EWCA Civ 590). The English Court of Appeal dismissed the insurers’ appeal on the issue of whether Zurich’s underwriters had been induced by a non-disclosure.
The insurers’ argument was not that the policy would have been written on different terms had the requisite disclosures been made, but rather that it would not have written the policy at all. The first instance judge found that the policy would still have been written but at a higher premium due to internal errors in pricing the risk rather than because of the non-disclosure. This decision was upheld by the Court of Appeal.
The insurers argued that the relevant test was the "but for" test. However, the Court of Appeal disagreed, holding that the relevant test was whether the non-disclosure was the “efficient cause”. Applying this “efficient cause” test to the facts, the Court of Appeal upheld the first instance judge’s decision in concluding that the underwriters had not been induced to write the policy. There was also evidence that had the non-disclosed information been provided to the insurer, a higher premium would likely have been charged. This would have been a likely reaction to the error in the underwriter’s initial pricing rather than because of the non-disclosure.
The above position would likely remain the legal position in common-law countries like Singapore.
As such, policy coverage disputes in relation to non-disclosure require the said non-disclosure to be the “efficient cause” of the underwriter’s inducement to enter into the contract.
Interpretation of the Term “Deliberate Acts” in a Public Liability Policy
The UK Supreme Court recently had to interpret the term “deliberate acts” in a public liability policy in the case of Burnett or Grant v International Insurance Company of Hanover Ltd ((2021) UKSC 12).
The claimant’s husband was killed following an assault on him by the first defendant, a nightclub door steward employed by the second defendant. It was not disputed that the first defendant had not intended to cause the death of, or any serious injury to, the claimant’s husband. The second defendant was insured under a public liability policy issued by the fourth defendant. The policy covered, among others, liability arising out of accidental injury. However, the policy excluded liability for injury arising out of “deliberate acts” of employees.
The first instance court held that the exclusion applies only when the outcome was the intended objective. Because there was no such intention, the exclusion did not apply. This was upheld on the first appeal where it was held that “deliberate acts” only included acts by the insured with the deliberate intention of reaching a particular objective. In essence, this would require the first defendant to have deliberately intended the death of, or serious injury to, the claimant’s husband.
This was brought to the UK Supreme Court where the insurers’ interpretation of “deliberate acts” was accepted. It was found that “deliberate acts” mean acts which are intended to cause injury, as the policy did not distinguish between different kinds of injury.
As such, it was found that an intention to injure in whatever way was sufficient to qualify as a "deliberate act".
See 1.1 Statutory and Procedural Regime.
Where the law views the insured party as a consumer, this does have an effect on claims, as different protections are afforded to customers under Singapore law.
Under the Consumer Protection (Fair Trading) Act (Chapter 52A), consumers can commence legal action against suppliers of services if a supplier has engaged in an unfair practice.
An unfair practice is defined as:
Insurance companies, as suppliers of financial services, are subject to the Consumer Protection (Fair Trading) Act. An insurance company that engages in unfair practices, may face legal action commenced by the consumer. Life and health insurers are also obliged to provide consumers with a 14-day "free look" period from the receipt of the policy to reconsider their decision to enter into the policy.
Alternatively, the Consumer Association of Singapore (CASE), a specified body under the Consumer Protection (Fair Trading) Act, can require the insurance company to enter into a voluntary compliance agreement after investigating the matter and determining that the insurance company engaged in an unfair practice. Under such an agreement, the insurance company must undertake in writing to refrain from unfair practices and may also be required to:
Motor Vehicle Act
Under the Motor Vehicle (Third-Party Risks and Compensation) Act, an insurer must comply with judgments made in favour of a third party following a motor vehicle accident. Where the insured has become bankrupt or has been wound up, a victim of an accident or an involuntary creditor may be entitled to recover its judgment debt directly from the bankrupt-tortfeasor's insurer under the Motor Vehicle (Third Party Risks and Compensation) Act. This is regardless of whether the insurer may have been entitled to deny coverage to the insured tortfeasor, if the insurer had at least seven days' notice of the commencement of proceedings and the insurer is not entitled to, and has not avoided, the insurance policy on the ground of non-disclosure.
