o sell insurance without commissions and financial advice is about to come into force in Singapore.
From April 7, consumers will be able to directly purchase insurance – like lifetime financial protection – from a provider, according to a new rule introduced by the Monetary Authority of Singapore (MAS).
As well as the introduction of direct purchase insurance (DPI), the MAS has helped build an interactive web portal called comparefirst.sg which allows consumers to easily compare insurance products sold by different life companies.
Both initiatives have been introduced under Singapore’s Financial Advisory Industry Review (FAIR), which aims to stamp out unfairness in the city-state’s financial industry through amendments to the Financial Advisers Act and Insurance Act.
Premiums underlining direct purchase insurance – which can be identified by the word “direct” in their product names – are lower than comparable life insurance products because no commissions are charged. MAS said these products will be easier for consumers to understand and come equipped with a factsheet and a checklist.
Natural progression
Tim Searle, chairman of Singapore-based financial advisory firm Globaleye, said his advisers are ensuring their clients are aware of this facility, but that Globaleye clients who have more complex requirements when compared to the mass market would “prefer to seek specialist advice and solutions that transactional type platforms cannot support”.
He said the DPI initiative is a natural progression of things. “The baby boomer money is going to start to dry up and the generation who welcomed a sit down over a cup of coffee with their financial adviser will diminish.
“The new generation is going to need a new approach that comes with a cost benefit, and online platforms will feature heavily in that offering.
“But there cannot be a total replacement by going online since complex financial solutions require a tailored result from a qualified and regulated adviser. Just because I can google medical information doesn’t mean I’m going to take my appendix out myself.”
Purely informative
Meanwhile, the new portal Comparefirst allows consumers to quickly compare the premiums and features of similar life insurance products to help them make informed decisions about which policy to buy and how much coverage to get.
As the portal is purely informative, customers will still need to speak to their financial adviser or the life company to purchase the product.
The interactive tool is a collaborative effort by the Consumers Association of Singapore, MAS, Singapore’s Life Insurance Association, and MoneySense.
Another avenue
Earlier this week, Manulife Singapore announced it is launching two new direct purchase products.
Hitesh Shah, chief marketing officer of Manulife’s Singapore-based arm, said the firm is supportive of the direct channel which “will offer another avenue for people to access insurance products and provides additional choice for self-directed and knowledgeable consumers who know exactly what they are looking for.”
However, he said experience from other markets has shown that direct insurance sales usually only takes up only a small share of the market.
“Given the complexity and level of customisation in life insurance, we believe most consumers still value the expertise of an experienced financial planner in helping them to make important long-term financial decisions about their future,” he said.
“Most importantly, consumers need to ensure that they have sufficient coverage to meet their needs, as research shows that there is still a significant protection gap in Singapore.”
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