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MAS unveils details of life policies that can be bought directly

People in Singapore will be able to buy certain types of life insurance products directly from insurance companies starting next year, saving on commissions. 

SINGAPORE: People in Singapore will be able to buy certain types of life insurance products directly from insurance companies starting next year, saving on commissions. This is according to the Monetary Authority of Singapore (MAS), which said on Wednesday (July 30) that all insurance companies that serve the retail market will have to offer the following direct purchase products:

(a) Term life insurance products with Total Permanent Disability (TPD) cover;
(b) Whole life insurance products with TPD cover; and
(c) Optional critical illness (CI) rider attached to term life or whole life insurance products.

Consumers who wish to buy direct purchase products will still be subject to underwriting by the insurer, MAS said. "When direct purchase products are introduced in early 2015, they will provide consumers who do not require advice with cheaper access to selected life insurance products," Mr Lee Boon Ngiap, Assistant Managing Director for Capital Markets at MAS, said in a statement. "Consumers will benefit from the greater price competition that will be introduced between the direct and commission-based channels."

MAS said consumers who are unfamiliar with financial products should approach their financial advisory representatives for financial advice. According to MAS, the features of these direct purchase products will be broadly standardised to make them easier for consumers to understand and purchase without the need for financial advice.

MAS has been working with consumer groups and industry associations on this, over the past 10 months. In countries like the UK, price comparison sites allow consumers to buy basic life insurance products online. This is available on a limited basis through sites like DirectAsia.com in Singapore, and most products sold tend to be simple car and travel insurance policies.

The Life Insurance Association of Singapore (LIA) says insurers are working to finalise their product pricing ahead of the implementation deadline.

"Direct purchase products are protection-oriented insurance products, designed to enable consumers who do not wish to receive advice, to purchase such products directly from insurance companies,” said Tan Hak Leh, Chairman of FAIR Implementation, Life Insurance Association Singapore. “The impact on premium rates is likely to vary across products. Broadly, we will expect the direct purchase insurance products to have lower premiums rates of approximately 5-to-10 per cent. "

"In other markets, it's typically been simple, term life products that have had the most success,” said Andrew Taggart of PwC SEA Consulting. “But typically it's relatively small numbers in terms of penetration across most markets where this has actually gained some traction. Life insurance typically, due to its complexity and the fact that it needs to be sold, rather than bought by consumers - does require quite a bit of a face to face interaction."

According to experts, this means that the direct channel may not cannabalise too much of the business done by insurance agents. LIA also says that according to its surveys in the Singapore market, there is a strong preference for personalised advice when it comes to buying life insurance policies.

LIA also says that the direct channel will help narrow the protection gap in Singapore. The protection gap, which is the protection needs less existing insurance coverage and CPF savings, of the average working adult in Singapore is 3.7 times of annual income in 2011.

For term life insurance, direct purchase products will comprise three variations in the policy coverage period, with the premium payment period matching the policy coverage period. These are: five years, with renewability feature; 20 years; and up to age 65. For whole life insurance, direct purchase products will comprise two variations in the premium payment period: payment up to age 70 and payment up to age 85.

The maximum sum assured for direct purchase products will be set at S$400,000, with a sub-limit of S$200,000 for whole life products, on a "per person per insurer" basis. For more details about the insurance plans that will be available online, which is an initiative under the Financial Advisory Industry Review (FAIR), click: http://www.mas.gov.sg/news-and-publications/media-releases/2014/buying-life-insurance-products-directly-from-insurance-companies-without-commissions.aspx
 

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