DISTRIBUTION CHANNELS

An increasing number of insurers are using multiple distribution channels as they continue to balance the needs of different groups of consumers against the cost of distributing their products and services. When it comes to insurance distribution channels, one size does not necessarily fit all.

Appended below are the various distribution channels:

 

Insurance Agents

An insurance agent is defined under the Insurance Act (Cap. 142) as a person who is or has been carrying on insurance business in Singapore as a registered agent for one or more insurers, and includes an agent of a foreign insurer carrying on insurance business in Singapore under a foreign insurer scheme under Part IIA of the Act. Individual agents or corporate agencies can employ nominee agents to assist them in their business transactions.

For the purpose of registration with the ARB as an insurance agent pursuant to the mandatory requirements of the Notice No: MAS 211, an applicant may be classified under any one of the following:

  • Individual agents
  • Corporate agents; i.e. sole proprietorship/partnership company registered with the Account and Corporate Regulatory Authority, society/cooperative society registered with the Registrar of Societies; and
  • Trade Specific Agents

All the above-mentioned entities may appoint nominee agents, including individual agents.

↑ Back to Top

 

Trade Specific Agents (TSAs)

TSAs are engaged in a business of which insurance is not their core business, and usually sell only one type of insurance product (e.g. travel agents selling travel insurance) in the course of their other business activities.

The list of Trade Specific Agent types are as follows:

The General Insurance Agents Registration Regulations (GIARR) specify that a person (individual or entity) shall not arrange, or hold himself out as entitled to arrange, a contract of insurance as an agent for an insurer, unless and until he has:

  • Been duly registered with the ARB of the GIA (the registered agent being classified as either a "Cash Agent" or "Credit Agent"), and is issued with a Certificate of Registration by the ARB; and
  • Entered into an agency agreement in writing with his principal (the insurer that he is representing).

Before commencing and representing any insurers in selling insurance, all general insurance agents and Trade Specific Agents (TSAs) must register with the Agents’ Registration Board (ARB) of the General Insurance Association of Singapore (GIA) through their principal insurers. The ARB will issue each of them with a unique GIA nominee number. Consumers can authenticate and confirm if an agent is registered with the ARB and is authorised to transact general insurance business with the insurer by verifying the agent’s details in the agent search module on the GIA website at https://www.arcm.com.sg/App/UI/Common/SearchAgentInfor.aspx?strApplicationType=SearchNominee

All general insurance agents are required to comply with the following:

  • General Insurance Agents Registration Regulations
  • Fit and Proper Criteria
  • The Code of Practice for Agents; and
  • Continuous Professional Development (CPD) Requirements, except for Trade Specific Agents.

Under the Code of Practice for Agents, an agent shall not enter into any agreement or arrangement whatsoever for the appointment or engagement of any sub-agent.

In Singapore, under the GIARR, general insurance agents can represent up to a maximum of three (3) general insurers, or principals, at any given time. In addition, it is a mandatory requirement for general insurers to accept insurance business only from qualified agents registered with the ARB.

↑ Back to Top

 

Insurance Brokers

They are registered under the Insurance Act (Cap. 142) to carry on insurance business as agents of insureds or intending insureds. They advise individual or corporate buyers of insurance on their insurance needs. They act on their clients' behalf to negotiate and obtain the most appropriate insurance covers at competitive premium rates from their insurers, exercising care and skill in doing so.

Currently, insurance brokers in Singapore are generally classified under the following categories:

  • Direct insurance brokers
  • General reinsurance brokers – placement of reinsurance risks for general insurers; and
  • Life reinsurance brokers – placement of reinsurance risks for life insurers.

Reinsurance brokers negotiate reinsurance contracts between the ceding insurers and reinsurers. They generally represent the ceding insurers for placing the reinsurance business and perform other necessary services.

A list of the insurance brokers licensed by MAS is available on the MAS website at http://www.mas.gov.sg/fi_directory/index.html

Unlike an agent, a broker is free to place the client’s insurance business with any number of insurers. His duty is to provide independent expert advice on a wide range of insurance matters to the client. These include identifying the best type of cover to meet the client’s insurance needs, and providing assistance when an insured makes a claim. The broker has to exercise due care and diligence in understanding and satisfying the insurance requirements of the client, and take all reasonable steps to act fairly in the interests of the client. Although insurance buyers (i.e. ordinary retail consumers) may deal with insurers directly, the vast majority of commercial businesses (i.e. insurance covers bought by companies) are usually transacted through registered brokers. The complexity of many commercial risks and large premiums involved often render a broker’s services invaluable to the insured.

