Monetary Authority of Singapore
Building Human Capital for the New World and Beyond
1 Good morning ladies and gentlemen. I would like to thank the Singapore Insurance Institute and its President, Mr Derek Teo, for inviting me to address you this morning.
2 The insurance industry has undergone significant changes over the last few years. There has been substantial consolidation amidst a demanding operating environment. At the same time, a number of countries in Asia have begun to liberalise their insurance markets, presenting greater growth opportunities to insurers. As a result, the industry profile is now quite different from what it was just a few years ago. The pace of change could be even more rapid in the years ahead and the challenges more demanding.
Singapore' Insurance Industry Performance in 2004
3 Amidst this increasingly challenging operating environment, the Singapore insurance industry has performed well. In 2004, total premiums grew by about 11% to S$17 billion, while total assets expanded by 12% to S$87 billion. The life insurance industry saw growth in sales of both annual premium and single premium products. The industry remained profitable, recording a net income of $939 million.
4 Total premiums for the general insurance industry, however, fell marginally by 2%, largely the result of softer rates because of more intense competition. Despite this, and the unfortunate events of December 26, the industry still managed a credible performance, making underwriting and operating profits of $252 million and $553 million, respectively, in 2004.
5 The relatively good overall performance of the insurance industry in 2004 could be partly attributed to the strong recovery of the Singapore economy, which boosted consumer confidence, and a more favourable investment climate. Prospects for the industry remain positive with an increasing interest in medical insurance, and a growing demand for insurance services by the SME and property sectors. The low insurance penetration rate in Singapore, compared with that in the developed markets, also means that there remains untapped potential for insurers to exploit.
6 As with the insurance markets in the region and globally, the Singapore insurance industry is also going through a process of transformation. We are seeing the emergence of specialist insurers as consumers are becoming more sophisticated and demanding products and services that could not be met by the traditional insurers. At the same time, banks and other financial institutions are moving into the insurance arena. But, this has not all been in direct competition with insurance companies. A number of banks have tied up with insurers to distribute insurance products, taking advantage of their wide customer base.
Human Capital Development
7 The rapid developments in the financial services industry means that insurers also have to keep pace by upgrading their expertise. There is a growing array of financial products that insurers, banks and capital market service providers are offering to compete for the consumers' investment dollar. Insurers will have to pay attention to enhancing the quality and competence of their human capital. Otherwise, they risk being left behind in the race for innovation and quality in the products they offer.
8 To meet these challenges, insurers will have to provide the right environment for innovative ideas to bloom and devote sufficient resources to training their people. They will have to continually upgrade their actuarial, underwriting, specialist claims and product development capabilities. On-going training of their marketing and sales force must be a priority. At the same time, they will need to re-engineer their processes to keep costs manageable.
9 But all these will only be possible if there is strong leadership at the board and senior management. The board and senior management have to lead the way and be committed to developing a strong learning culture in their respective organisations.
Financial Industry Competency Standards (FICS)
10 It is with this in mind that the Institute of Banking and Finance, with the support of the Monetary Authority of Singapore, has been working with the financial services industry in Singapore to develop the Financial Industry Competency Standards (FICS). To be launched in September, the FICS initiative aims to develop a comprehensive set of competency standards that are aligned with international best practices, and a certification framework for competency that allows portability across industries. The FICS framework will provide a good basis for industry practitioners to upgrade themselves professionally through certification.
11 I am pleased to note that the insurance industry has fully supported the FICS initiative. Claims handling for both life and general insurance will be among the four pilot job families that will be rolled out in November this year. The remaining insurance job families will be implemented next year.
Financial Sector Development Fund (FSDF)
12 MAS continues to place much emphasis on enhancing the competency and specialist skills of the workforce in Singapore's financial services industry. This goes hand in glove with other measures that we have been introducing over the years to provide a conducive environment for the financial services industry to prosper in Singapore. In particular, the Financial Training Scheme (FTS) under the Financial Sector Development Fund (FSDF) has co-funded a wide range of intermediate to advanced level technical training programmes.
