Buying simple insurance policies might get simpler
The Monetary Authority of Singapore (MAS) wants to make it easier for consumers to buy simple and cost-effective insurance policies that meet their needs, thus narrowing protection gaps in Singapore.
To achieve this, MAS is proposing cutting down on the amount of information consumers have to provide to financial institutions selling these policies.
The proposals apply to term life insurance policies, standard critical illness riders sold with term life insurance, and standard standalone critical illness policies.
Representatives from financial institutions can collect less information from clients when they make recommendations on these policies that are based on the Basic Financial Planning Guide.
The guide outlines a few rules of thumb for individuals to address their savings, insurance and investment needs. For example, consumers are advised to spend at most 15 per cent of their take-home pay on insurance protection. They are also encouraged to obtain insurance coverage of nine times their annual income for death and total permanent disability (TPD), and four times their annual income for critical illness.
The guide was launched in October 2023 by MAS and national financial education programme MoneySense – in collaboration with the Central Provident Fund Board and finance industry associations – and updated on Jan 31 with six variations for individuals at various life stages.
MAS said the proposals to collect a reduced set of client information also aim to promote the guide’s adoption by the financial advisory industry.
The proposals apply to term life insurance policies, standard critical illness riders sold with term life insurance, and standard standalone critical illness policies.
If the proposals are adopted, financial institutions will need to ask clients only for their financial objectives; their current insurance policies that provide coverage for death and total and permanent disability, critical illness, or both; and their annual income.
For standalone critical illness policies and critical illness riders, clients must also disclose any medical conditions they may have.
Clients previously needed to disclose other information such as their financial situation – including assets, liabilities, cash flow and income – their financial commitments, and information about their dependants where applicable.
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