SINGAPORE — The Monetary Authority of Singapore (MAS) is proposing that financial institutions collect less information from their clients for selected insurance policies.
The proposals, which were published in a consultation paper on Friday (2 February), will enable consumers to meet their protection needs more easily through the purchase of simple and cost-effective insurance policies, MAS said.
Currently, the information which financial institutions are required to collect and document from clients for investment products includes a list of nine categories as outlined in the Financial Advisers Act 2001 (FAA), while the information required for accident and health insurance policies lists eight different categories as outlined in MAS Notice 120 on Disclosure and Advisory Process Requirements for Accident and Health Insurance Products (Notice 120).
Under the proposals, financial institutions which make recommendations on certain insurance products in accordance with the Basic Financial Planning Guide are to be exempted from the full information collection requirements under the FAA and MAS Notice 120.
Instead, financial institutions are required to collect only information pertaining to the client's objectives, annual income, current insurance policies that provide death, total permanent disability, or critical illness coverage, and for standalone critical illness policies and riders, any medical conditions that the insured may have.
Basic Financial Planning Guide
The Basic Financial Planning Guide, which MAS launched in October 2023 in collaboration with Money Sense, the Central Provident Fund Board (CPFB), and finance industry associations, outlines a few rules of thumb for individuals to start taking proactive steps to address their savings, insurance and investment needs.
Specifically, the guide encourages Singaporeans to allocate up to 15 per cent of their net income for insurance protection. Consumers are also advised to obtain insurance coverage of nine times their annual income for death and total permanent disability, and four times their annual income for critical illness.
On 31 January, the guide issued six customised variations to illustrate the financial planning needs of individuals at different life stages, beginning with those new to the workforce and ending with those approaching retirement.
“The proposals seek to simplify the financial advisory process through which Singaporeans can obtain cost-effective insurance coverage. At the same time, the upper limits stipulated in the Basic Financial Planning Guide on insurance coverage and spending serve as safeguards to protect consumers’ interests,” said Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS.
MAS is currently seeking feedback from financial institutions, consumers, and other interested parties on its proposals. Comments on the proposals must be submitted by 15 March 2024.