Financial services regulator, MAS, has issued guidelines, which took effect on 31 March 2017, that say that a direct life insurer may offer all types of life policies on the online direct channel with no advice provided. MAS says that the guidelines set out the Authority's expectations on the safeguards that direct life insurers should put in place for such distribution.
Before a direct life insurer offers a specific life policy online, it should first determine whether it offers an equivalent Direct Purchase Insurance (DPI). If an equivalent DPI is currently available, the direct life insurer should also make available that DPI on its online direct channel, says the guidelines.
The Authority has not required all direct life insurers to offer DPIs online, recognising that not all direct life insurers have an online platform for the distribution of life policies. However, where a direct life insurer has an online platform to distribute life policies, it should also offer the equivalent DPI online to its clients.
The guidelines call for the provision of key information including product information and full policy wordings of the relevant life policy. The direct life insurer should also obtain the client’s acknowledgement that he has: read and understood the benefit illustration and product summary, including any coverage exclusion; completed and disclosed fully and truthfully all the information requested in the proposal form and any supplementary questionnaire(s); declared all pre-existing medical conditions in the proposal form; and reviewed all existing life policies that he owns, or is in the process of applying for and declared his current financial situation.
The direct life insurer should highlight to a client any conditions, including special exclusions or additional premium loadings imposed by the direct life insurer as a result of underwriting the policy application. Where the client intends to purchase a life policy with a conditional acceptance, the direct life insurer should require the client to acknowledge that he has read and understood these conditions before purchasing the life policy. Examples of conditional acceptance include instances where the direct life insurer’s acceptance of a client’s policy is contingent upon exclusion of the client’s pre-existing medical condition or there is additional premium loading imposed by the direct life insurer due to the client’s pre-existing medical condition.
A direct life insurer should encourage its clients to use the Insurance Estimator and Budget Calculator before buying a life policy via the online direct channel. This will enable the client to (a) calculate the amount of life insurance coverage the client would need, so that the client may determine if the life policy meets his protection needs; and (b) check if the premium payable for the life policy is affordable based on his income and expenditure. The insurer should also urge the client to visit www.comparefirst.sg to compare the features and premiums of DPI and other types of life policies, consider the different types of life policies that are available, and whether the life policy that he intends to purchase is suitable for his financial circumstances and needs.
A direct life insurer should set up appropriate avenues to address general queries from its clients relating to the life policies offered on its online direct channel, including but not limited to telephone or email helplines. A direct life insurer should also provide information, such as contact details, information on the claims process and the process for filing complaints, on its online direct channel.
Internal control and risk management
It is an existing obligation for a direct life insurer to ensure that it has adequate policies, procedures and controls to mitigate money laundering and terrorism financing risks. A direct life insurer shall take steps to address any specific risks associated with non-face-to-face business relations with a client. It is also an existing obligation for a direct life insurer to implement internal policies and processes to address technological risks.
A direct life insurer should also put in place an appropriate business continuity plan to minimise system downtime or component failures to the online direct channel, and to ensure the functionality and continued operation of the online direct channel.
Direct life insurers should be able to demonstrate to MAS that they are able to observe the guidelines. Where MAS is not satisfied with a direct life insurer’s observance of the guidelines, the Authority may require the direct life insurer to take additional measures to address the deficiencies noted.