Q I HAVE insurance policies with two companies and when I inquire on beneficiaries and claims, they provide different information.

Great Eastern (GE) quotes Insurance Act Section 61 and says that nominated beneficiaries, other than spouse and children, are indicative. Any proper claimant can make a claim. He/she is required to declare whether the insured has a spouse and children.

So GE advised me that there is no need to change the beneficiary of my insurance policy (which I bought before marriage) from my brother to my wife and children.

On the other hand, AIA quotes Conveyancing Law and Property Act (CLPA) Section 73, which allows changes to the named beneficiary with the current beneficiary's consent.

The catch is that all current beneficiaries have to be 21 years old and above before any change can be made.

I have policies with the following nominations:

Policy 1: My brother only;

Policy 2: My wife only;

Policy 3: My wife and a minor child; and

Policy 4: A minor child only.

How can I re-nominate all my policies to have my wife and three children as the only beneficiaries?

Can I quote CLPA Section 73 and ask GE to allow me to re-nominate my beneficiaries?

A BOTH Section 61 of the Insurance Act and Section 73 of the Conveyancing Law and Property Act (CLPA) may be relevant depending on the question to be addressed.

When you buy a policy on your own life and nominate a beneficiary or beneficiaries, the insurer is generally entitled to make payment to the named beneficiaries.

Where no beneficiary has been named or where it is stated that the money should go to the estate of the deceased policyholder, Section 61 of the Insurance Act allows the insurer to make payment of policy monies without the need to produce any probate or letters of administration to a proper claimant.

The Act defines a proper claimant as including the executor of the deceased policyholder's estate or someone who claims to be entitled to the policy monies and who is the widower, widow, parent, child, brother, sister, nephew or niece of the deceased.

However, when you nominate your spouse or your child or both as beneficiary/beneficiaries under the policy, you are deemed to have created a trust in favour of your spouse and child.

This is the effect of Section 73. Such a trust comes into existence automatically even if there was no intention to create the trust in the first place.

Once the trust is created, you, the policyholder, will be considered to be a trustee and will no longer have any rights or control over the policy as you have transferred the ownership of the policy to the named beneficiaries.

As a result, you cannot change the beneficiaries unless the named beneficiaries give their consent and are above 21 years of age.

If you are going through a divorce, you would have to obtain the consent of your soon-to-be former spouse to change the nomination and if such consent is not given, your lawyer will have to get a court order to enable you to change the nomination or nominate your future spouse as a beneficiary.

The rationale that underlines Section 73 is to provide family financial protection to the spouse and children of the policyholder.

For instance, if the policyholder is declared bankrupt and a payout occurs, the policy monies would be protected from his creditors.

In answer to both your questions:

As you have named your brother as the sole beneficiary in the first policy, no trust has been created so you may change the nomination. However, once you have changed the nomination to your wife and all three children, Section 73 would come into operation thereafter.

The other three policies are subject to Section 73 of the CLPA.

Policy 2 names your wife as the sole beneficiary. If she gives consent, you may change the nomination to include your three children.

The situation is, however, different with policies 3 and 4 as you have named a minor child as a beneficiary. As legal consent from these beneficiaries can be given only when they reach 21, it will not be possible for you to change the nomination in the mean time.

The Monetary Authority of Singapore (MAS) is aware of the fact that the present nomination framework and restrictions under Section 73 have caused some confusion and concern to policyholders.

MAS recognises that there is a need to make legislative changes to accord greater flexibility and clarity to policyholders as to how the insurance proceeds are to be disbursed.

It has therefore proposed some changes which entail amendments to the Insurance Act and repealing of Section 73. However these changes are currently still being considered.

Tan Lee Cheng
Lawyer
Harry Elias Partnership

Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to a1admin@sph.com.sg.

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