NTUC Income, Strategies for Success as a Cooperative
Article for ICMIF World
December 2005
Paper presented by Tan Kin Lian, Chief Executive Officer, NTUC Income


1. INTRODUCTION

NTUC Income was established with an initial capital of S$1 million in 1970. Our aim is to serve the lower income groups by providing affordable insurance. In our 35 years of operations, NTUC Income has matured into a leading composite insurer with over:

- 1.8 million policyholders
- S$15 billion assets (US$9 billion)
- Total premium income of S$2 billion in 2004 (US$1.2 billion)
- 15% market share in life, general and health insurance.

We are the largest general insurer in Singapore and the third largest life insurer, by market share measured in premiums. We are rated 'AA' by Standard & Poor. This is the highest rating given by the rating agency for all insurance companies in Asia.

2. COOPERATIVE ADVANTAGE

As a cooperative, we work for the best interest of our policyholders. We allocate 98% of our profits to policyholders. Our shareholders receive a modest rate of dividend, which takes up about 2% of our annual surplus. We believe in serving our customers well and in treating them fairly.

We act transparently. We communicate the terms of the insurance contract clearly to them. We ask them to work with us to prevent unnecessary claim payments, especially for the repair of motor vehicles. By helping to prevent inflated claims, our policyholders will benefit from lower insurance premiums.

We work efficiently and keep our expenses low. This helps us to lower the cost of insurance to our policyholders, and give them better value for their premiums.   We have one of the lowest expense ratio in the industry.

We educate our customers about the principles of insurance and how a cooperative behaves differently from a profit-driven insurance company.  We market our cooperative advantage.

3. TECHNOLOGICAL ADVANTAGE

We have built up a strong e-business capability for our insurance processes. This helped us achieve higher efficiency and lower our cost of business operations. We use the Internet website actively for sales support, lead generation and customer service. Customers can also submit insurance transactions and claims through the internet.

Our website attracts 50 million hits a month, from an estimate 1 million visitors. We were awarded as the best insurance website in Asia in 2005. Our website provides comprehensive and user-friendly informative to the public.

Our call centre handles 120,000 telephone calls a month from our customers. We handle their enquiries, transactions insurance applications and claims. We were awarded the best call center in Singapore and the second best in the Asia Pacific region in 2005.

We believe that success in the insurance business of the future depends on the ability to offer a wide range of attractive insurance products at competitive cost and providing prompt and excellent customer service.

4. INNOVATION

We have implemented several innovative approaches to handle our business. We invite our quality workshops to tender for the repair of motor vehicles. This helps us to reduce our repair cost by about 20% and maintain a satisfactory standard of repair and customer satisfaction.

We advice our medical insurance policyholders on the best hospital to treat their medical condition. This helps to keep down the cost of medical treatment, and ensure a satisfactory quality.

We have adopted new approaches in our marketing and training of employees.

We believe that our success depend on our ability to manage our business in an innovative way that can make us better than our competitors.

5. Challenges in Recent Years

We faced the following challenges in recent years:

  a.. 30% of life insurance sales are now sold by the banks.  We are not able to have a share of this market, as the banks insist on high commission rates that are beyond the margins allowed in our products.
  b.. Investment linked products now account for 50% of life insurance sales. We have a smaller share of this market, as our tied agents prefer to sell the traditional products that offer guaranteed returns.

These changes have a significant impact on our life insurance sales in recent years.

6. Our future strategies

We will be adopting two important strategies to help us to serve our customers better in the future.

Firstly, we will increase the number of educational seminars that are organised for our policyholders. These seminars will cover the different types of insurance and financial products. Our policyholders have found these seminars to be very useful and educational. We expect these seminars to be more popular in the future.

Secondly, we will develop a channel for policyholders to buy their insurance directly from us. We will offer them a discount on the premium, if they come directly.  This channel will supplement the sales made by our insurance advisers who visit the homes of the policyholders. We believe that some customers may prefer to come to us through our website or visit our office. The new channel will give them this choice.

The business environment has changed. By keeping up with the changes, we hope to remain relevant to our customers and be able to serve them better. We will, however, keep our cooperative identity and offer our policyholders with "the cooperative advantage".