- POSTED: 30 Sep 2013 17:58
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Consumers are set to benefit from new initiatives which will change the way insurance products are sold in Singapore.
SINGAPORE: Consumers are set to benefit from new initiatives which will change the way insurance products are sold in Singapore.
Among the measures are: a direct channel where basic insurance products can be sold with a nominal administration fee, and a website for consumers to compare various insurance products before making their purchases.
By the middle of next year, insurers can sell basic insurance products through an online direct channel.
This means consumers will be able to buy these products without having to pay for financial advice.
The change will be supported by the setting up of a web aggregator by the end of next year. This will allow consumers to compare prices and features of basic products.
Vincent Ee, president of Association of Financial Advisers, said: "There will always be a small fraction of consumers that prefer (buying through) the direct or online channel. And for financial products, these are typically the savvy investors. They are educated. I believe there will be a small percentage of the business that will be shifted to the online channel."
While there were concerns that the direct channel could eat up market share of the financial advisors and insurance agents, Deloitte Consulting said it may help open up new, and more tech-savvy customer segments for the insurers.
Mohit Mehrotra, executive director at Deloitte Consulting, said: "Clearly, it's going to help the consumers in the long run, and the industry overall because we are coming from position of a relatively less penetrated insurance market compared to other developed economies around the world. It should actually help the entire ecosystem - the insurance companies, the intermediaries and the consumer."
In addition, a revised remuneration framework will be implemented to align the interest of financial advisory representatives with that of customers.
Commissions received by agents will be capped at 55 per cent of the total amount in the first year, with the rest spread over at least five years or the remaining duration of the policy, whichever is shorter.
This is intended to prevent agents from pushing sales at the expense of customer interest.
Annette King, president of Life Insurance Association of Singapore, said: "While every company will be reviewing their remuneration model based on these latest changes, it's still a very viable compelling career for people that will be rewarding."
The Monetary Authority of Singapore (MAS) on Monday issued its response to the public consultation on the recommendations of the Financial Advisory Industry Review (FAIR).
In total, there were 28 recommendations made by the FAIR panel, which published its recommendations on 16 January 2013. The review had aimed to raise the standards and professionalism of the financial advisory industry, and enhance the market efficiency for the distribution of life insurance products.
The recommendations were open for public consultation from March to June 2013.
In a statement, MAS said it fully accepted 19 recommendations, modified 8 and dropped one recommendation.
Mr Lee Chuan Teck, assistant managing director for Capital Markets at MAS, said: "This set of initiatives will transform the financial advisory industry by creating an environment where firms compete on the quality and value of their products and services rather than on the aggressiveness of their sales force.
"Consumers will be the ultimate beneficiaries of this change. MAS will review these measures periodically to see if more needs to be done."
The FAIR initiatives will be introduced in stages, with transition periods, to ensure their smooth implementation by the industry.