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SINGAPORE: The Monetary Authority of Singapore (MAS) has called for a review of the commission structure for life insurance advisers.
At an industry seminar on Thursday, it expressed concern that the prevailing pay structure may not serve the best interests of consumers. In response, industry players said it may also be important to have a strict recruitment process.
Under the current pay structure, the commission is front-loaded, meaning that insurance advisers are paid a substantial part of the commission the moment a policy is sold. This is an area that the central bank wants the industry to revisit.
Low Kwok Mun, executive director, Insurance Supervision, MAS, said: "The incentive structures currently tend to encourage advisers to push the sales of products that generate the most commissions, rather than products that meet the needs of the consumer."
There has been much debate over the commission structure recently. While some argued that it is not in the best interests of customers, some said changing the lump sum structure could hurt some advisers who depend on commissions as their sole source of income.
M. Salim, CEO, First Principal Financial, said: "They wouldn't be coming in looking for salaries or fixed incomes. They come in looking at it as a business. As such, most would rely on the initial income to help them build their finances. The front load, unfortunately, is important to advisers who are starting up in this business."
Some said adjusting the commission structure is the only way to control self-interest. They noted that firms should have a strict selection process to ensure their advisers are up to scratch.
"Whoever the firm recruits, there must be a proper selection process in place. They must be prepared to identify and select reps or advisers whom they feel will serve their interests the best. Of course, there has to be a review of the character and the personality of the advisers," said Mr Salim.
Industry players have also indicated that they prefer the MAS to take the lead in setting any changes to avoid self-interested regulation by insurance companies.
- CNA/so
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