A NEW test that insurance agents have to pass or risk losing their licence to sell is getting them all hot under the collar.

 

The newly introduced Capital Markets and Financial Advisory Services Examination Module 9A (M9A) is a new requirement by the Monetary Authority of Singapore (MAS) on insurance agents marketing life insurance products.

 

The test, which is in addition to two existing ones that agents already have to take, applies to those who join the industry from next year. Existing agents have up till June 2013 to pass it.

 

It will test agents on their knowledge and understanding of the advantages and risks in structured products, especially structured investment-linked policies (ILPs). It also covers a variety of derivatives in the market, both on-the-exchange and over-the-counter.

 

Mr F.K. Leong, 54, who has been selling insurance for the past 29 years, said that while he understands the need for agents to continually upgrade and improve, he finds it unfair that their livelihood will be taken away just because they cannot pass the M9A.

 

'I just feel quite disappointed. I know what I am doing, and I have been doing it for so long, but now, I may not be able to continue with selling insurance. It is my rice bowl,' said Mr Leong, who studied till Secondary 2.

 

His worries are shared by many of the 13,000 agents in the industry.

 

Some feel the test is too broad-based as it covers a gamut of products, including esoteric ones that they do not traditionally sell.

 

They include futures contracts, options, warrants and contracts for differences.

 

Mr Tommy Wee, president of the Insurance and Financial Practitioners Association of Singapore, said: 'It is definitely a daunting prospect for some of the older agents who are Chinese-educated and may have difficulty understanding the syllabus.'

 

Mr Wee represents about 4,000 agents in his association, of whom only about 60 per cent have a tertiary education. He added that the minimum educational requirement for insurance agents is actually four O-level passes, 'a far cry from having a degree in financial engineering'.

 

'I think for the 60 per cent, they may be able to pass after a few tries, but for the rest, I am really worried,' added Mr Wee.

 

Another concern that the industry has is that it may not be able to attract enough new hires, given that the bar is being set so high.

 

Mr Daniel Chin, president of the Financial Planning Association of Singapore, said: 'If I had a degree in computational finance, I don't think I would want to sell insurance.'

 

Only agents who have a degree or higher qualification in finance, financial engineering or computational finance, or have Chartered Financial Analyst (CFA) qualification awarded by the CFA Institute will be exempt.

 

The test, administered by the Singapore College of Insurance, a non-profit company incorporated in 1994, will be compulsory for existing agents, who have till June 2013 to pass.

 

There is no cap as to how many attempts each agent is allowed, but it will cost between $107 and $151.94 for first-timers, and between $85.60 and $130.54 for subsequent attempts.

 

When contacted, an MAS spokesman said: 'As the financial services industry continues to evolve and new products come on stream, it is important that representatives providing advice to investors have an understanding of a wide spectrum of financial products.'

 

It is part of the new safeguards put forward to protect retail investors.

 

When asked if the test is too onerous for insurance agents who have only four O-level passes, the MAS said: 'The entry requirement is a minimum admission criterion to ensure that a representative has the basic English language and numeracy skills. Going forward, MAS will review the entry requirement of four O-level passes, given that our investor population is becoming better educated.'

 

The Life Insurance Association (LIA), which is an umbrella organisation for all life insurance organisations in Singapore, supports efforts to raise the professionalism of practitioners.

 

Mr Tan Hak Leh, president of LIA, said: 'As with all new initiatives, its effectiveness in delivering the desired outcomes should be reviewed on an ongoing basis.'

 

Similarly, Mr Richard Vargo, group managing director and head of bancassurance at DBS Bank, is supportive of assessments designed to enhance the quality of financial representatives in Singapore.

 

'We will be introducing the required syllabus to our staff in smaller modules to help them fully comprehend the subjects and attain the necessary accreditation. New employees will be required to take the exam starting January 2012 and the bank will work with existing employees to ensure that they complete the required exams by 2013.'

 

Mr William Cai, who is the deputy investment head of GYC Financial Advisory, said the M9A exam is a step in the right direction.

 

'You never know when insurance companies will push products that have these underlying investment tools. It is always better for the agent to know more, rather than less,' he said.