Singapore Financial Advisory

British insurer Aviva Singapore is in the midst of setting up a financial advisory (FA) firm in a move to strengthen its key distribution channel in a highly-competitive industry.

While market sources told The Business Times that details are unavailable, they said Aviva has applied to the regulator for a licence to set up a wholly-owned FA firm.

BT understands that the insurer has received in-principle approval.As Aviva currently relies largely on independent financial advisers and partly on a small team of relationship consultants to sell its products, industry sources also said Aviva is on a hiring spree for agents, adding that British insurer Prudential Singapore is the latest casualty in the ongoing battle for representatives.

BT was told that in mid-June, a sizable number of agents resigned from Peter Tan Organisation (PTO), one of Prudential's biggest agency "districts" or put simply, group of agency units. Sources said about 200 PTO agents have quit and a group of them are expected to join Aviva's new FA firm, although the situation remains fluid.

They added that in recent years, PTO's more than 400 agents are estimated to have contributed on average as much as 10 per cent of Prudential's new business in weighted premiums. 

Peter Tan, founder of PTO, said in an email that he is "currently contracted with Prudential" and referred BT to the insurer for queries on the matter.

Prudential declined to comment on the resignations but a spokeswoman said: "Prudential has a strong and growing agency force. As a leading life insurer, we will continue to invest in building our agency force to serve the protection and savings needs of our customers."

When approached, Aviva said: "We decline to comment on speculation."

BT understands the new FA firm could have a business model that is similar to either Great Eastern Financial Advisers (GEFA) or Manulife Financial Advisers (MFA), or a combination of both. GEFA is wholly-owned by insurer Great Eastern Holdings Limited and was set up five years ago.

It has more than 700 advisers who are allowed to sell not just the insurer's life and general products but also a very slim selection of life insurance products from other providers under special arrangements. About half of the FA firm's general insurance offerings are understood to be from other insurance providers.

In contrast, Canadian insurer Manulife Singapore holds a 78 per cent stake in MFA, launched in April last year. The remaining shares are held by the FA firm's three vice-presidents of sales.

The difference between MFA and GEFA is that the former's advisers are able to offer customers a range of insurance products other than those from Manulife.

Based on the Life Insurance Association Singapore's (LIA Singapore's) data, the FA channel has been growing steadily in the past few years. While it used to contribute only 14 per cent of new insurance business in weighted premiums in 2011, the channel has grown to 19 per cent in 2015.

LIA's first-quarter 2016 data showed that the FA channel made up 17 per cent of new business sales. With no exclusive bank distribution deal in sight until about 2021 or so, industry players agreed that the only ways left to grow the insurance business would be to build up their agency force or FA arm, if they do not already have one.