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Health, Beauty & Fashion

Case enforces spa insurance scheme

CaseTrust spas have to insure their customers against sudden closures
The Straits Times - July 1, 2011
By: Jessica Lim
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Case enforces spa insurance scheme Subtle Senses outlet in Ngee Ann City with its shutters half down last October. It is understood that some 8,000 customers were left with unused amounts on their spa packages worth thousands of dollars in total. -- ST FILE PHOTO

IN THE first major step to clean up the spa industry, Singapore's consumer watchdog has made it a must for some spas to insure their customers against sudden closures.

The spas required to do this are the 145 under the CaseTrust accreditation scheme run by the Consumers Association of Singapore (Case).

What this means for customers of these spas is that they will be compensated for the unused portion of their prepaid packages if the spa shuts down for at least 30 days.

The move comes after a spate of sudden spa closures in the last two years.

An insurance policy devised by insurance broker AVA, with inputs from the Spa and Wellness Association Singapore (Swas), hit the market a year ago, but only 15 of the association's more than 3,000 members took it up.

The reasons cited were that paying the premiums added to their costs and that it was not a mandatory move, said Swas acting president Susan Teng. Swas members include suppliers of beauty products and hair salons. Spa-only businesses number about 2,000 here.

With Case's directive, the 145 accredited spas, many of whom are members of Swas, now have no choice. They have until Oct 1 to offer their customers insurance against closure.

It is the kind of financial protection that more than 15,000 customers stranded with unclaimed packages could have done with.

Here is how the insurance scheme would work for this business: A spa is granted an 'insurance limit' each year, based on factors such as its financial health and the number of packages it typically sells.

A spa given a limit of under $500,000, for example, would pay the insurer a flat fee of 2 per cent of the limit awarded in premiums, subject to a minimum premium of $1,000.

With this settled, a spa can then hand out coverage for packages they sell for the year up until the limit amount. Thereafter, it has to buy a fresh policy.

Case's executive director Seah Seng Choon said the watchdog will now work towards raising the number of CaseTrust spas. The 145 such spas are listed online at www.casetrust.org.sg

Case received 3,111 complaints against the beauty industry last year, 51 per cent more than the 2,060 the year before.

Asked whether the insurance scheme was a 'magic bullet', Ms Teng said it is up to the customer to go only to spas which offer accountability and insurance.

'If customers demand it, more spas will start to offer it, and it will become a standard practice for the industry to do so,' she said.

However, there is nothing to prevent spas from passing on the extra cost of providing insurance to their customers.

Ms Wendy Teo, 32, left with about $900 unused on her package with nail spa Wax in the City two years ago, said: 'Insurance is a good thing, but the cost should not be passed down to customers. It's not fair for customers to pay because companies should be responsible.'

But housewife Cindy Yip, 29, is glad that she can choose to patronise only spas which offer insurance, and said she is likely to switch to a CaseTrust spa for brow-threading and massage packages.

The owner of CaseTrust spa chain Touche has mixed feelings about the new rule. Madam Choo Lee Lian, 46, said offering insurance adds to her costs, 'but we hope to attract more customers because we have insurance'.

She added: 'We haven't decided whether to pass the cost down to customers; maybe it will depend on the package size.

'Overall, it's good for the industry. It may help to mend our bad reputation.'

limjess@sph.com.sg

Step closer to clearing Subtle Senses' debt

THE creditors of spa chain Subtle Senses that shut down last April may be a step closer to getting compensation.

A law firm representing the chain said that the High Court granted Subtle Senses a judgment of debt for $453,671 yesterday. This was an amount owed to the chain by HealthTrends Medical Investments (HTMI). Ironically, HTMI is also part of the HealthTrends group which owns Subtle Senses.

A judgment of debt means Subtle Senses can begin the process of claiming the amount owed.

A creditors' meeting last year revealed that the chain was $12 million in debt, but its assets amounted to just over $730,000. It is understood that among the creditors are some 8,000 customers left with unused amounts on their packages worth thousands of dollars in total.

However, lawyer Tan Kok Peng from law firm Braddell Brothers, which is representing the spa chain, said that the judgment simply meant an establishment of debt.

'Now we have to start chasing HealthTrends for the money. If we get it back, it will go into the pool of assets that can be distributed to creditors like customers,' he said, adding that HTMI can appeal against the judgment.

The spa chain's liquidator Stone Forest said that creditors like employees will be compensated first. The balance is then paid to unsecured creditors, the bulk of which are customers.

Left in the lurch

Wellness Village

 

  • When it was shut: November 2009
  •  

     

  • What happened: More than 500 customers were left stranded. About 330 filed claims with the Small Claims Tribunal.
  •  

    Simply Spa

     

  • When it was shut: December 2009
  •  

     

  • What happened: When the shutters came down at its Hotel Parkroyal premises, customers were told by a sign on the door which said outstanding prepaid packages 'will not be refunded'.
  •  

    Wax in the City

     

  • When it was shut: February last year
  •  

     

  • What happened: More than 4,000 people who had bought packages were left stranded. It is understood that more than 40 police reports were filed and more than 200 complaints were made with the Consumers Association of Singapore.
  •  

    True Spa

     

  • When it was shut: April last year
  •  

     

  • What happened: Its two outlets closed suddenly, and its customers were told that another spa, Subtle Senses, would take over its operations.
  •  

    Naughty by Nature

     

  • When it was shut: September last year
  •  

     

  • What happened: It abruptly shut one weekend, leaving some 6,000 people with unused amounts on their packages. These were worth up to $4,000 each.
  •  

    Subtle Senses

     

  • When it was shut: October last year
  •  

     

  • What happened: It stepped up to 'absorb' about 15,000 stranded customers from failed spas, including True Spa, and then itself tanked. The company was liquidated the following month, but creditors have yet to see compensation.
  •  

    JESSICA LIM

     

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