SM GOH CALLS ON INSURANCE INDUSTRY TO KEEP INSURANCE PROTECTION AFFORDABLE.

Singapore SM Goh Chok Tong

Channel News Asia reports:

Senior Minister Goh Chok Tong has asked the insurance industry to make a more concerted effort to keep insurance protection affordable.

He said the insurance industry needs to place more emphasis on protection plans like term assurance which is a more cost-effective way of addressing the protection needs of Singaporeans.

Speaking at NTUC Income’s 40th anniversary dinner on Friday, Mr Goh said studies have suggested that Singaporeans are under-insured.

“It could be due to complacency and a false sense of security that misfortune would not befall the individual. Or it could also be a general lack of awareness of how much coverage would be considered adequate,” said SM Goh, who is also chairman of the Monetary Authority of Singapore (MAS).

“But the more likely reason is the perception that getting the recommended amount of insurance protection is costly and beyond their means. Hence, it is given lower priority amidst other more pressing financial commitments like housing, children’s education and other day-to-day needs,” he added.

And part of the problem, he said, lies in the conventional practice of bundling the savings and protection elements into what’s called “Whole Life Plans”.

Mr Goh said the insurance premiums in such plans could be 3 to 5 times that of term assurance plans, for the same level of protection.

“I faced the same problem when I first started work. I could not afford a Whole Life Plan but had the good sense to choose a term assurance policy. Protecting my young family then was more important than leaving them my Whole Life insurance payout after they are all grown up when they need the sum of money the least,” said Mr Goh.

So Mr Goh’s recommendation to the insurance sector is to place more emphasis on protection plans like a simple term assurance.

Being more cost-effective, Mr Goh said term assurance will cater to customers from lower-income homes where there are competing demands for limited income in the family.

He added that the MAS would help consumers make informed decisions when buying insurance.

It will do so by working with the industry to enhance transparency in disclosing what insurance products like a Whole Life Plan contain.

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