CMFAS M5 Chapter 5: Development and Pricing of Insurance Products

MAS 302 – PRODUCT DEVELOPMENT AND PRICING
Comprises both mandatory requirements and guidelines. This Notice applies to any direct insurer registered to carry on life business.

Part 1 - Mandatory Requirements

• Prudent Management Oversight
• Approval For New Products
• Contravention Of Requirements Imposed

Approval For New Products
An insurer shall obtain written approval from the MAS before offering any product with any feature that does not appear in any product in the insurer’s then-existing business portfolio.
Any request for such approval shall be made in writing and submitted to the MAS no later than 1 month before the proposed official launch date of the product.

The paragraph above shall not apply in respect of:

• a short-term accident and health policy; or
• a term policy having a duration of 5 years or less.

Information And Product Documents To Be Submitted For Approval Of New Insurance Products

Part 2 – Guidelines
The standards set out in this section are not mandatory in that failure by an insurer to comply with any of the standards shall not of itself render the insurer to be in breach of this Notice.
MAS may take into account a failure to comply with these standards in considering whether to:

• approve a new product;
• revoke the approval for a product; or
• issue directions for the withdrawal of a product.

Notification For Products Launched
An insurer should notify the MAS in writing of any product launched by the insurer that does not require the approval of the MAS. Such notice should be given to the MAS within 7 working days after the official launch date of the product.

MAS 307 – NOTICE ON INVESTMENT-LINKED LIFE INSURANCE POLICIES

The MAS 307 was issued to ensure that insurers adhere to minimum standards of investment and disclosure requirements for ILPs. Under the MAS 307 Notice, an insurer shall seek written approval from the MAS for:

• the establishment of any ILP sub-fund; or
• any significant change to any ILP sub-fund, such as any change in the manager or investment objective of the ILP sub-fund.

Investment-linked sub-fund refers to each separate sub-fund within an ILP to which a policyholder can choose to allocate his or her premiums under the ILP.

Disclosure Of Information
It is important that all insurers issuing investment-linked policies should ensure that adequate and accurate information about the policies is provided to policyholders

1. Information For Applicants -Sales Materials/Policy Forms
2. Information For Policyholders

• Statement To Policyholders
• Reports To Policyholders

Sales Materials/Policy Forms

Sales materials and brochures shall not be written in language which may confuse or mislead an applicant due to his lack of experience. The shall include {p.155]:

1. a general description of the principal features of the policy;
2. a list of ILP sub-funds
3. investment policy of each sub-fund including:

• a description of the investment objectives intended
• principal types of investments,
• the markets and sectors intend;

4. the risks to be borne by the policyholder;
5. charges to be borne by the policyholders:

• initial charge
• management fees
• mortality cost
• any other charges
  

6. basis for computing all policy benefits
7. basis and frequency for valuing the assets
8. illustrations of benefits payable
9. investment performance of each sub-fund over the last 1-year, 3-year, 5-year, 10 years and since inception.

Statement To Policyholders. All policyholders shall be provided with a statement on the performance and value of their policies at least on an annual basis.

Report To Policyholders [p.157]

All policyholders shall also be entitled to receive from the insurer semi-annual and annual audited reports on the performance of each investment-linked sub-fund. The report shall include:

1.a summary of the financial statement of the sub-fund
2. the net investment performance
3. a list of investments held at market value and as percentage of net asset value
4. the top 10 holdings at market value and as a percentage of net asset value.
5. any charges levied against the sub-fund
6. a statement of any change in

• investment objective and the orientation
• any restriction or material quantitative or qualitative investment requirement.
  

Minimum Death Benefits. There is no prescribed minimum death benefit for an Investment-linked Life Insurance policy.