MAS Accepts Committee's Proposals to Improve Transparency, Competition and Efficiency of Life Insurance Distribution System
Singapore, 5 Dec 2000... The Monetary Authority of Singapore (MAS) today announced that it has accepted most of the recommendations made by the Committee on Efficient Distribution of Life Insurance (CEDLI) in its Supplementary Report, paving the way for a more transparent, competitive and efficient life insurance distribution system in Singapore. This final report by the CEDLI covered three key areas: the agency structure, the roles and responsibilities of sales advisers and their supervisors, and the development of alternative distribution channels for life insurance distribution.
2 CEDLI proposed that existing regulatory limits on commissions and agency costs be lifted six months after the disclosure of distribution costs, charges and expenses is put in place, in line with the aim of free competition and more transparency.
3 On agency structure, MAS also accepted the Committee's recommendation that existing regulatory limits on agency size and new recruits should be replaced with a best practice standard on span of control.
4 On the roles and responsibilities of sales advisers and their supervisors, CEDLI had recommended that the supervisors should take on a greater role in grooming their sales advisers by conducting regular group meetings and one-on-one coaching, and reviewing sales advisers' needs analysis and recommendations. This will significantly enhance the quality and professionalism of the sales advisers, the advice rendered to the customers and the productivity of sales advisers, as well as build up an acceptable minimum standard of service across the industry.
5 On the development of alternative distribution channels, CEDLI recommended that sales staff and managers of financial institutions that distribute life insurance products be subject to similar requirements as tied agents and brokers. This ensures consistent standards of service delivery across all channels of distribution. In addition, financial institutions will be responsible for their conduct on life insurance distribution.
6 MAS also said that it will further study the following five recommendations by CEDLI:
- allowing referral arrangements where individuals and firms effect introductions between customers and product providers/intermediaries ;
- requiring financial institutions to define their status as tied agents or independent brokers for the purposes of life insurance distribution;
- allowing finance companies to be life insurance intermediaries;
- allowing network or franchise structure for life insurance brokerages; and
- licensing internet companies which provide recommendations and advice as insurance intermediaries.
7 In a letter to Mr Law Song Keng, Chairman of CEDLI, Deputy Prime Minister Lee Hsien Loong thanked the Committee for the extensive efforts made by its members in coming up with the recommendations. "In a time of rapid market changes in the financial services arena, the work of CEDLI represents the kind of invaluable collaboration with industry players needed to ensure that our industry stays relevant and competitive. I am hopeful that this effort would be the model of future partnership between the Authority and the industry," said DPM Lee. "The next stage of work is now to ensure the smooth implementation of the recommendations. MAS will work with the Life Insurance Association (LIA) and other industry bodies to this end," he added.
8 The CEDLI was appointed by the MAS in March this year to review the existing distribution structure of the life insurance industry, and look into ways to raise the industry's standards, transparency and efficiency. CEDLI presented its Main Report to MAS in August this year, recommending changes to the sales advisory process, additional training and competence requirements for sales advisers and their supervisors, and the disclosure of distribution cost and total expenses. All recommendations in the Main Report were accepted by MAS.