The MAS aims to promote responsible recruitment practices in the financial advisory industry and address risks that may arise from the mass poaching of insurance agents from rival insurers.
To deal with the issue, the MAS has launched a public consultation exercise that is scheduled to end on 9 April this year.
Speaking at the Life Insurance Association Singapore’s (LIA Singapore) annual luncheon in March, MAS deputy managing director of financial supervision, Mr Ong Chong Tee said the mass recruitment of insurance agents by one firm can give rise to heightened market conduct risk, such as aggressive sales tactics and improper switching.
He said: “On the issue of trust, recent episodes of large-scale movement of representatives have cast the industry in an unfavourable light.”
Measures to reduce market conduct risk
He also said that LIA members have agreed that they, as well as their Financial Advisory (FA) subsidiaries, will go ahead to adopt a number of measures to reduce the risks. The measures include:
- Capping a representative’s sales targets and sign-on incentives in the first year after the representative joins the new FA firm. This reduces the pressure on representatives to engage in aggressive sales tactics to meet inflated sales targets;
- Spreading sign-on incentives over a minimum period of six years, to create longer-term alignment between the representative and his new FA firm. This will foster better quality after-sales services to customers;
- Reducing the entitlement to sign-on incentives if the persistency of the policies serviced by the representative at his previous firm falls below industry norms, to deter improper switching; and
- Requiring the FA firm to undertake enhanced monitoring of its representative’s sales transactions to verify that the sales and advisory process has been properly conducted, which will include customer call-backs conducted by an independent external party.
Emphasis on ethical behaviour
Mr Ong reminded insurers that within the industry, revenues and growth must be driven by strong value propositions to customers and not by sheer aggressive recruitment and sales tactics.
He said: “An emphasis on ethical behaviour must permeate day-to-day practices. Boards and Management should set the appropriate tone from the top, and demonstrate a collective determination to walk that talk. Recognition and reward systems should match the espoused values of the firm.”
There have been several mass movements of financial advisers. For example, in September 2017, about 300 agents from Great Eastern’s agency unit Advisors Alliance Group moved to the then newly formed AIA Financial Advisers. In 2016, 250 agents at Prudential Singapore’s agency unit – Peter Tan Organisation – resigned to join Aviva. A