Connect with us


Insurance Industry Review By MAS: Is It Enough?

A look at what the latest changes announced by MAS would mean for the insurance industry in Singapore.

For years, many young Singaporeans have been plagued by the dreaded reality of having a close friend become an insurance agent. No one likes losing a friend.

This week the Monetary Authority of Singapore (MAS) introduced new changes, brought about by the Financial Advisory Industry Review (“Fair”) programme aimed at changing the way insurance is sold in Singapore. We have not decided if we should join in to rejoice, and start embracing our long lost mates yet.

We believe this is a step in the right direction. We covered this topic earlier in the year, asking if the insurance industry is in the business of unethical profiteering, after a panel set up by MAS deliberated for eight months on whether we should change the way the insurance industry was run, only to come back saying we consumers were not ready for a change.

Six months on, it seems we are suddenly ready for a change, as reported by our unique media channels.

Here’s what will be changing –

 1. A balanced scorecard remuneration framework, which rewards the provision of good quality advice to align the interest of financial advisor (FA) representatives with that of the consumers;

Our Views: Including non-sales KPIs in the assessment of a FA’s performance may be tricky, and quite easy to side step. While the overall effectiveness of this new policy cannot be determined yet, we do agree this is a change for the better.

We have to start from somewhere, eventually.

2. A direct channel through which consumers can purchase “basic insurance” products, paying only a nominal administration fee;

Our Views: This is what have been yearning for, and most appreciate.

Having a direct sales platform where consumers can buy basic insurance products, without having to pay commission to FAs, is a huge step in the right direction in improving the standard of the industry.

Consumers would now have the incentive to educate themselves on the basic of insurance, and purchase policies directly without requiring the “advice” of FAs, who may simply be attempting to shove other types of high profit margin products down their throat.

3. A web aggregator to enhance comparability amongst life insurance products.

Our Views: Having a web portal to compare prices and products? Could this possibly be true? If done so in the right manner, this would be wonderful and we will definitely be the first few people visiting the site.

However we have a feeling that reality may not be so simple. Products would be “differentiated,” and this could render the whole process a meaningless farce by the industry.

Nevertheless we wait eagerly to be proved wrong.

What we think of these changes…

Overall we believe that the first steps to move the industry in the right direction are being taken.  The new changes will allow consumers to have easy access to product information, and encourage them to better understand and select for themselves the right policies.

This will in turn raise the bar for FAs. With consumers having direct access to insurance products, FAs would now need to value-add and provide enhanced services. Be it through superior product knowledge, good after sales service or simply giving valuable advice, the level of standard among FAs will go up, thus benefitting the industry as a whole.

However there are other areas worth looking into as well. For example, kickbacks to managers are widely used and accepted at the norm in the industry, and it is what makes the industry noth lucrative and unscrupulous at the same time. We understand the reason for this is because managers provide “training” and “advice” to newer FAs under them, hence the remuneration.

Nonetheless it still means paying more than need be for insurance products. We are sure there are other ways that managers can be compensated for their work, such as maybe the insurance companies themselves paying a monthly stipend to these managers for the added responsibility.

We do hope that the system would continue to be reviewed, and that the brilliant people sitting atop of the industry will improve it, not make it a bigger mockery. At the end of the day, the insurance industry is probably a lot smarter than us, and most consumers, and will try to find ways around these changes in return for larger profits, if given the chance.

What do you think of these changes? Share your thought with us on Facebook.


Original photo by Benjamin Lim. Used with permission.