Life Insurance Association backs MAS proposals to raise financial adviser competency

Focus on quality welcomed.

The Life Insurance Association of Singapore (LIA), in a release, said that the industry welcomes the MAS’s ‘Response to Public Consultation on Recommendations of the Financial Advisory Industry Review”, stating that it is another milestone in the evolution of the life insurance industry in driving best outcomes for consumers as well as the industry.

The MAS proposals focused on raising the competency of financial advisers (FAs), aligning their remuneration framework, and creating new a channel for consumer information and sale of life insurance products.

Ms. Annette King, LIA’s President, said that the life insurance industry -- which protects Singaporeans with S$79 billion of life and health cover and last year paid S$63 billion to beneficiaries and in maturities -- has long focused on quality outcomes for consumers.

“In this regard the life insurance industry has made a significant contribution to society and families in saving for the future and closing the protection gap.

“As the MAS Consultation Paper points out, with rising educational levels and financial literacy comes a demand for more customised financial planning solutions among Singaporeans. At the same time we also must meet the needs of consumers who seek basic insurance products.”

Ms King said that the LIA supports the intent of raising the quality of financial advisory and that it will collaborate with the MAS and other financial institutions on the practical implementation of the proposals outlined by the MAS.

“Enhancements to the practices of the life insurance industry will follow on the heels of the MAS proposals, which in turn will boost consumer confidence in our Industry.”

The LIA said that the industry will continue to raise the bar in the professionalism of its practitioners, including changes proposed by MAS on the contents of the Continuing Professional Development requirement.

While MAS proposes that the entry qualification requirements for new entrants to the industry be raised from the current ‘O’ level entry requirements, the industry is confident that it will continue to attract well qualified young talents who meet the new academic requirement for new FA representatives.

As of 30 June 2013, almost 30 per cent of the tied life agents (4,028 out of life insurers’ industry total of 13,535) were university graduates.

The LIA is also pleased that the MAS recognizes the value that veteran practitioners bring to their clients and to the industry and who will be allowed to continue to service long-time clients and share their wealth of knowledge and experience with younger FAs.

The LIA said that it fully supports the proposal for FA representatives to be required to be fully dedicated and committed to providing quality financial advice to their clients and not be distracted with activities that distract them or may be in conflict with their FA role.

The LIA said that the setting up of a ‘web aggregator’ would best serve as an informational tool that would lead to more widespread awareness of life insurance among Singaporeans. It is pleased that the MAS has weighed the pros and cons of a web aggregator.

The web aggregator, it said, will allow consumers to compare the benefits and pricing structure of basic products, however, it does not work for situations in which the consumer needs advice, tailored solutions or personalised ongoing service.

Weighing in on the direct-to-consumer distribution channel, the LIA said that this can work for basic insurance products where the consumer is self-directed and does not require any advice. However, it cannot substitute for the in-depth and highly personalised consultation given by financial advisers for clients who seek customised life insurance solutions.

Ms King added: “The fact that entry qualifications for practitioners are being raised and continual professional development continues to be compulsory affirms that qualified personal advice is still important to consumers in their purchase decisions.

“It’s like choosing to buy a suit online or having it tailored at your regular bespoke tailor. Or put another way, it is self-service versus special delivery.

“Customised life insurance solutions require highly qualified advice at the time of purchase and personalised service long after the purchase on an ongoing basis.”

The LIA supports the MAS’s proposal for a balanced scorecard framework for remunerating financial advisers. However, it cautioned that careful calibration must be considered as it must fully reflect the value of advice and quality of personalised service given at the time of purchase.

The LIA and its members will carefully review the recommendations put forward by the MAS.

“Singaporeans can remain confident that any change within our industry will only ensure that they continue to have access to sound professional counsel and innovative life insurance solutions that can best serve their needs,” said Ms King.