offered to their corporate customers. however, over the years, we have noticed that for some insurance brokers, fa activities and revenue from the advisory business have eclipsed that of their core insurance broking business. mas is concerned that insurance brokers may not have sufficient management expertise and compliance capability to oversee and manage the fa portion of their business. lowering distribution costs our fourth key thrust is to lower the cost of distribution, so that we can keep the overall cost of life insurance products affordable for singaporeans. direct sales of simple products the online channel is one of the ways in which we can lower distribution costs. we have seen the use of direct sales via the internet for the distribution of general insurance products such as travel insurance and motor insurance. why not life insurance? the industry could explore the use of the internet as an alternative distribution channel to offer life insurance to consumers at competitive prices. online distribution will also mean that products will have to be simplified. simple term life insurance via the internet could be a good way to help lower cost and make affordable insurance protection more readily available to a wider population. and simple term life insurance is sometimes all that a person needs to protect against risk. mas would like to see the sale of simple term life insurance products through the internet. bis central bankers ’ speeches commission - based remuneration and distribution structure but customised financial advice is still required for the more complicated insurance plans, tailored to suit individual and family needs and circumstances, and for those who want to supplement their term life insurance. to lower costs for such products, we must address some of the underlying inefficiencies in our remuneration and distribution structure. fair will fundamentally review the commission - based remuneration and distribution structure. in singapore, insurance products are distributed through insurance agencies, banks, and financial advisory firms. the premiums for these insurance products include charges that cover mortality risk, as well as various expenses incurred by the insurer, such as distribution and management expenses. a substantial proportion of the premium in the earlier years goes to paying for distribution expenses. over the life of a policy, this cost can account for as much as 8 % of the total premiums paid. a key driver of this cost is the multi - tier distribution structure that is common in singapore ’ s insurance companies and large fa firms. the commission - based, multi - tier distribution structure involves representatives in the upper tiers having a share of the commissions earned by lower - tier representatives who provide insurance and financial advice

representatives bis central bankers ’ speeches product knowledge of fa representatives we have introduced new examination modules to ensure that fa representatives have sufficient knowledge of the wide and complex range of investment and insurance products currently available in the market. most firms and fa representatives understand and support the need to raise knowledge and skill levels through a set of common examinations. some representatives have questioned why they need to pass these new exams when all they sell are simple products. mas takes the view that a good financial adviser should be able to explain the advantages and disadvantages and the risks of competing products – both simple and complex. the reality is that consumers today are faced with a wide range of choices. for example, a consumer wishing to invest and buy insurance protection has a few options. he may consider a participating policy or a regular premium investment - linked policy or simply purchase an insurance term policy and invest separately. he could build a portfolio of just plain vanilla stocks and bonds or include etfs and futures or simply buy unit trusts. each option has its own set of risk - return and cost considerations. the increasingly educated consumer will expect his representative to help him make sense of the complexity of the products and their suitability, even if he eventually settles on simple life insurance and investment products. some other fa representatives feel that their academic qualifications are sufficient and should allow them an exemption from the exams. but consumers should have some assurance that the qualifications of the fa representatives meet a common standard. the examinations are industry - certified, and set a common standard and benchmark for fa representatives. it is important that all representatives, even those who have been in the industry for many years, stay abreast of latest market developments and products. only then can they provide holistic advice and comprehensive recommendations on what to buy, and – more importantly – what not to buy. but we understand the concerns that some representatives have raised. mas is prepared to adjust its requirements subject to the companies putting in place proper controls to ensure that only simple products are sold by the selected fa representatives who do not take the new examinations. entry requirements for fa representatives next, as part of fair, mas will review the minimum level of qualifications that we expect of our fa representatives, to ensure they stay relevant to the needs and expectations of consumers. the current entry requirement for fa representatives is four gce “ o ” level passes. it is clearly not in keeping with singapore ’ s rising educational levels, the increasing complexity of products, and higher expectations from a more literate and sophisticated public.