Opening Address by Mr Ng Nam Sin, Executive Director, Monetary Authority of Singapore, at the International Insurance Conference Singapore 2008
Securing the Future: A Challenge for the 21st Century Business
1 It gives me great pleasure to be here at the International Insurance Conference @ Singapore. I understand this is the 6th in the series of biennial conferences organised by the Singapore Insurance Brokers’ Association and for the first time, co-organised with the Singapore College of Insurance. We are pleased to note that this event draws a good mix of brokers, direct insurers and reinsurers. To start, let me make a few observations on the insurance sector and then highlight the important role that insurance intermediaries play.
Developments and trends within the global market
2 The US financial sector had been hard hit by the subprime crisis. In Asia, we have been relatively insulated from the turmoil. However, there could still be channels where adverse market or economic changes in the US could be transmitted to Asia. We should still therefore remain vigilant.
3 Yet, in spite of these short-term volatilities, we are confident of Asia’s long term growth, due to our region’s strong fundamentals. With slower growth expected in the US and Europe, many see Asia as a key source of growth.
4 The Asian growth story thus remains relevant. What implications does this have for the insurance industry? It means that with increasing wealth and sophistication of economic activities, there will be a strong rise in the volume and complexity of risks. In particular, we are beginning to see keen interest to grow the specialised lines such as marine, energy and trade credit insurance. And with the advent of globalisation, risk management solutions will increasingly become more important. Yet, compared to the US & Europe - Asia remains under-insured.
5 Against this backdrop, intermediaries would play a critical role in the whole value chain of the insurance industry. For today, I will share my views on this important role of the insurance intermediaries. Also, in keeping with the theme of the conference on talent development, I will also touch on initiatives aimed at developing and attracting talent for the insurance industry.
Role of Intermediaries
6 Allow me to first touch on the role of intermediaries. Within the insurance and financial advisory industry, intermediaries serve as an important link for their clients, and the service providers.
7 For the insurance intermediation industry to flourish, the foundations for good advisory and sales practices, be it insurance brokers, insurance agents or financial advisors, must be firmly entrenched. The industry must be seen to be promulgating the right values such as honesty, integrity, professionalism and strong ethics. Allow me to elaborate two attributes relating to this aspect.
Integrity and Professionalism
8 Firstly, we have seen greater innovation in the financial services industry, with more complex products coming into the market. Given this, insurance intermediaries have the responsibility to educate their clients on the risks and features of the solutions available. In addition, they should also ensure that the recommendations are provided on a needs-basis.
9 As such, it is of utmost importance for the intermediaries to maintain the highest standards of integrity and professionalism to ensure that any advice given is fair, objective and in the best interest of the client. They should not trade off long-term interests of the client for their own short-term gains. For instance, the excessive churning of clients’ investments solely for the purposes of earning commission fees, will undoubtedly be at the cost of the long-term value of the investment. Such conduct, even by a handful of errant players, brings the whole industry into disrepute. So all industry players and associations have a clear responsibility to make sure you and your agents are not engaging in such conduct and are acting in the best longer term interests of the clientele.
10 Secondly, the intermediary must be able to add value. They have had to keep up - not only in understanding the changing needs of their clients but also the increasingly complex array of products available in the market. Only then, can they provide value-adding services in risk management, investment and insurance advice. We have noticed that intermediaries, like the insurance and reinsurance brokers, have been active in spearheading research and development. For instance, they are using sophisticated models to help their clients quantify, price and monitor insurance and financial risks. Such research capability will enhance the quality of insurance underwriting and risk management, and builds our depth of expertise.
Meeting the Challenges - Putting Focus on Human Capital Development
11 The insurance business is a knowledge-intensive and complex business. Hence, top talents are needed to facilitate its growth. Yet, such expertise does not emerge overnight. The industry, not only competes within itself for talent, but also faces competition from other parts of the financial services industry and even non-financial sector industries.
Developing Insurance Expertise
12 MAS is cognisant of these challenges. We have placed significant importance on attracting and developing our manpower resources, both in terms of numbers and depth of expertise. Working with industry players, the MAS has been facilitating several manpower development and talent attraction initiatives. Let me highlight these initiatives.
13 Firstly, on raising competencies. The industry may already be familiar with the Financial Industry Competency Standards (FICS) framework. The FICS was set up by the financial industry to benchmark competency standards of financial professionals to international best practices. Here, the Singapore College of Insurance (SCI) is playing a key role, having been appointed a lead provider for FICS-accredited training and assessment programs for general insurance, life insurance, and the retail and mass affluent segments in wealth management. SCI has already developed FICS-compliant curriculum for its General Insurance programs that are also consistent with the curriculum requirements of Chartered Insurance Institute’s (CII) programs. We urge industry players to take advantage of the FICS-accredited programs offered.
14 The second initiative relates to building up specialist skills. Besides building a broad base of insurance talent, it is also necessary to develop industry specialists and leaders. In this regard, the MAS has launched scholarship programs that will co-fund masters programs in risk management, financial engineering and actuarial science. You may be aware that the Nanyang Technological University is looking to launch a Risk Management and Insurance minor which will start next year. The GIA has also recently formed the Regional Development Committee to bring together representatives from the various segments of the industry. The committee’s flagship task is the launch of the Global Internship Program aimed at talent attraction.
15 The third is on outreach. In recent years, MAS has partnered with the industry and other government agencies on various overseas outreach events to the US, UK and Australia. The objective is to promote greater awareness of Singapore as an international financial centre that offers attractive working opportunities. These outreach events have helped to raise Singapore’s profile amongst the top minds and good talent from all over the world. We encourage more insurance players to participate in this initiative as part of your talent recruitment strategy.
16 To conclude, Asia continues to present an exciting time for the financial services industry. In particular, the insurance landscape will be shaped by many forces, and continue to evolve over time. However, human capital will remain one of the most important force behind the growth of the industry. The industry will also have to rise to the challenge of meeting higher consumer expectations. To succeed, it calls for companies to be big on talent, and consistently invest in people's skills and competencies. MAS will continue to play our part, but the central tenet of achieving excellence in the industry lies with a value system of honesty, integrity and good reputation - values which we are confident the industry will continue to establish and promulgate in the journey towards an industry of excellence.
17 I am happy to know that the organisers have invited Professor Kishore Mahbubani as a Special Guest Lecturer. With his extensive experience ranging from Asian economies to politics, I’m sure the conference will be able to gain from his insights on the Future of Asia. I wish you a fruitful and enjoyable conference. Thank you.