The Monetary Authority of Singapore has reiterated the importance of protecting the interests of customers in the mass migration of advisers between insurance companies.
As reported in Singapore’s Business Times, MAS said that “Representatives must ensure that their product recommendations are suitable given their customers' needs, risk profile and financial circumstances. In addition, financial incentives offered by an insurer to recruit existing representatives from another firm to join the insurer or its related FA firm cannot be charged to the insurance funds. If the insurer disburses financial incentives, the amount must be borne by the insurer's shareholders.”
Mass migrations of agents often come with sign-on fees and incentives tied to hitting production targets. The concern over high fees paid to entice mass migration is that those who accept the remuneration package raise the risks of policy churning, over-selling and mis-selling as they are pressured into hitting the high sales targets.
The statement comes shortly after reports that 300 Great Eastern agents are expected to migrate to AIA Financial Advisers, a newly formed FA arm of AIA.
On the recruitment of FAs, AIA Financial Advisers Chief Executive Tan Chuan How, told BT: "AIA FA adopts sound recruitment practices to protect consumers' interests and strongly advocates that packages offered to experienced representatives should (be) commensurate with each individual's qualifications, track record and experience.
"Our core philosophy remains consistent and that is to reward fairly, commensurate with the efforts and productivity of our representatives."
While MAS acknowledges that such large-scale movements could result in improper switching of insurance policies, it is also aware that the offering of high sign-on bonuses and other financial incentives might drive up costs in the industry. The regulator pointed out that there are guidelines to safeguard consumers against improper switching of plans. In addition, incentives offered by an insurer cannot be charged to the insurance funds. Financial incentives must be borne by the insurer’s shareholders.
Concurrently, the MAS said that the Life Insurance Association Singapore (LIA Singapore) would be "working on some parameters on future movements" of representatives. Ms Pauline Lim, Executive Director of LIA, confirmed that the association would work with its members to craft parameters for these movements. Although the association does not govern compensation, it is important for the firms to adopt "professional, responsible and ethical recruitment practices to ensure that our industry continues to progress in a sustainable manner”, she said.
Read also: AIA Singapore launches AIA Financial Advisers
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