28 March 2019
On 13 March 2019, the Monetary Authority of Singapore (“MAS”) released its Response to Feedback Received on Proposed Enhancements to Disclosure Requirements for Sale of Investment-linked Policies (“Response”). In its Response, MAS addressed some of the feedback received from the consultation held from 26 June 2015 to 31 July 2015 in which MAS sought comments on proposals to improve the disclosure requirements for sales of investment-linked policies (“ILPs”).
Proposal 1: Enhanced disclosure on fees and charges in a new Product-level Product Highlights Sheet
MAS had proposed that insurers disclose all fees and charges for an ILP in a new Product-level Product Highlights Sheet (“PPHS”). In its Response, MAS noted the substantial feedback received and announced that it intends to leverage on behavioural insights to enhance the overall readability of the PPHS, including the disclosure of fees and charges in the PPHS. MAS will continue to engage the relevant stakeholders in the process.
Proposal 2: Method of determining entry charge for Layer 1
MAS had proposed that insurers set out a single “entry charge”, representing the amount of premium deducted upfront, before the purchase of any units of the ILP sub-fund(s).
While noting that insurers currently impose different upfront deductions in ILPs and use different methods of calculating these charges, in its Response, MAS stated that it was of the view that simplifying these upfront deductions into a single “entry charge” would still be the clearest and most consistent way of presenting upfront deductions. The single entry charge will apply to new ILP policies issued, i.e. both new ILP products launched and new policies issued under existing ILP products.
Proposal 3: Disallow use of the terms “premium allocation rate” and “bid-offer spread”
MAS will proceed with its proposal to disallow the use of the term “premium allocation rate” as the term may not necessarily reflect the actual percentage of premiums that will be invested.
Currently, ILP sub-funds are priced on an NAV basis or a bid-offer basis. In its Response, MAS stated that it will proceed with its proposal to adopt single pricing on an NAV basis for ILP sub-funds. This change will apply to all new policies issued. Existing ILP policies can remain on dual pricing. As this change may involve major implementation efforts, MAS will provide a transitional period of 12 months upon revision of MAS Notice 307.
Proposal 4: Monthly statements for ILPs with minimal insurance cover
MAS had proposed that monthly statements be provided to policyholders of ILPs that provide minimal insurance cover, i.e. single premium ILPs. Following feedback, MAS stated that it is agreeable to revise the proposal to also include recurrent single premium ILPs. The requirement will not apply to regular premium ILPs.
There will be circumstances where insurers need not send monthly statements to policyholders. These provisions will be specified and are equivalent to those in regulation 40(1A) of the Securities and Futures (Licensing and Conduct of Business) Regulations in relation to collective investment schemes.
MAS had proposed to provide insurers with a transitional period of six months to implement the proposals. In its Response, MAS announced that the transitional period will be revised as follows:
- Proposal 1: MAS will conduct a review of Proposal 1. MAS will seek feedback from the industry on the implementation timeframe after the PPHS has been finalised.
- Proposals 2 and 3: In view of the system and operational changes required to implement these proposals, MAS will allow for an implementation period of 12 months for both proposals after MAS Notice 307 has been revised.
- Proposal 4: MAS will revise MAS Notice 307 to include provisions mirroring regulation 40(1A) of the Securities and Futures (Licensing and Conduct of Business) Regulations. The changes to the proposal on monthly statements will take effect immediately upon the revision of MAS Notice 307.