Operating a business in such a well-regulated environment such as Singapore calls not only for reliable legal defenses but also for sufficient insurance coverage to mitigate the risks and costs involved. Some of these business insurances are required by law for every company in Singapore, while others are highly advisable to have a business running smoothly.
Below is the list of those insurance policies which are most often mentioned in connection with operating in Singapore or in Singaporean regulations. Those entrepreneurs who would like to clarify whether a particular insurance policy fits their individual situation should consult with an experienced lawyer to have their insurance agreement reviewed and possibly revised according to their needs.
1. Business Interruption and Consequential Loss
According to several publications, business interruption was named the top risk for businesses in Singapore in 2020 for the third year in a row, coming as a consequence of other major risks such as cyberattacks or natural catastrophes. The business interruption insurance is designed to mitigate such risks, providing coverage for loss of revenue, wages, and rising costs due to suspended business operation.
With the spread of coronavirus, aka COVID-19 in 2020, many companies are reviewing their business interruption policies to see if they might cover the resulting losses. While most existing business interruption policies do not cover damages from epidemics, in some cases, they can still be applied for losses consequential to bacteriological contamination, for example, closure of premises for quarantine, suspended deliveries of supplies or other similar situations.
2. Data Breach or Cyber Insurance
With the risk of cybercrimes ranking high among other perils for running a business in Singapore, many entrepreneurs consider data breach and cyber insurance as an essential part of their insurance package.
Although cyber insurance wouldn’t protect companies’ information systems and data against theft or loss, it can provide the insured with various type of compensations, so much needed when under attack, including the coverage of corporate liability, costs of data recovery, costs of investigation, and losses of revenue.
Due to the novelty and variety of challenges faced by companies in the realm of data security, the scope of insurance differs depending on the insurer and must be checked against the offered insurance plans.
3. Extension of MediShield Life Health Insurance
All citizens and permanent residents in Singapore are automatically covered by the MediShield Life insurance administered by the Central Provident Fund. Since this insurance covers only inpatient stay in public hospitals of B2 and C categories, the employers in Singapore should extend the healthcare benefits to their employees according to the guidelines of the Employment Act.
Singaporean businesses can make contributions to Medishield in several ways, including:
- portable medical benefits scheme, making monthly contributions to employee’s MediSave account,
- transferable Medical Insurance Scheme, buying an additional hospitalization and surgical coverage,
- Integrated Shield Plan, extending coverage to inpatient treatment in A or B1 ward types or private hospitals.
4. Work Injury Compensation Insurance (WISI)
This is one of the obligatory insurances which should be provided by employers in Singapore according to the Work Injury Compensation Act. According to the law, employers have to provide coverage for:
- all employees involved in manual work, regardless of their salary level,
- all employees involved in non-manual work provided their salary exceeds certain thresholds.
The amendments into the Work Injury Compensation Act presume a gradual increase in the salary threshold for non-manual employees to claim the insurance. Previously, such threshold was equal to $1,600, but starting from April 01, 2020, it will make $2,100. Next year, the minimum salary for a non-manual employee to claim compensation under WICI will be further increased up to $2,600, starting from April 01, 2021.
5. Directors and Officers Insurance
This policy protects companies’ officials from claims made by any third parties, such as shareholders, customers, or government authorities. In a general case, it includes allegations of any type of wrongful acts, errors, and omissions in the course of fulfilling job duties.
The directors and officers (D&O) insurance compensate for legal costs, civil fines, penalties, and other losses. Among the claims covered, the D&O policy includes claims for:
- non-compliance with any regulations, such as licensing or securities trading rules,
- failure to inform the shareholders of the company’s financial standing,
- breach of employment law through harassment or wrongful dismissal,
- breach of copyright by copying a product or a business model,
- other breaches of duties foreseen by law or company’s internal regulations.
6. Product Liability Insurance
All businesses involved in manufacturing should consider product liability insurance covering bodily and proprietary damages to others caused by defective products. Taking into account the potential sums and the number of claims which may arise in connection with damage to consumers, this coverage is crucial for any business involved in production-related industries, including but not limited to:
- manufacturing and production,
- wholesale and retail operations,
- food industry and catering industry,
- power and energy sector,
- transportation and logistics.
7. Professional Liability Insurance
This policy is specific to those businesses in Singapore, which are providing professional services, such as lawyers, accountants, consultants, medical practitioners, architects, and engineers, among others. Clients rely on consultations of such professionals and have the right to file a claim in case of suffering losses due to malpractice or breach of professional duty.
The professional liability insurance protects against the mentioned risks as well as compensates the cost of legal expenses when the clients decide to bring the matter to the court. Having such insurance, business professionals can operate safely without holding anything back with their professional liability fully covered.
8. Public Liability Insurance
This insurance policy protects companies against liabilities that arise in connection with their business, including manufacturing and distribution of products. In addition to covering bodily injuries and/or property damage, it insures personal and advertising liability and may have extensions to provide for miscellaneous errors and omissions.
This insurance is essential whenever the company interacts with the public in any way, such as the delivery of goods, accommodating clients in its offices, holding an event, or when sending employees to work within clients’ premises. It’s most relevant for construction companies, manufacturers, distributors, service providers, including banks and telecommunications, real estate operators such as hotels, resorts, as well as retailers.
9. Trade Credit Insurance
With ever-increasing competition in all types of industries, the sale of products and services becomes of utmost importance. In these conditions, many businesses which are trying to compete by offering their clients post-payment and selling their goods and services on credit terms, expose themselves to the risks of non-payment.
The trade credit insurance is intended to provide protection against non-payment for various reasons, including customer insolvency, default, and political situation. It allows increasing sales while mitigating the risks, reducing bad debt reserve, and helping companies to manage accounts receivable.
10. Property Insurance
This is one of the most well-known types of insurance advisable to any business or entrepreneur, beginning from startups, whose property is limited to a few computers, and ending with multinational corporations, owning production facilities, machinery, fixtures, office equipment, inventory, and tools.
This insurance protects all tangible business assets from damage and loss by fire, flood, theft, vandalism, and other perils. Considered as a must-have for all companies, especially for those, whose business depends on the use of property or equipment.
The above list of insurances is non-exclusive and includes only those which are most often called for in a general business setting in Singapore. There are many other types of insurance, specific for certain industries, for example, Marine Cargo Insurance or Vehicle Insurance, which are required if a company is involved in transportation by sea or owns cars needed for its operations.
It shall be also be noted that the scope of coverage will depend on the insurer and the terms of the contract. The above descriptions of risks included in insurance policies are the examples only, and all policyholders are advised to check the exact scope of risks covered by their individual agreements.
Businesses in Singapore should carefully map the risks associated with their operations and provide the coverage for those in insurance agreements. While some insurance policies include standard terms which must be accepted by the insured, others are negotiable or at least can be added to provide for the required protection.
It is highly advisable to show your insurance agreements to a lawyer at the stage of negotiating with the insurer or even if the agreements have already been signed. An experienced insurance attorney would help to outline the existing as well as desirable coverage and clarify all the procedures to follow in insurance cases to make sure you are fully covered.