Third Parties (Rights Against Insurers) Act
Victims and involuntary creditors of bankrupt or wound-up tortfeasors can also seek recovery of the insolvent tortfeasor's liability to the victim from liability insurers under the Third Parties (Rights Against Insurers) Act (Chapter 395), in priority to other claimants against the insolvent estate of the tortfeasor. However, the victim must stand in the shoes of the insolvent tortfeasor, and is therefore subject to the terms of the relevant liability insurance policy. The liability insurer may therefore be able to avoid liability to third parties under the Third Parties (Rights Against Insurers) Act by relying on pay-to-be-paid clauses in the relevant insurance policy.
Civil Law Act and Marine Insurance Act
A third party can also claim under the policy if the policy has been duly assigned to them in accordance with the Civil Law Act (Chapter 43) (and/or the Marine Insurance Act for a marine insurance policy). Where the right of payment under a policy (eg, a life policy) has been assigned in accordance with the Civil Law Act, the assignee of the right to payment can also claim payment in place of the insured/assignor.
Contracts (Rights of Third Parties) Act
Under the Contracts (Rights of Third Parties) Act (Chapter 53B), a third party can also claim under a policy if either:
This Act allows a third party to bypass the doctrine of privity of contract in defined circumstances and to make a claim under the insurance contract in their own name. However, the law on the rights of third parties to a contract is complex, and a third party may not necessarily be entitled to claim under the policy in the above circumstances. A comprehensive analysis of the Act and its corresponding case law will therefore be required. Insurance policies commonly exclude the rights of third parties to claim under the policy.
This does not apply in Singapore.
There is clear public policy interest in ensuring that insurance customers are protected against unreasonable delay in the payment of claims. This point does not appear to be in doubt. For example, the Singapore Insurance Brokers’ Association Code of Practice contains a specific commitment to consumers that claims will be handled “fairly and promptly”, and it is a common licensing condition for all insurance companies registered with the MAS that the insurer will treat all policyholders fairly.
Section 35R of the Insurance Act (Chapter 142) provides for representations by insurance intermediaries.
An insurance intermediary is defined in the Act as a person who, as an agent for one or more insurers or as an agent for insureds or intending insureds, arranges contracts of insurance in Singapore. This includes an insurance agent or an insurance broker.
As such, brokers would not be able to make representations that are false or misleading, or omit to disclose any matter on behalf of the parties they represent.
The delegated underwriting segment is one that is on the rise in Singapore. However, it is a rather recent development that has yet to mature.
It was announced in November 2015 that specialist insurance and reinsurance company, Lloyd’s, had launched its new, expanded specialist underwriting platform in Singapore. Data from the MAS showed that Lloyd’s is the largest provider of offshore insurance premium income in Singapore. In April 2015, the MAS gave the green light for Lloyd’s Asia service companies to sub-delegate their underwriting authority to insurance intermediaries both within Singapore and overseas. It remains to be seen whether this arrangement will give rise to more issues to be litigated.
A liability insurance policy protects an insured against claims resulting from injuries and damage to people or properties. In addition, it covers any legal costs and payouts for which an insured is responsible, if the insured is found legally liable.
The main areas of claims where insurers fund the defence of insureds include bodily injury, property damage, advertising injuries, and legal fees.
These are common claims in insurance and are unlikely to change in the near future.
No information is available on this in Singapore.
After-the-event (ATE) insurance, or litigation insurance, is a legal expenses insurance policy put in place once a legal action/dispute has arisen to cover the costs associated with the same. It is available to both the claimant and defendant and provides coverage for legal costs incurred in civil litigation disputes/action. In addition, it can be used for various legal actions such as negligence cases, commercial disputes, contentious probate, and personal injury claims.
ATE policies have been issued for disputes involving international arbitration and litigation, although the same are commonly used in legal proceedings in the UK. Usually, ATE insurance policies cover legal costs that a plaintiff/claimant is liable to pay to a defendant when a claim is unsuccessful.
Insurers are able to recover sums from third parties who have caused loss to an insured, through the process of subrogation. In this process, the insurer assumes or takes on the rights or conditions of the insured that arose as a result of the loss or diminishment that the insured is insured for.