As required under the Insurance Act (Cap. 142), an insurance broking company must have in force a Professional Indemnity Insurance Policy.

↑ Back to Top

 

Bancassurance

Banks, including finance companies, with their huge database of customers, sell insurance through a network of branches. Almost all of the local banks in Singapore own or have partnership agreements with insurance companies.

Bancassurance is the term used to describe the partnership or relationship between a bank and an insurance company, whereby the insurance company uses the bank sales channel in order to sell insurance products, most of which are personal lines.

Bank staff members, rather than insurance agents, become the point of sales or point of contact for customers. Bank staff members are advised and supported by the insurance companies through product information, marketing campaigns and sales training. They are also required to pass the relevant licensing examinations before they can sell insurance or provide insurance-related advice.

Banks also make use of their websites to sell personal lines products, such as Card Protection Insurance, Household Insurance, Private Motor Car Insurance and Travel Insurance. Some banks even offer travel insurance products through their ATM networks.

↑ Back to Top

 

Online Internet Portals

Company Portals

The growth of information on the Internet has also increased the amount of time people spend on it. This has in turn generated a new market for online offering of insurance products.

In recent years, Singapore has seen the entry of direct-to-consumer insurance companies selling individual motor, travel, home and accident insurance. Its business model entails direct underwriting via an online platform, supported by a fully staffed contract centre (operating 24 hours every day of the week) and a full-fledged claims department.

In Singapore, online insurance selling is limited mostly to personal lines products covering home, motor, golf, travel, card protection, personal accident, hospital income and even domestic maid packages. General insurers involved will sell these individual products through their own informative websites, which can provide for quotations and accessibility to web brochures, proposal forms and policy wording.

Independent Portals

Apart from the individual company’s portals, there are also independent portals. These are deemed "passive" in nature, i.e. they are clearly not involved in any sales distribution functions, and need not register with the ARB of the GIA.

Passive portals are not involved in any sales distribution functions, namely:

  • They do not provide sales or product advice. Provision of static product information of the respective insurers without comments on product features, including premiums, is not deemed to be providing product advice;
  • They are not involved in the collection of premiums and proposals;
  • They do not issue policy documents on behalf of insurers;.
  • The fees must not be based on the premiums.

Note: The remuneration fee for such online transactions must not in any way be tied to the premiums of the products being sold. If a fee based on premiums is paid, this will be deemed as sales commission and will be seen as being involved in the sales distribution process.

Portals not meeting the above-mentioned criteria will be deemed as insurance intermediaries by MAS. Such portals have to be registered with the ARB as agents, or licensed as brokers by MAS.

↑ Back to Top

 

Direct Marketing

Rapid technological advancements have changed the way in which individual insurance companies can now serve their customers. At the same time, new technology has allowed for more information on individual policyholders, which enables their buying habits to be stored in the IT systems of direct insurers. The build-up of such databases over the years is a useful marketing tool to harness the power of information technology by the insurers. They can then execute segment marketing to focus on customised products for niche target groups.

Insurers have directly marketed personal lines, such as Personal Accident Insurance, Travel Insurance, Private Motor Insurance, Household Insurance, Hospital Income Insurance, Golfer’s Insurance and even Domestic Maid Package Insurance, through their informative websites. Intending insureds self-declare their pertinent information in the simplified online proposal forms. Insurance product quotations and policy wording are made available online. Payment of premiums is instant, made easy through online payment via credit cards.

Insurers also periodically send out promotional product brochures (direct mailers) to existing policyholders without servicing agents. Telemarketers from call centres owned or appointed by insurers also phone customers to advise and market personal lines, as well as help to file claims. Insurers also embark on cross-selling strategies to serve the needs of their customers.

↑ Back to Top

 

This article has been jointly produced by:
The General Insurance Association of Singapore and
The Singapore College of Insurance

*We would like to thank the Singapore College of Insurance for their contribution on the above write up.