22-23 August 2000

"Revolutionary Leadership in the Insurance Industry" Speech by Mrs Hauw Soo Hoon, Executive Director (Insurance Department), MAS

Date:  22 Aug 2000 

1   I am very happy to join you this morning for the 3rd GAMA Singapore Agency Management Conference.

2   Coming a day after the announcement of CEDLI's recommendations, GAMA could not have chosen a more appropriate time for this conference. For the benefit of our foreign friends, CEDLI - which stands for the Committee on Efficient Distribution of Life Insurance - is a private sector committee appointed by the MAS in March this year, to propose recommendations to promote transparency, competitiveness and efficiency in the distribution of life insurance products. The Committee has - yesterday - announced its proposed recommendations to enhance the sales advisory process, product disclosure, and the professional training requirements for intermediaries selling life insurance products. These recommendations have all been accepted by the MAS.

3   As such I feel like I have come today to address an officers' academy when only the day before the battle cry for action has just been sounded. Even more well selected than the timing is the theme of the conference - "Revolutionary Leadership". We expect great changes in the life industry over the next 24 months. Such times call for leadership that must be truly revolutionary. No less than inspirational army officers, agency leaders today must possess the energizing vision and drive, along with the professional skills and ability, to galvanize your teams to thrive in the new competitive environment.

EMBRACING COMPETITION AND CHANGE IN THE LIFE INSURANCE INDUSTRY

4   Rapid and dramatic changes are shaping the financial services industry worldwide. Market participants and regulators are all learning how to deal with the challenges of globalisation, financial deregulation, product convergence and innovation, technological advances, and changing customer profile and sophistication .

5   As an integral part of the financial sector, the insurance industry does not stand apart from these forces of change. Competition is unstoppable and should be embraced. MAS moved decisively in March to open up the insurance sector. We believe that competition is the best driver to transform the industry within the wider context of a financial services sector undergoing tumultuous changes.

6   For Life insurance business, a major area for improvement is in the quality and efficiency of its distribution channels.

7   It is in this context that MAS appointed CEDLI to study and recommend ways to raise standards in the distribution of life insurance products. It is generally acknowledged there is room to improve the professionalism and productivity of the agency force and to encourage the development of alternative distribution channels for greater competition.

8   The main thrust of the Committee's recommendations is that the sales advisory process and professional training requirements should be enhanced to ensure that all advisors are professionally competent to deliver a minimum standard in the quality of advice when recommending life insurance products. With enhanced disclosure, in particular distribution costs, policyholders would be able to evaluate for themselves whether they are getting value in terms of the advice they are receiving and to compare proposals of other products whether from the same or other insurance companies.

CHALLENGES FOR LIFE INSURANCE INTERMEDIARIES

Provision of Quality Advice on Life Insurance

9   There is no doubt that many agents and supervisors already actively advocate high standards in sales and supervisory practices. Yet there are still some in the industry that fall behind in this area. Their poor performance contributes to the continuing perception the public has of the irresponsible insurance agent. The new requirements serve to impose the discipline of a minimum standard on all intermediaries for the sale of insurance products. In the new competitive environment, all advisors must realise that there will be continued pressure to improve themselves and the quality of their service. Only in this way can they expect to remain relevant in a highly competitive market. .

10   The agency leader has a unique role to play in this process. One of the greatest challenges facing managers in wrestling performance improvements from their teams is mobilising people to do things they would not otherwise have done. Learning new skills, adopting new values and discarding old habits are difficult things to do because these tasks involve change. Yet if a manager hopes to draw extraordinary results, the change must first come from within. The manager needs first to upgrade his or her professional competence before being equipped to ensure the continuous professional development of his agents. And this process must be a continuous one. Only when there is this process of continuous upgrading in place, would sales and growth targets be met in the context of high service and ethical standards.

Agency Leaders as People Developers

11   Every successful professional manager must consider yourself a people developer. There is no resource more powerful in your hand than the potential of your team. Superior talent is the prime source of competitive advantage. Leadership carries the responsibility to foster the right talent-building behaviour to unlock the potential of your team.

12   So more than having the skill to conduct training programmes, effective leaders need to be able to develop and put in place well-defined coaching, counseling, mentoring and supervisory initiatives. The effective leader needs to look at the holistic development of the agent. Only when a framework is in place to address the comprehensive development of the agent would the manager be able to transfer directly to them techniques for improving sales productivity, reducing persistency problems, and achieving a customer loyalty.

Provision of Quality Advice on a Wider Range of Financial Product

13   Managing the career and professional development of your agents becomes even more important in an environment of converging financial products. This is important as convergence brings immediate threats and opportunities. Recently, MAS Chairman DPM Lee announced that MAS has completed its review for the framework on Independent Financial Advisers. The aim is now to promote a class of IFAs who can offer comprehensive financial planning and advice on the entire range of investment and saving options. This would facilitate the aspirations of banks, securities firms and insurance companies eager to develop one stop service to investors in financial planning and other personal investment services.

14   While this would mean that life agents have the potential to acquire the qualifications and develop expertise to sell other financial products, they must also expect the encroachment into their traditional markets by other intermediaries. Agency leaders have important roles to play in supervising the training of your agents so that they can upgrade their skills and competence to sell more than just life insurance products.

GAMA SINGAPORE'S CONTRIBUTION TO THE UPGRADING PROCESS

15   GAMA Singapore as part of an international organisation with a network of expertise in agency management is poised to play a very important role in the steps ahead. Your counterparts from developed markets are able to share with you how they have successfully coped with the business and regulatory changes in their environment. It is a network that you as members should tap fully.

16   GAMA Singapore has organised agency management courses of high standards. CEDLI has recommended that, in addition to MAS 306 requirements for new supervisor, the new supervisor must have completed a practice-oriented Agency Management course. We therefore look forward to GAMA Singapore to actively contribute in this area of upgrading and in the 30 hour per year continuous training requirement for the supervisors.

17   As the regulator, MAS is keen to have regular feedback from different market participants as the changes take place. We want a partnership with committed stakeholders to jointly build a conducive environment for the sound and progressive development of the insurance industry. In this respect, MAS has initiated a regular dialogue with GAMA representatives as we recognise that your association can provide valuable input in the feedback process.

CONCLUSION

18   In conclusion, the role of agency leaders has never been more challenging. I come back to the analogy of the army officer. On the battlefield, the most effective ones are not those that yell "charge" during the offensive manoeuvers. They are the ones that shout "follow me" into the attack. It is this simple difference that separates the best. I have no doubt that all agency leaders will respond in a proactive manner to the challenges ahead, and that you are ready to reinvent your business processes to enable yourselves to compete successfully in this new and challenging environment.

19   On this note I wish you all a fruitful conference. Thank you.