There was a discussion in the Finance community recently on REPs Holdings and a blogger has written about it as well. Many were curious about their business of buying and reselling policies. Since I already know of someone from the company who approached me for a banner ad, I thought it would be a good idea to consolidate the questions and post it to them. I believe that both readers and the company will benefit from it.
Disclaimer: I am not paid to write this post and other than a paid banner ad, I have no links with the company
The questions are answered by Darren Tan, Senior Sales Manager from REPs Holdings.
1) Is your company repackaging the resale policies or just acting as a middle man between the buyer and seller?
REPs Holdings is an independent service provider specialising in buying and re-selling of local Resale Endowment Policies (REPs) since 2010. All the policies that we have are owned by the company using our own capital. We aim to provide a wide range of policies to suit the needs of our investors.
2) If it's the former, how can I mitigate counterparty risk since you're not regulated by MAS? If it's the latter, is it even legal and obligated by the insurance company to pay out to a person who bought the traded policy but is not the person insured?
We do not really repackage the REPs. Rather, we ‘clean’ it up and ensure the policies have good titles. We remove riders, change the mode of payment and do the necessary to maximise the returns and make it easy for the investors to manage. After the transfer is registered, the investor become the legal owner of the policies issued by MAS licenced insurers (not issued by us).
Third party policies, where the life assured and the owner are not the same person, are common. Eg. A company takes up a insurance policy on the life of its CEO. A parent can also own the policy on behalf of his child and the ownership is transferred to the child when he/she reach legal age (18-25). This is known as vesting.
Absolute Assignment is the legal transfer of policy ownership from the Assignor to the Assignee. This is part of the policy provisions of the insurance contract. The rights of the Assignee are absolute and only the Assignee can give a legal discharge to the insurer for the policy.
We have been in this business for 5 years and have numerous policies that have matured both owned by us and our investors. Some are happy that the maturity value are higher than they expected.
3) Are all the policies you have for offer bought locally? If not, which countries are they from?
Yes, we only accept endowment which are issued by MAS licenced insurers. As we are the primary investor, we perform stringent due diligence checks on the policy at the insurance company. Most of the REPs are in Singapore Dollars so there are no currency risks for investors. We also have some policies that are denominated in USD.
4) What and how do you stand to profit from the trade? Do you get a cut from the initial sum, sort of a front loading as your commission etc?
4b) How do you make money? Are there hidden costs?
The financial fundamental of REPs is the discounted rate over its real policy value. Our company operate in 2 ways: We hold the REPs to maturity or resell them to other investors for a small margin on the initial sum.
Investors only have to pay us the initial sum as stated on the factsheet for taking over the policy and future premiums (if any) are made directly to the insurer. There are no other costs. When an investor takes over a resale endowment from us, he/she is not buying a policy created by us but one that is issued by MAS licenced insurer.
5) Does the policyholder's name changes to the for example A if i buy over the policy while the insured still remains as B?
Yes. There will be a written endorsement or the insurer will issue a new certificate stating the name of the new policyowner.
6) When the word insurance is used, we often relate to financial planning, coverage etc. I would believe your company does not do those because you will need a license. How then do you differentiate your business clearly?
We are the product provider of Resale Endowment Policies. We will provide a weekly update of our policies online and investors can directly choose the policies that suits their goal, time frame and financial gaps themselves easily. They can also work with their own financial advisers. We can offer factual information but we do not provide financial advice.
7) All these policies are bought as part of the policy owner holistic financial planning. If you are not licensed to offer any financial advice, how then can you explain to your customer to sell their policy?
We don’t. We only let policyholders who are discontinuing know of their options which include selling to us for a higher value so that they can make an informed financial decision. Our philosophy are in line with MAS Fair Dealing guidelines.
REPs Holdings welcome any further questions or feedback. If you have any other queries, feel free to leave your questions in the comment box below and I will ask Darren to reply here.
