MAS Market Conduct Framework: What Singapore Insurers Need to Know

Conduct as a Regulatory Priority

Market conduct has become one of MAS's most active supervisory priorities. Thematic inspections, industry guidance and enforcement actions in recent years have made clear that MAS expects insurers and their distribution channels to place customer outcomes -- not just regulatory process compliance -- at the centre of how they sell and service insurance.

The shift is significant. It is no longer sufficient to have compliant documentation, disclosure forms and training programmes. MAS expects to see evidence that the structures, incentives and culture of a licensed insurer actually result in customers being treated fairly. This article outlines what that expectation means in practice.

The Regulatory Framework

Market conduct obligations for Singapore insurers draw from multiple sources.

The Financial Advisers Act (FAA) and its subsidiary legislation establish the framework for financial advisory activity, including the sale of life insurance. Insurers and financial advisers must comply with rules on product due diligence, suitability, disclosure, fact-finding and advice documentation.

MAS Notice FAA-N16 (Requirements for the Balanced Scorecard Framework) requires financial advisory firms -- including those tied to insurers -- to apply a balanced scorecard approach to performance management that weighs customer outcome metrics alongside sales metrics. This was introduced specifically to reduce the incentive structures that drove mis-selling.

MAS Guidelines on Fair Dealing (FAA-G11) outline the board and management responsibilities for ensuring fair dealing outcomes across product design, sales, disclosure, service and complaints handling.

Insurance-specific notices and circulars address conduct in the context of specific product types (including investment-linked policies and group insurance) and distribution channels.

Board Responsibility for Conduct

MAS's guidelines make explicit that market conduct is a board-level responsibility. The board is expected to:

• Set and reinforce a culture that supports fair dealing with customers
• Approve product governance frameworks and conduct oversight mechanisms
• Receive and challenge regular management information on conduct indicators
• Ensure that remuneration structures do not create incentives for mis-selling

This is not a delegation that can be fully passed to compliance. The board must demonstrate active ownership of conduct outcomes, not merely receipt of conduct reports.

In regulatory inspections, MAS looks at board minutes and committee papers to assess whether conduct issues are being raised, questioned and followed up at the board level. Boards that approve conduct frameworks without engaging with whether those frameworks are working in practice are exposed.

The Balanced Scorecard Framework

The balanced scorecard requirement is central to how MAS addresses sales conduct risk at the financial adviser level. Under the framework, the compensation of financial advisers and their supervisors must be tied to conduct metrics -- not just sales volumes.

Conduct metrics that should feed into the balanced scorecard include:

• Customer complaints rates
• Policy persistency (lapse rates as a proxy for suitability)
• Switches and replacements that may not be in the customer's interest
• Supervisory observations from file reviews

Advisers who score poorly on conduct metrics should have their variable compensation reduced, regardless of their sales performance. The framework is intended to make the financial consequences of poor conduct real and not merely reputational.

MAS has been explicit that balanced scorecards which exist on paper but do not actually influence compensation decisions do not meet the regulatory intent. The scorecard must bite.

Product Governance and Suitability

MAS expects insurers to apply robust product governance before a product is sold -- not merely process compliance at the point of sale.

Product due diligence. Distributors (including tied agents and independent financial advisers distributing the insurer's products) are expected to conduct due diligence on the products they sell. For insurers that manufacture products, MAS expects them to support distributors in understanding the products, including the risks, costs and target customer profile.

Suitability assessment. Where investment-linked policies or other complex products are involved, financial advisers must assess customer suitability before recommending a product. The suitability assessment must be documented, and the documentation must support the recommendation actually made -- not a generic record.

Replacement and switching. MAS pays particular attention to policy replacements and switches, which are a known vector for conduct failures. Recommendations to replace an existing policy with a new one must be justified by reference to the customer's specific circumstances, not by the adviser's financial incentive.

Disclosure Requirements

MAS requires comprehensive disclosure to customers in the insurance sales process. Key disclosure requirements include:

Product Summary and Product Highlights Sheet. For investment-linked policies and certain other products, a standardised product summary must be provided to customers before a transaction.

Benefit Illustration. For life insurance products, a benefit illustration projecting future values under different scenarios must be provided and explained to the customer.

Remuneration disclosure. Financial advisers must disclose their remuneration arrangements (commissions, fees) to customers. MAS has tightened remuneration disclosure requirements in recent years.

Material exclusions and limitations. Customers must be informed of significant exclusions and limitations on cover, not merely referred to the policy document.

Handling Complaints

MAS expects insurers and financial advisers to handle complaints fairly and promptly. Key requirements include:

• A documented complaints handling procedure
• Timely acknowledgement and resolution
• Root-cause analysis for complaint patterns
• Escalation to the board for significant complaints

Complaint data should be analysed for patterns that may indicate systemic conduct issues. A high rate of complaints in a particular product category or distribution channel is a signal that MAS would expect the board to investigate and address.

Managing Conduct Risk in Third-Party Distribution

Many Singapore insurers distribute through independent financial advisers, bancassurance partners or online platforms. Third-party distribution creates conduct risk that the insurer remains responsible for managing.

MAS expects insurers to:

• Conduct due diligence on distribution partners
• Provide adequate product training and support
• Monitor distribution partner conduct through data (persistency rates, complaints, switches)
• Take action when distribution partner conduct falls below expected standards

The fact that a product was mis-sold by an independent adviser does not eliminate the insurer's regulatory exposure. MAS expects product manufacturers to take responsibility for how their products are sold.

What Inspections Look For

In thematic market conduct inspections, MAS typically looks for:

• Evidence that the balanced scorecard is genuinely influencing compensation decisions
• Quality of suitability assessments and fact-find documentation
• How complaints are handled and whether root-cause analysis is being done
• Whether product replacements are justified and documented
• Whether the board is actively engaged with conduct metrics, not merely receiving reports

Our regulatory licensing and AML/CFT compliance advisory teams work with Singapore-licensed insurers on market conduct frameworks, balanced scorecard implementation and preparation for MAS inspections. If you are reviewing your conduct framework or preparing for a supervisory review, our team is available to assist.