The much-anticipated move is aimed at giving consumers another avenue to buy insurance products and encourage more people to be insured. However, industry professionals told TODAY they do not expect the take-up rate to be high due to the limited coverage of the plans and the typically complex nature of insurance policies that many might have difficulty understanding.
“My guess is 10 to 20 per cent of people, which is not a big number, will buy directly from the insurance companies. The MAS has also imposed a maximum sum assured per person per insurer of S$400,000. If you want more, you will have to buy from another company, which can be cumbersome. I don’t think many people have the time and financial expertise to do everything on their own,” said Mr Christopher Tan, chief executive of financial advisory firm Providend.
The direct purchase initiative is a result of the Financial Advisory Industry Review (FAIR) introduced in 2012 to raise the standards of the insurance sector. Another initiative, a single information portal where consumers can look up and compare available life insurance products, will also be launched in April, the MAS said yesterday.
Last July, the MAS laid out the features of the term and whole life policies that consumers can buy directly from the companies.
It emphasised yesterday the direct purchase products will be “a new class of life insurance products for basic needs that is ‘retail-access friendly’.”
“It will be simpler as the features are broadly standardised. This allows a consumer to make straightforward product comparisons when deciding which (product) to purchase,” MAS deputy managing director Ong Chong Tee said yesterday. “Consumers who know what they want and do not need financial advice will be able to buy (the products) directly from life insurers. It will be cheaper as no commissions will be charged,” he added.
On concerns expressed by some financial advisers that their livelihoods might be affected by this initiative, Dr Khoo Kah Siang, president of Life Insurance Association Singapore, said this was unlikely.
“The products available through the direct channel are those with very simple proposition; there are safeguards to make sure people who purchase them really understand what they’re buying without advice,” Dr Khoo said. “But if you look at the range of insurance (products in the market), it’s very wide. They can also be very complex and because of the complexity, advisory is very important.”
In addition to providing advice, financial advisers also “follow up with clients if anything were to happen to them” — something that the direct purchase channel cannot provide, noted Mr Rave Peh, agency development manager at AXA Singapore.
Consumers concurred that the personal touch provided by advisers is hard to replace. “I would like to feel more secure, that there is someone I can trust, an individual to provide that connection to the insurance agency. I’m willing to pay commission to get that kind of service,” said Mr Steven Chung, head of events and programming at Sentosa Leisure Management.
Synergy Financial Advisers executive director Jeff Lee said the move could force the industry to improve. “If advisers don’t improve their skills and don’t add value, then they’re just out there to sell and will lose out. But if they improve their competency ... and give good advice to clients, I don’t think (the initiative) will put many out of jobs.” Lee Yen Nee, with Additional reporting by Angela Teng
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