Come 7th April 2015, MAS will launch an online platform, CompareFIRST, to allow consumers to make comparison and make informed decisions prior to purchasing life insurance products. At the same time, Direct Purchase Insurance will be made available with all insurers to allow consumers who do not need financial advice to purchase life insurance products without commissions. For DPI, premiums will be cheaper as no commissions are charged.
http://www.mas.gov.sg/News-and-Publications/Media-Releases/2015/compareFIRST-and-DPI.aspx
Generally, this is good news for consumers as informed consumers who know what they want will be able enjoy cheaper products. Transparency and competition will also help to drive improvements to the product offerings. Hopefully, these initiatives,
CompareFIRST and DPI, will help create more awareness about the importance of insurance planning.
Background
According to LIA – 2012 Protection Gap Study Singapore, the average protection gap of an economically active adult is about 3.7x of his Annual Income.
Might Good Intentions Go Wrong?
1. Commoditization will drive prices down, which in turn drives commissions down. Eventually, some FA (Financial Advisors), especially those who have been product-selling all these while, might be forced to make a decision to leave the industry.
2. Assuming the total number of FA decreases, it means that the reach of the remaining FA will shrink. An outcome which may see Singaporean having less insurance, financial and retirement planning/savings, in the long run.
3. Insurance and financial products are sold and not purchased. I presume that this collaboration between MAS and LIA (Life Insurance Association Singapore) is aimed at this protection gap eventually. However, we must also recognized that most people don’t wake up one day in the morning and say, “Let’s buy insurance today!” When the hype cool off, most people tend to procrastinate with important financial planning decisions, adding to the effect of the previous argument.
Hence eventually, contrary to what the regulatory bodies wanted to achieve in the very first place, there is a possibility that the outcome in the long run is not what they had wanted to achieve in the first place.
What are your views, from both the standpoint of consumers and from practitioners?
© Wee Khai
Wee Khai is an avid soccer player, who completed 12 half-marathons and 3 full marathons in his entire life.
Wee Khai 