IMPOSING a fee-based pay structure from abroad for the local insurance industry would be like putting a car on the moon and wondering why it did not work.
That colourful analogy came from Manulife Singapore president and chief executive Annette King who was responding to the Monetary Authority of Singapore's (MAS) review of the insurance industry to lower costs and raise professionalism.
Of the difficulties in getting a car to take to the lunar landscape, she said: 'That's because the gravity is different. You've got to modify it a bit to be a moon buggy, and take into account the environment in which you operate.
'To take best practices from other parts of the world, yes, but we have got to be careful to apply it to our circumstances.'
The MAS is reviewing the current tiered payment system here where a customer pays commissions not only to his agent, but also his supervisors.
One alternative that may be studied in the review could be the fee-based system that has been adopted in Britain and Australia. The possibility that the model could be introduced here has already caused much opposition in the industry.
Ms King noted that these two countries have 'quite a number of structural differences in the insurance industry and social differences' from Singapore, which means that what works in those places may not work here. For example, Singapore does not have a safety net for the underinsured because there is no social security. 'CPF (Central Provident Fund), of course, takes care of working people to some extent, but it is not the same as social security.'
Also, clients in Singapore tend to prefer bundled investment and protection products, whereas Britain and Australia generally sell unbundled products. 'Their distribution structure is dominated by financial advisers, with an open architecture of products. We are not there yet, only about 15 per cent of Singapore's distribution is through (independent) financial advisers,' she added.
Manulife Financial also launched the Manulife Income Series-Singapore Fund yesterday. This is an investment-linked plan which provides a regular monthly income that caters to retirement needs and those seeking a passive income.
The fund targets to pay a dividend of 3.6 cents per unit a year, and seeks to provide medium- to long-term capital appreciation.
Ms King added that while this fund is a first in Singapore, Manulife Financial has been managing such funds for many years in North America. She is setting a target for the fund size to reach $30 million to $50 million in the next 12 months.
The dividend payout will be reviewed from time to time, and if the fund is performing, the company will consider increasing the distribution. The fund will be managed by Manulife Asset Management, with about 60 per cent of it being invested in Singapore bonds, and about 40 per cent of it in Singapore equities.