By Zakir Hussain

FINANCE Minister Tharman Shanmugaratnam had this advice for insurers last night: Go back to basics.

That is, stick to your core business, have boards and senior management that take risks seriously and, above all, maintain the trust of customers.

Mr Tharman reminded about 1,000 union leaders and NTUC Income staff about these solid home truths when he said: 'They are very simple lessons which have been talked about before, understood before, but which were easily forgotten by many institutions during the phase of euphoria that they've been through over the last four to five years.'

He was speaking at the insurance cooperative's annual dinner.

His advice came as NTUC Income chairman Ng Kee Choe vowed to stay focused on the insurance business and uphold high standards of transparency and disclosure beyond statutory requirements.

Said Mr Tharman: 'We may have passed the worst of the crisis, but we know significant risks remain, and the risks may be with us for a long while.'

It was therefore important to 'also start learning the lessons that need to be learnt, not just in Singapore, but also by looking at other countries - what pitfalls need to be avoided, and what areas we can improve'.

Insurers here had not been spared from the fallout of the global financial turmoil. But, he noted, they were fortunate that following the 1997 Asian financial crisis, they had reduced their exposure to equities.

The near-collapse of American International Group (AIG) has an object lesson for insurers, he said.

It is: 'Focus on the core area of expertise, try to do it very well, try to manage the risk.'

Last month, AIG was bailed out by the United States government with a US$123 billion (S$185 billion) loan.

Mr Tharman pinpointed AIG's venture into credit derivatives and other structured financial products as its Achilles' heel.

These were outside its core area of expertise. Along with the high returns came high risks that AIG could not manage very well, he noted.

The global crisis also highlights the perils of boards taking their eye off the ball on 'the most basic issues of risk management'. Boards, he said, have a duty to question a company's exposure to risk and ability to ride out improbable scenarios.

This was especially important in the insurance industry, he said, as 'this has been a year of the improbables becoming reality'.

As for maintaining the trust of customers, Mr Tharman stressed that educating customers and meeting their needs fairly and transparently will be more important now than ever before.

'I think you've come some way,' he said to applause, and added: 'We don't get major complaints about NTUC Income.

'You should continue to set the highest standards of professionalism. In the short term, you can't sell every product you want, but it pays off in the long term.'

In a departure from previous years, no alcohol was served at the dinner, as a gesture to the current hard times.

The $10,000 saved will go towards helping needy children at a kindergarten in Taman Jurong, which is Mr Tharman's ward.

Said Income CEO Tan Suee Chieh: 'We decided that...prudence and thrift should take higher precedence and that we begin with giving up things which we need least.'

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This article was first published in The Straits Times on October 24, 2008.