When the Monetary Authority of Singapore issued a consultation paper on the regulatory framework for accident and health (A&H) insurance on 22 May, it proposed clarifying that life insurers are responsible for the conduct of its intermediaries selling insurance.
However, respondents from the life insurance industry said this proposal was inconsistent with the city’s Financial Advisers Act which states that financial advice (FA) firms are responsible for their own conduct in relation to the sale of life policies.
Less effective
The recent MAS paper, which was published on Friday and details feedback from industry, pointed out that life insurers would be less effective than advice firms when taking action against IFAs for misconduct because they have no control over the behaviour of non-tied intermediaries.
“[The] MAS has taken the feedback into consideration and notes the operational difficulties for life insurers to be fully responsible for the market conduct of [advice] firms and their representatives,” the Singapore regulator said.
"The life insurance industry voiced concerns that the proposal was inconsistent with the policy intent of the Financial Advisers Act"
Remain responsible
The MAS said it will review this proposal and plans to ensure A&H insurance intermediaries are responsible for the general conduct of their representatives when selling products created by life insurers.
“Where there are issues pertaining to the A&H policy sold, life insurers will continue to remain responsible as product manufacturers,” it said.
Insurers are not expected to be responsible for intermediaries such as insurance brokers where there is no “principal agency relationship” between the broker and the insurer.
Fact-find
The MAS also said it intends to make it a requirement for advisers to use a fact-find and needs analysis when selling health insurance.
This analysis process, it said, aims to ensure intermediaries have adequate information, such as the consumer’s financial ability, to provide suitable advice to consumers.
Affordability
“During the sales advisory process, insurance intermediaries should remind consumers to consider their health insurance needs and long-term affordability of the insurance policy,” it said.
If the consumer does not wish to provide the information required, the insurance intermediary must clearly document the decision, the paper reads.
The MAS said it will work with the industry associations to review and update the existing templates for the fact-find forms and needs analysis.
Amendments to the MAS regulation regarding conduct of insurance intermediaries, which will be detailed as part of MAS Notice 117, will be issued by the end of the year.
