NTUC Income - promoting cooperative insurance in Singapore

1. Introduction

NTUC Income was formed in 1970 by the trade union movement. It was established as a cooperative society and registered to transact insurance business. Its initial capital was SGD 1 million. Most of the capital was contributed by the trade unions in Singapore.

Its initial strategy was to provide life insurance to the ordinary people. It introduced insurance products payable by small monthly premiums that are deducted from the monthly wages of the policyholders.

At the initial stage, the insurance policies were sold by part time sales agents who are members of the trade unions. They sell the insurance to their colleagues in the workplace.

2. Growth

Over the past 37 years, NTUC Income had achieved tremendous growth:

* Premium income in 2006: SGD 2,200 million

* Total assets at end 2006: SGD 18,700 million

* Number of policyholders: 1,800,000

* Number of policies: 3,200,000

* Market share in life insurance: 12.9 %

* Market share in general insurance: 10.9 %

* Market share in health insurance: 29.8 %

It has the largest market share in general and health insurance, and the third largest in life insurance in Singapore.

It covers about 50% of the resident population in Singapore (excluding the short term foreign workers).

It has a rating of AA by Standard and Poors. This is the highest rating among all insurance companies in Asia.

3. My Observations

I joined NTUC Income in April 1977 as the general manager and actuary. I was re-designated as the chief executive and held this position until my retirement in March 2007. I served for 30 years in NTUC Income.

I wish to share my personal observations of the key factors that contributed to the growth and success of NTUC Income during this period.

4. Advantages

During the initial years, NTUC Income had the following advantages:

* As a cooperative society, it enjoyed a different tax treatment from commercial companies

* It was able to use the large network and connections provided by the trade union movement

It also had the following disadvantages:

* Inadequate capital and human resources

* Limited access to know-how and best practice

My management team decided to adopt strategies that enhance our advantages and minimise our disadvantages.

5. Strategies

The strategies adopted by NTUC Income over the past years are:

* operate at low cost
* market the advantages of insuring with a cooperative
* look after the interest of the policyholders
* achive high standard of customer service
* develop international links

I shall elaborate on them.

6. Low Cost

NTUC Income operates at lower cost, to reduce the premium payable by the policyholders. This is achieved through the following:

* Lower commission paid to the agent to sell the insurance policies

* Simplified administration processes

* Low cost of collection of premium through salary deduction and bank transfers

* Simple products (avoid complicated features)

* Use of low cost technology

7. Cooperative

NTUC Income communicates actively with its policyholders. The key messages are:

* NTUC Income is a cooperative society

* It aims to serve the best interest of its policyholders

* It operates at low cost, to reduce the premium payable by its policyholders

* Its shareholders receive a modest dividend on the share capital

* Most of the surplus (98%) are distributed as bonuses to policyholders

* The policyholders get a better return on maturity compared to similar products offered in the market.

These messages have been effective in getting many policyholders to join the cooperative. The insurance agents use them to convince customers to come to NTUC Income.

8. Members Interest

NTUC Income aims to look after the best interest of its policyholders:

* It offers products that meet their protection and investment needs

* It does not aim to sell products for the sake of making profits for shareholders

* It encourages policyholders to keep the existing insurance policy, instead of replacing them with a new policy

* It upgrades existing products to give better benefits to policyholders

NTUC Income has a high retention rate of its policyholders, compared to the market. It has built a loyal following of policyholders.

9. Customer Service

NTUC Income has achieved a high level of customer service:

* Employees and agents to access relevant information on the computer to service the policyholders.

* Policyholders are given access to their records by using an ID and password

* Its call center has achieved international recognistion for innovation and customer service

* It has an active website that is easily accessible by policyholders, employees and agents

* It adopts a practice to respond promptly to requests to policyholders

10. International Links

NTUC Income has active links with cooperative insurance societies in other countries, through its membership and participation in the activities of the International Cooperative and Mutual Insurance Associations, the Asia and Oceania Assocation of ICMIF and the International Cooperative Alliance.

These links allow NTUC Income and its managers to learn about the experiences and best practices of other cooperative societies. They have been helpful in shaping the business strategy, marketing, product innovation and other business processes.

NTUC Income has strong links with Zenrosai for the past 25 years.

11. Lessons

The key lessons that can be learned from the past 30 years of growth of NTUC Income are:

* It has to operate efficiently, to reduce cost to the policyholders

* It has to provide a high level of customer service

* It has to educate the policyholders on the role of a cooperative society in serving its policyholders

12. A Personal Message

I have benefited personally through my long association with Zenrosai. On the occasion of the 50th anniversary of Zenrosai, I wish to send best wishes to the leaders, employees and policyholders of Zenrosai and to wish your organisation greater success in the years ahead.

Tan Kin Lian
Retired CEO,
NTUC Income, Singapore