The Singapore life insurance industry is set for a series of shake-ups in what is being called a bid to end “poor practices” and promote greater use of environmental, social and governance (ESG) principles, while also bridging the “under-insurance gap” in the region.
Speaking at the Life Insurance Association of Singapore’s annual luncheon, held on Monday, senior officials outlined a series of planned changes. Industry participants were also warned that they should expect to see the Monetary Authority of Singapore to engage them more regularly on what they are doing within their organisations, to shape what was referred to as “the right culture”.
Lee Boon Ngiap, assistant managing director of capital markets at MAS, warned that financial firms which currently are paying financial rewards to employees, including large commissions, without ensuring correct practices are in place will face serious consequences and in some cases, he says, could see financial penalties for both institutions and individuals brought to bear.
“Getting the culture right in financial institutions is critical, because poor culture can be a driver of poor conduct,” Lee added.
“How a firm rewards and manages its employees and agents send a clear signal about the accepted corporate culture. If they see that high revenue producers are rewarded despite, or even because of poor conduct, that is a sure recipe for poor culture to take root in an organisation.
“Remuneration policies must not just motivate high performance based on sales or profits but also penalise poor conduct so that they can serve as an effective deterrent to bad behaviour.”
In his speech at the event, Lee also noted that the MAS will be placing greater emphasis on individual accountability for meeting conduct standards and expectations, including that of supervisors of staff involved in misconduct, he said.
“While the life insurance industry may not have been at the forefront of the major misconduct cases making global headlines, some of these conduct costs involve mis-selling of products and inappropriate advice, said Lee.
‘The price of misconduct’
“The need to pay attention to culture to avoid paying the price of misconduct is clearly equally applicable to the life insurance industry, particularly when it involves poor financial advisory practices.
Patrick Teow, president of LIA Singapore, pictured left, speaking at the event, said that the three areas of focus for 2017 will centre on: managing the affordability of healthcare in Singapore, bridging the underinsurance gap, and enhancing consumer interests.
“Life insurance is all about people and in 2017 we are enhancing consumer interest by introducing new disclosure initiatives under the Financial Advisory Industry Review (FAIR), exploring digital innovations to increase choice and improve customer experience for consumers,” he said.
New disclosure initiatives under FAIR includes enhancements to disclosures in Benefit Illustrations – which will itself be renamed ‘Policy Illustrations’ – new disclosures on bundled products, and a new ‘Cover Page’ for participating and non-participating plans.
“In keeping with this, LIA Singapore last month signed a Statement of Intent together with other financial institutions to affirm our commitment in spearheading digital innovations aimed at increasing choice, lowering costs and offering greater convenience for consumers,” he said.
Other consumer-centric initiatives by LIA Singapore include: mystery shopping exercises to enhance the sales advisory process, co-creating an Insurance Management Associate Programme (iMAP) for the life sector with the Singapore College of Insurance to accelerate professional learning of new graduates joining the industry.
On its ESG principles, member companies are encouraged to adopt existing global ESG platforms such as the UN Principles for Sustainable Insurance (UN PSI) and UN Principles for Responsible Investment (UN PRI), which provide aspirational sets of principles that integrate ESG factors into activities of the insurance value chain and practices of investment.
“Good culture drives good conduct, and good conduct is good for business” added Lee. “Firms should spare no efforts to develop and sustain the right culture that genuinely puts customers first if they want to be around for the long term.
“I urge all of you to regularly think about your organisation’s culture and reflect on changes that you can make to promote a more positive culture of doing the right thing.”