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SINGAPORE: The public outcry over the sale of Income Insurance to the giant German financial service company Allianz holds useful insights on what concerns Singaporeans and lessons on how to address them.
There are four issues worth examining.
First is the angst that selling Income was a betrayal of the original idea by former Deputy Prime Minister Goh Keng Swee who started the insurance co-operative to serve the needs of low-income workers.
Singapore owes a huge debt to the under-appreciated achievements of Dr Goh, whose far-sighted vision and intellect paved the way for many of the institutions that led to the country’s rapid development over the decades.
He understood the needs of poorer Singaporeans for affordable goods and services as the economy developed and urged the labour movement to launch co-operatives to serve them.
It is interesting he proposed insurance as the first such venture, an indication of how important he believed it was to the welfare of these workers.
He had another motive: To modernise and strengthen the labour movement so that it would continue to be relevant to the people. What better way to do this than to get the National Trades Union Congress (NTUC) involved in services that workers needed most and priced accordingly. Several co-operatives were started after Income, including Comfort for taxi drivers and the retailer FairPrice (originally called NTUC Welcome).
It is a testimony to his far-sightedness that Dr Goh’s co-operative idea worked for more than 50 years providing millions of Singaporeans with insurance coverage throughout their working life.
I do not think he would have objected to the change made in 2022 to corporatise Income. It was inevitable as co-ops are limited by their ability to raise capital, which is a major drawback in the highly competitive insurance business dominated by large international companies with financial firepower.
It was thus the right decision in 2022 to turn it into a corporation but with ownership still firmly in the hands of the NTUC.
What is more important than how the entity is structured is the original motive: To provide lower-priced products for ordinary workers.
The co-operative idea may be outdated but the needs of low-income people are as urgent as they were in 1970.
Any move to change Income’s identity has to place this objective at the top.
Which leads me to the second issue to do with how Income built its customer base and its responsibility to them.
There are several organisations in Singapore that were launched soon after the country’s independence and whose growth mirrored the economy, including POSB and DBS banks, Singtel, Singapore Airlines, NTUC FairPrice and Income.
In the early years, they enjoyed a unique position providing needed services for almost the entire population, sometimes under special arrangements with the government.
When I was doing my national service in the 1970s, we had to open a POSB account to credit our monthly allowances into.
That’s an army of account holders from which the bank was able to grow until it was acquired by DBS in 1998.
Similarly, Income benefited from its labour movement connections and many of its customers today, including 1.7 million Singaporeans, would have started their accounts from those humble beginnings.
When ElderShield, which was a government plan to provide long-term care for severely disabled persons began in 2002, the business was given to only two local insurers, Income and Great Eastern.
Given this history, it is not surprising that many Singaporeans have high expectations of these institutions and of their responsibilities to stay true to their original mission.
When your business was supported by a generation who stood by you through thick and thin in the early years, I think you have a special responsibility to them.
This isn’t about being overly sentimental about the past. In fact these sentiments should be celebrated and encouraged because they show that Singaporeans care about the country’s icons and the pioneering spirit that shaped them.
It reinforces Singapore’s identity by strengthening the emotional connections people have with the past and their institutions.
Which leads to my third point about the sale to a foreign company. It is this, I believe, that gets people the most upset.
The latest remarks by NTUC Enterprise justifying the sale to Allianz were useful in explaining the challenges faced by Income in recent years amid the growing competition in the business, domestically and internationally.
But they did not go far enough to persuade naysayers. Income is not a struggling business in dire need of funds from a foreign company.
Indeed, if you read reports by independent financial consultants as recently as late last year, their assessments were very positive about Income’s prospects.
Here is one excerpt from Zero One, dated December 2023:
“The company offers stable long-term growth potential with a defensive base of business, due to its well-entrenched business in Singapore, as well as its digital transformation initiatives which will allow the company to not only increase its competitiveness in Singapore but also expand regionally.”
Of course, with Allianz’s backing now, it is possible that Income Insurance can become even more competitive and profitable.
But you could say this of any Singapore company to justify its sale to an international giant. DBS might do better if it was bought by JP Morgan, the largest bank in the world.
Should Singtel be sold to T-Mobile US or China Mobile?
These sales might be good for the owners of the company being bought but will they benefit Singapore customers?
Given Income’s history and its social mission beginnings, a sale to a foreign company is the worst possible option to reassure its customers about the new owner’s intentions.
It would have been much better had the sale been to a Singapore company.
Now that it looks like a done deal, the two parties should try to work towards some legally binding commitment to ensure there is no fundamental change in its mission to be the provider of low-cost services for Singaporeans.
Finally, there is a lesson in this saga about how to communicate major changes that affect a very large number of people.
Income and its parent company NTUC Enterprise failed to appreciate the deep feelings and emotion involved and were put on the defensive right at the outset when the news broke.
With so many people affected and given Income’s history, there should have been a comprehensive plan to consult stakeholders and communicate the move to the public.
It would have been a good opportunity to explain the challenges facing the insurer and what the options were.
Instead, it was presented as a fait accompli to an unsuspecting public.
There are sensitivities involved in a commercial negotiation with another party but a good communication plan can take this into account without breaking disclosure agreements.
Such a plan should begin well before selection of the suitor.
This failure extends back to the 2022 announcement that the co-operative was to be corporatised.
That was also disclosed in a sudden press statement with little public discussion.
When the matter was raised in parliament in February 2022 about how the change would affect Income’s social mission, the government’s answer in three paragraphs was that the needs of workers for affordable insurance coverage were best served by having a vibrant and competitive industry.
An opportunity was again lost to educate the public about the realities of the new world.
Although the sale of Income and the adverse public reaction isn’t directly connected to the government, it has suffered collateral damage because of its close links to the labour movement.
I fear the issue isn’t just about the art of communication, which can be remedied.
More serious is a lack of understanding of the ground and what people are concerned about.
That’s a more serious problem that money cannot fix.
Han Fook Kwang was a veteran newspaper editor and is senior fellow at the S Rajaratnam School of International Studies, Nanyang Technological University
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