The principle of subrogation is set out by Brett LJ in Castellain v Preston (1883) 11 QBD 380: “The contract of insurance... is a contract of indemnity... and this contract means that the assured, in the case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified.”
To the extent that an insurer steps into an insured’s shoes, an insurer can only exercise its rights of subrogation through the insured (ie, in the insured’s own name). An insurer would not be entitled to bring an action against a third party in the insurer’s own name unless the insured’s cause of action has been assigned to it (Esso Petroleum Ltd v Hall Russell & Co (1989) AC 643).
The COVID-19 pandemic and war in Ukraine have had an impact on:
These two devastating events have sent shock waves through the global economy. They have disrupted supply and demand worldwide, caused a steep dip in business and consumer confidence, and resulted in job losses, difficult financial conditions and lack of economic prospects. In addition, the energy market has been disrupted, energy prices have risen sharply, the supply of food has been affected and as a result, inflation rates have risen significantly.
All of this has directly impacted the way businesses operate and elevated the risks of default.
Most commercial insurance claims are likely to involve business interruption losses due to disruption from these global events. However, policyholders may encounter a few problems while making claims.
Although most businesses hold business interruption insurance, their policies often exclude liability in the event of viruses, eg, COVID-19, or cover only named diseases. Although insurance disputes relating to COVID-19 are emerging between insurers and insureds, especially regarding business interruption test cases, there have been no reports of court proceedings currently dealing with the validity of business interruption claims in Singapore, most likely due to "subject to arbitration" clauses in the insurance policy, the proceedings of which are confidential.
This situation is unlikely to change in the next 12 months.
See 7.1 Type and Amount of Litigation.
The measures taken to limit the spread of COVID-19 have significantly disrupted global economic activities. Coverage will differ, depending on the type of insurance policy, and whether the insurance policy will cover losses related to COVID-19 will depend solely on what liabilities the said policy includes or excludes.
Some insurance companies have offered detailed coverage for business interruption losses due to an infectious disease outbreak (eg, COVID-19), either as a standalone policy or as an endorsement to a policyholder’s existing business interruption coverage. In addition, some companies are providing free additional insurance cover against COVID-19 to their customers.
As a result of the uncertainty brought by COVID-19 and the Ukraine war, risk appetites have consequently dropped, as businesses are less willing/able to undertake risks when the future remains uncertain and bleak.
The push for change to limit carbon emissions has had a number of key financial implications for insurers, including uncertainty in business volumes, claim frequency and severity, capital impacts, customers’ ability to make premium payments, as well as a changing risk profile and business mix.
There is a need to reprice current products or modify product offerings, so that businesses can attempt to reduce carbon emissions and achieve carbon neutrality. There is also a need to assess the existing reinsurance arrangements to understand the exposure to different counterparties and limits.
Most of the recent amendments to Singapore’s Personal Data Protection (Amendment) Act 2020 have been in force since 1 February 2021. The amendments update Singapore's regulatory framework and seek to balance economic needs with the protection of consumers' data rights.
The Personal Data Protection Commission (PDPC)
The amendments introduce, among other things, a mandatory breach notification regime. Organisations must notify the Personal Data Protection Commission (PDPC) of significant-scale data breaches, which occur on or after 1 February 2021. A significant-scale breach is one that affects or is likely to affect 500 or more people. Organisations must also notify both the PDPC and affected individuals when a data breach (again, on or after 1 February 2021) results in or is likely to result in significant harm to individuals. This includes a combination of personal data and, often, financial, health or other sensitive data. Schedules to the Personal Data Protection (Notification of Data Breaches) Regulations 2021 stipulate the categories/types of data likely to result in significant harm.
The amendments are likely to increase the demand for cyber-insurance in Singapore. The combination of the PDPC's enforcement approach, mandatory breach notification and the significant increase in the maximum fine amounts (up to SGD1 million or 10% of annual turnover in Singapore, whichever is higher) means that there is likely to be an increase in the number of investigations and higher fines, which might prompt organisations to consider their insurance cover in this regard. Other countries in South-East Asia are also introducing new or modified data protection laws.