THE insurance industry in Singapore is a fairly mature one. A 2012 study commissioned by the Life Insurance Association estimated that 58 per cent of the Singapore population own at least one insurance policy. Among those age 30 to 49, the penetration rate is even higher at 73 per cent. Yet, it is an industry where misconceptions and confusion about insurance persist, even as a segment of the population grows more financially sophisticated. It is also an industry where advice may be skewed by product commissions, which have remained stubbornly impervious to competition. Hence the type of products most frequently bought by individuals is telling: whole life policies and endowments, which pay higher commissions, are far more popular than term assurance. For the same premium, term assurance provides significantly more protection than whole life policies.

Enter the new direct sales channel mandated by the Monetary Authority of Singapore from next year. Consumers are expected to be able to access a portal which aggregates insurers' offerings in the whole life and term life space. For the first time, they will be able to compare prices and benefits, buy directly from insurers and pay no commissions. Already in the market today, one financial advisory firm - Providend - has launched its own do-it-yourself insurance portal, which carries term assurance and more recently, endowment plans, from selected insurers. It is hoped that the direct channel will help to lower product costs, which should enhance cash values of whole life plans. Ultimately, it is also hoped that the channel would help plug the protection gap, which was estimated in 2012 at a total of S$462 billion or over S$242,000 per working adult.

To be sure, the direct channel ushers in a number of significant benefits. One is greater price transparency and the ability to compare prices. Insurers have often hid behind the argument that product benefits differ too much to be comparable. But that is clearly not so, particularly in plain vanilla products such as term assurance and even whole life plans. A second potential benefit is a greater degree of competitiveness in terms of price and benefits. Insurers who aim to stand out will surely enhance their offerings.