NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 2. Summary of significant accounting policies (continued) (c) Insurance contracts (continued) (i) Recognition and measurement (continued) General Insurance Contracts Premium revenue Premiums are recognised as written from the commencement date of insurance cover. Written premiums are reported in the financial statements on a gross basis, inclusive of commission payable to intermediaries. Premiums received in advance before commencement date of insurance cover are not recognised as revenue. They are recorded as advance premiums and included in “Insurance and other payables” in the statement of financial position until they are recognised as revenue when insurance cover commences. Claims Claims incurred comprise claims paid during the financial year, net of salvage and subrogation recoveries, and changes in provision for insurance claims. Salvage and subrogation reimbursements Some insurance contracts permit the Group to sell salvaged property (salvage) or sue liable third parties (subrogation) in recovering the cost of losses. Reasonable estimates of the salvage recoveries or subrogation reimbursements are included as an allowance in the measurement of the insurance liability for claims, and recognised in other assets when the liability is settled. Insurance contract provisions – General Insurance Fund The valuation of insurance contract liabilities is determined according to the Insurance Act and Insurance (Valuation and Capital) Regulations 2004 for general insurance funds. Provision for unexpired risks Provision for unexpired risks includes provision for unearned premiums and a provision for premium deficiency. The provision for unearned premiums represents premiums written for risks that have not yet expired. The provision is recognised when contracts are entered into and premiums are charged. The provision is released over the term of the contract. Additional provision for premium deficiency is made where the expected future claim costs and expenses and a provision for adverse deviation exceed the provision for unearned premiums. Provision for insurance claims Provision is made for all outstanding claims as at the reporting date. This provision includes all unpaid claims, claims incurred but not reported, the anticipated direct and indirect costs of settling these claims and a provision for adverse deviation. Investment Contracts Amounts collected on investment contracts, which primarily involve the transfer of financial risk are accounted for using deposit accounting. The liability is initially measured at its fair value less transaction costs that are incremental and directly attributable to the acquisition or issue of the contract. Subsequent measurement of investment contracts at amortised cost uses the effective interest method. Claim and/or benefit settlement is adjusted directly against the value of investment contract liabilities. 53 2018 ANNUAL REPORT