Better conduct in insurance sales in Singapore is for long-term protection

SINGAPORE – Whatever they are called, insurance agents, financial advisers, brokers and even banks all play the role of a middleman.

And, save for banks which also offer a lot of other products, they have one common purpose here – to sell insurance policies of one kind or another.

These middlemen can be very helpful to consumers who can get bogged down by the many terms and conditions of policies they are interested in, be it a whole life participating plan, a yearly renewable travel policy, or a short-term endowment plan.

They can also alert busy consumers to new financial products out in the market.

So when consumers find responsible middlemen, there is a tendency to stick with them.

But make no mistake, the existence of the middlemen is built on the need to sell. This is where things can go wrong, as I experienced in early September.

A third-party telemarketer made a cold call to promote an insurer’s Integrated Shield Plan (IP). This is is private health insurance coverage in addition to the national health insurance scheme MediShield Life.

Our conversation flatlined upon my questioning – claims were made, incorrectly, that the Government has been urging people to get IPs in recent years.

One could argue, at the very least, that the telemarketer was ignorant, or that she was simply trying to get me to make an appointment with a financial consultant who would explain the product.

Most likely, she was just out to sell, sell, sell at all costs.

To be clear, MediShield Life is sufficient to cover most public hospital bills.

In mid-July, Health Minister Ong Ye Kung said the national scheme is designed to cover nine in 10 subsidised public hospital bills, with very little or no out-of-pocket payment by the patient.

What soon came in mid-October was the announcement that

MediShield Life claim limits and premiums will rise

from April 2025, as a result of rising healthcare costs.

In September, almost all insurers jacked up the premiums of IPs and riders.

Based on the timeline of events, the telemarketer was likely tasked to sell IPs before their premiums increased, which would make it harder for consultants to push the products.

Of course, consumers have to carry out their own due diligence so they would not be misled.

But any middleman who provides incorrect or misleading information – whether intentionally or not – is eroding consumers’ trust in the local insurance industry.

A report released on Nov 14 found that consumers’ trust in life insurers in Singapore moved up a notch to 70 points in 2024 from a score of 68 in 2023.

Consumers’ trust in agents and financial advisers remains unchanged at 73 points, while the confidence levels of small and large businesses in general insurers and their intermediaries dipped.

The report noted that the scores in all categories are still strong.

The study, commissioned by the insurance culture and conduct steering committee, identifies areas where consumers’ and businesses’ trust in the Singapore insurance industry can be improved.

These scores show that the industry’s efforts over the years to get the house in order have yielded some positive results.

As a veteran adviser recalls, the standards have “improved tremendously from more than 30 years ago”.

Indeed, market players say intermediaries are now more educated, knowledgeable and savvy about finances and products.

They are also using technology to access and assess data, alleviating some of the pain of processing information overload.

Nonetheless, the veteran adviser noted that practitioners’ common gripe has remained – they feel stifled because of the regulator’s proactive stance on consumer protection and fair dealing.

The insurance industry is highly regulated and the penalties for mis-selling can cause much pain.

For instance, the Monetary Authority of Singapore can issue public reprimands, composition penalties, prohibition orders or even refer the case for criminal prosecution.

There is also the balanced scorecard framework that requires financial sales representatives to be assessed every quarter and this can affect their remuneration.

Besides the many rules in place, intermediaries have to undergo training and obtain numerous certifications before they are qualified to go out and give advice.

Then there is the issue of more complicated products that also weighs on intermediaries.

So, yes, it can be challenging to raise the standards of the industry in such a regulated and competitive environment.

But the way to go about doing this is not to do more, but to simplify.

Perhaps it will help to move towards clearer and simpler language in training as much as possible.

After all, what is easy to understand in training will be more easily relayed to others.

More importantly, the Financial Industry Disputes Resolution Centre (Fidrec) statistics show that in the past three years, more than half the claims processed are to do with banks, finance companies and credit bureaus. In FY 2023, such claims were 67 per cent.

Claims to do with licensed financial advisers and insurance brokers are typically among the lowest.

It goes without saying that more attention needs to be paid to those who sell insurance products through banks, given that most disputes handled by Fidrec are from this channel.

As industry veterans agree, in the end, it is hard to completely eradicate mis-selling because “there will always be black sheep”.

But if the progress over the decades mean anything, industry players will just have to keep on trying even if it is an uphill task.