13 For the insurance sector, the FSDF supported a total of about 400 trainees for insurance-related courses, with about $300,000 disbursed as training grants over the past three years. I would strongly encourage the industry to continue in its efforts to support skills upgrading. In the long run, taking a more pro-active stance to plan and invest in its future manpower and training needs would bear fruit for the industry. It will be better placed to respond to and capture market opportunities more quickly. This will help the industry sustain its competitive edge.
Singapore Insurance Institute (SII) Faculty of Insurance
14 As we are all aware, the training infrastructure for the insurance sector already exists in Singapore. The Singapore Insurance Institute (SII) has been playing an active role in enhancing the professional standards of its members. The SII has recently entered into a joint venture with the UK-based Chartered Insurance Institute (CII) to set up the SII Faculty of Insurance in Singapore, offering technical insurance training and assessment services. The training programmes to be offered by the Faculty include technical training in specialist areas, risk management training programmes, and Diploma courses. This initiative is a good example of how training providers can keep abreast with changes in the industry and offer more relevant and comprehensive insurance training by collaborating with foreign partners.
Singapore College of Insurance (SCI)
15 As the Chairman of the Singapore College of Insurance (SCI), I should also mention the efforts that the SCI has been undertaking to meet the training needs of the insurance industry. From its initial task of nurturing a pool of professionally qualified local practitioners, SCI's programmes have in recent years focused on the upgrading of technical skills through practice-oriented workshops and seminars. SCI's courses place greater emphasis on the practical application of technical insurance concepts and knowledge using case studies and group discussions to enhance the learning experience for participants. SCI draws on a large pool of practitioners as part-time trainers. As practitioners, their knowledge of the industry is current and this ensures that the training programmes offered remains highly relevant.
16 The insurance regulatory examinations conducted by SCI continue to see high enrolment numbers, indicating the large number of individuals aspiring to enter the insurance industry. About 38,000 candidates sat for SCI's regulatory examinations in 2004, with a satisfactory passing rate of 61%. The high standards of the regulatory examinations help ensure that the candidates are well equipped with the necessary insurance knowledge before they start their careers in the industry. We also saw more in the insurance industry being trained by SCI. Enrolment for SCI's local and regional professional workshops and seminars, and courses for front-end operatives, increased by 19% in 2004.
17 Looking ahead, SCI and SII will continue to play significant roles in raising the standards of professionalism of insurance industry practitioners in Singapore. In this regard, I would encourage the two institutions to collaborate further with each other, tap on each other's strengths and optimise the use of the limited training resources to offer quality training programmes that will raise the level of competency and professional standards of insurance practitioners in Singapore.
Managing Responsibly
18 Raising the competency and professional standards in the industry will help build consumer confidence in the insurance industry. Consumers today demand high quality in the design of a product and how it is delivered. Insurers have to manage their businesses with greater responsibility and care if they are to maintain and build consumers' trust in them and their products. They have to keep abreast of the changing needs and expectations of their customers, and continuously adapt their product offerings to satisfy those needs.
19 Insurance is largely a people-centric business. This is especially so for the life insurance industry. Insurers should therefore pay close attention to the training needs of their sales force since they are perhaps the only point of contact that customers have with the insurance company. The level of professionalism of the sales force reflects the values and ethical standards of the company they represent. The reputation of the company can be easily damaged by just a few bad hats. Management and agency supervisors therefore need to inculcate the right values and motivations into their sales force. Thus, managers and supervisors also need to be adequately trained in the softer skills of management and communication.
20 Professional bodies, such as the SII, have an important role to play in promoting the highest standards of professional practices amongst their members. This would help insurers to continue to uphold standards of integrity and excellence in their dealings with the public, and contribute to the overall image of the industry.
Conclusion
21 To conclude, the insurance industry will face increasingly more demanding challenges in the years ahead. Indeed, the title of this conference A New World and Beyond is very apt. There are many priorities that the industry will have to contend with. I urge the industry not to neglect the importance of ensuring that its workforce remains well trained and possesses the necessary competencies as it moves into the next era and beyond. Having the right product or service to meet the changing needs of customers is essential. But maintaining a high level of professionalism when dealing with customers is equally important.
22 I hope you will get many useful pointers from the renowned professionals at this conference. I wish you a fruitful and enjoyable conference.