To make it easier for consumers to buy simple and cost-effective insurance policies that meet their needs, thus narrowing protection gaps here, the MAS is proposing cutting down on the amount of information consumers have to give 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 will be allowed to 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% 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 31 January 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.
Mr Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS, said, “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.”