Simplicity needed to untangle insurer Income's Gordian knot

Tapping its DNA to offer cheap, simple products might be one way to move forward

- Claire Huang

Sometimes, less is more. This axiom can be applied to the Gordian knot that seems to bind home-grown Income Insurance.

As some observers note, its humble roots might just be a source of inspiration.

The National Trades Union Congress (NTUC) set up its first cooperatives in 1970 - the insurer NTUC Income and NTUC Comfort, a taxi cooperative.

The insurer was started by Singapore's trade union leaders, who pledged $1.2 million from their workers' funds.

Setting up NTUC Income was the Government's way of helping lower-income workers get much-needed insurance cover at an affordable cost, and to encourage people to save.

A 2007 annual report stated that Income "saw a phenomenal increase in asset growth to $40 million" from 1970 to 1977.

Former NTUC Income chief Tan Kin Lian, whose tenure lasted 30 years from 1977 to 2007, said NTUC Income was "financially weak" when he took over.

He grew the insurer from an asset base of $40 million in 1977 to total assets of nearly $19 billion in 2007, with annual premiums exceeding $2 billion.

To achieve this, Mr Tan took a no-frills approach that kept sales and management expenses lower than industry norms.

His agents' income was solely based on commissions and even those were half the market rate.

Despite this, the agents were happy as sales were brisk because premiums of Income's products were 10 per cent cheaper than its competitors'.

Never mind that NTUC Income was not fancy, and that it did not have bancassurance partnerships with banks - or brokers. What Mr Tan lost in having cheaper products, he made back in volume and the business hummed along.

THE TRICKY BALANCE

In those early years, there was a line of thinking that cooperatives had to focus on profitability, so they were sustainable and there could be more returns to plough back to society.