SINGAPORE - The reform broom is sweeping through the insurance industry with upcoming measures unveiled yesterday that will improve transparency, create more competition and rein in hard-selling agents.
Key changes include setting up a website to let consumers easily compare a wide range of life insurance products.
Another will allow people to buy basic insurance policies directly without having to go through an agent and pay a commission.
"Consumers will be the ultimate beneficiaries," said Mr Lee Chuan Teck, the Monetary Authority of Singapore's (MAS) assistant managing director for capital markets, on Monday.
The moves will transform the industry and create an environment where firms "compete on the quality and value of their products and services rather than on the aggressiveness of their sales force", he noted.
The changes will be implemented in stages, from mid-next year to January 2015. They stem from sweeping recommendations made to the MAS by an industry review panel set up in April last year.
The Financial Advisory Industry Review (Fair) panel aims to raise standards and make it more efficient to distribute life insurance and investment products. Its recommendations were published on Jan 16 and open for public consultation from March to June.
The MAS said on Monday that it accepted 19 of the Fair panel's 28 recommendations, modified eight and dropped one - a proposal barring remuneration tied to successful introductions.
Most attention will likely fall on the new comparison website to be launched by the end of next year.
Consumers will get to compare features like premiums, death benefits and the surrender value for policies such as term life and whole life, those with critical illness riders and endowment plans.
Such comparisons are difficult now as price information is not collated but held by individual firms.
The new platform aims to raise awareness of different products, potentially leading to lower premiums with increased competition.
Another change will allow consumers to buy basic insurance directly with a nominal administration fee and without advice by mid-next year. This includes term life and whole life insurance policies, and critical illness riders.
Life insurance products cannot be bought directly now without paying a commission, even if no advice is given by the agent.
Another significant change is a balanced scorecard remuneration framework for financial advisers and their supervisors, to be introduced by January 2015.
This is to ensure advisers act in consumers' interests. Their sales deals will be sample-checked each quarter for infringements. Those who have one or more major infringements or 30 per cent or more of cases with minor ones could lose their full variable pay.
Major infringements include suggesting clearly unsuitable products and minor ones could be administrative. Staff who consistently fare badly under the framework will be asked to leave. Most advisers are now paid largely based on sales results.
Consumers and industry bodies supported the changes. Media executive Kevin Tan, 36, said agents will have to "think twice before pushing random inappropriate products".
Consumers Association of Singapore executive director Seah Seng Choon said policyholders will benefit from enhanced protection and professionalism. But he noted that the panel's recommended cap on advisers' commissions earned in a policy's first year was raised from 50 per cent to 55 per cent. "This means consumers will have lower returns in the first year," Mr Seah added.
The Insurance and Financial Practitioners Association of Singapore, Association of Financial Advisers (Singapore), Life Insurance Association of Singapore, Association of Banks in Singapore, Great Eastern and NTUC Income welcomed the changes, saying professionalism will be raised while consumers will benefit.
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