Mr Lim Hng Kiang, Minister for Trade and Industry, and Deputy Chairman of Monetary Authority of Singapore, recently made a keynote address at the 25th Pacific Insurance Conference.

He spoke about enhancing the penetration and availability of insurance, raising financial literacy and safeguarding retail customers’ interests.

One way to improve the penetration of insurance is to reach out to the poor through microinsurance. While I am familiar with the concept of microfinacing or microloans, microinsurance is something new to me.

This is certainly a new area that would be very useful and should be explored by the insurance companies.

Another area that can be addressed is to make long-term care insurance available at an earlier age. Currently, Eldershield only kicks in when you reach age 40. If you already have some disability at that time, it might be difficult to get additional coverage. So, one way is to allow for Eldershield enhancements to be made optionally available to those who want it at an earlier age.

Raising the level of financial literacy is already actively done via various online media and events. As the population gets more and more savvy, insurance agents would have to also raise their level of competency and professionalism in order to meet the clients’ requirements.

Lastly, on the area of safeguarding customers’ interests, I quote Minister Lim :

“Consumers rely on agents to provide them with sound, quality advice. It is important that agents carefully consider their customers’ financial needs and risk appetites before recommending suitable products. Agents should not engage in product pushing to maximise commissions. Agents must remember the important social role in helping customers get adequately insured for their future.

Insurance companies must also be customer-centric in their approach. They should not encourage the creation of a large agency force simply to compete for market share, or to push sales. Incentive structures must take into account how well the needs of customers are met, not merely sales volume. A strong fair dealing organisational culture will inculcate the right values for representatives to deal fairly with customers at all times.”

This is a worthy goal, but I think it is also going to be a tall order as long as (financial) incentives are always based on sales volume.

How do you develop an incentive structure that measures how well the needs of customers are being met? What if something that better meets the needs of customers results in less profits for the insurance company?

This kind of incentive structure is not something this is easy to develop. If someone does manage to implement such a scheme on a widespread level, it will likely revolutionize the entire insurance industry.