Tuesday, March 10, 2015

Insurance direct purchase and web aggregator set to launch early April

As revealed in "Buying Life Insurance Products Directly from Insurance Companies without Commissions", the launch of a direct purchase insurance products (DPI) or a insurance direct channel will not be launched in time in the first quarter of 2015. 

The good news: Mr Ong Chong Tee, Deputy Managing Director, Monetary Authority of Singapore (MAS), has announced at a recent Life Insurance Association of Singapore luncheon that they will be ready by early April.

Here's what he said:

There are three key initiatives under FAIR (or Financial Advisory Industry Review) of particular relevance to the life insurance industry. These are the web aggregator, direct purchase insurance products and the balanced scorecard framework.

Web aggregator
First, the web aggregator. Life insurers offer a wide range of life insurance products to cater to the varied financial needs of consumers. However, it can often be a daunting task for consumers to be sufficiently informed of what’s available to meet his needs and to have some easy way to compare life insurance products.
I am pleased to note that a web aggregator will be launched in early April as a collaborative effort between MAS, CASE and the life insurance industry. This will provide a single information portal that will enable consumers to easily look up available life insurance products and compare indicative quotes based on specified parameters in a user-friendly and interactive manner.

Direct Purchase Insurance
Second, direct purchase insurance products, or DPI. This is a new class of life insurance products for basic needs that is “retail-access friendly”

• It will be simpler as the features of DPI are broadly standardised. This allows a consumer to make straightforward product comparisons when deciding which DPI to purchase.
• It will be easier to buy as consumers who know what they want and do not need financial advice will be able to buy DPI directly from life insurers.
• It will be cheaper as no commissions will be charged.

There has been keen consumer interest in the DPI since its recommendation by the FAIR panel. Again, the DPI products will be rolled out in early April, along with the web aggregator. MAS will continue to work with the industry and consumer groups to conduct regular reviews to ensure that the product suite and features of DPI remain relevant in meeting the needs of consumers.

Mr Ong also touched on the balanced scorecard framework, less immediate direct impact on consumers, but a great move nonetheless in pushing financial advisors towards professionalism and aligning their interests with consumers.

Balanced Scorecard Framework
Third, the balanced scorecard or BSC framework as proposed by the FAIR panel. MAS has implemented this framework in January 2015 with a one year transition period for the industry to be familiar with the framework before the requirements are legislated in January 2016.
While many financial advisors do their work professionally, it is also a reality that compensation system can shape sales behaviours, and sales-based remuneration models may not always align the interests of financial advisers with the consumers.
Under the BSC framework, a major proportion of a representative’s remuneration will be based on whether the representative has acted professionally such as consumer needs analyses, recommendation of suitable products, and adequate disclosures. This BSC initiative will help to align the interests of financial advisers with their customers. Over the longer term, the BSC framework will boost consumer confidence in the professionalism of the financial advisory industry.
Information from Monetary Authority of Singapore.
More on FAIR can be found at the below posts:

Buying Life Insurance Products Directly from Insurance Companies without Commissions - The insurance products and the maximum sum assured that will be made available for Direct Purchase Insurance.

Insurance price comparison website in Singapore - Direct Purchase Insurance's effectiveness based on UK's experience

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