Regulations & Financial Needs Analysis

Notice No: MAS 120 — Disclosure and Advisory Process Requirements for Accident and Health (A&H) Insurance Products is the health-insurance-specific conduct rulebook. MAS first issued it on 30 January 2004 (in force 1 April 2004), and its last amendment was 1 June 2022. It is issued under sections 67, 72 and 154(4) of the Insurance Act 1966 and sets both mandatory requirements (Part I) and best-practice standards (Part II) for disclosing information and providing advice to policy owners on A&H policies (and life policies carrying A&H benefits). It applies broadly to direct insurers, licensed and exempt financial advisers and their representatives, and the intermediaries and representatives who advise on or arrange such policies. It does not apply to reinsurance, or to policies that pay A&H benefits only on total and permanent disability. Alongside it, representatives must keep abreast of the LIA and GIA Guidelines on Disclosure Requirements and Needs-Based Sales Process for A&H Insurance Products. The practical delivery vehicle for the advice requirements is the Financial Needs Analysis (FNA) / fact-find.

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Must-know for the exam

MAS Notice 120 = Disclosure and Advisory Process Requirements for A&H insurance products; first issued 30 Jan 2004, effective 1 April 2004, last amended 1 June 2022.
Issued under sections 67, 72 and 154(4) of the Insurance Act 1966; Part I (mandatory) + Part II (best practice); breach of a Part I requirement is an offence under section 142(3).
Does not apply to reinsurance, or to policies that pay A&H benefits only on total and permanent disability.
No direct insurer may use 'Shield' in an A&H policy name unless it is a Medisave-approved policy.
The intermediary must disclose in writing its identity, all remuneration (commission, fee, other benefit) and any actual or potential conflict of interest.
Division 4 requires a reasonable basis, Know-Your-Client, needs analysis, documentation and switching safeguards for A&H advice.
Division 4 does not apply where no recommendation is made / only factual info is given, or to advice on ElderShield.
No advice on a health policy without a reasonable basis — the client's objectives, financial situation and particular needs must be considered and documented.
A switch must not be detrimental to the insured; the intermediary must disclose in writing any fee/charge and the change in benefit level.
Part II best practice: the policy owner declares in writing whether he was advised to switch, and a supervisor reviews the switch recommendation in writing.
'Selected client' = meets any two of: aged 62+, not proficient in spoken/written English, or below GCE 'O'/'N' level — triggering extra safeguards such as a client call-back.
'Selected A&H insurance representative client' = a client served by a rep graded balanced scorecard B or worse for two consecutive quarters under the s47 FA Act framework.
General A&H free-look: up to 14 days from receipt of the policy (deemed received 7 days after dispatch), full cover in force, refund of premium less medical fees; ElderShield's free-look is 60 days.
Fact-Find Application Type 3 = no needs analysis; the client is responsible for suitability, but product features, fees and charges must still be explained.
Needs quantification is industry best practice (not mandatory), e.g. disability income at about 75% of monthly income; the advisor's declaration must assure confidentiality under the Personal Data Protection Act 2012.
Three recommendation principles: recommend only if needed, only the most suitable product, and refer the client out if your company does not carry what he needs.

MAS Notice 120 — what it is and who it covers

It applies broadly to direct insurers licensed under the Act, and to licensed or exempt financial advisers (and their representatives) who provide advice on or arrange such policies. It does not apply to (a) policies in respect of reinsurance of liabilities, or (b) policies under which A&H benefits are paid out only if the insured becomes totally and permanently disabled.

Structure — two parts and the 'Shield' rule

The Notice has Part I (Mandatory Requirements) and Part II (Non-mandatory Best Practice Standards). Part I is organised into Divisions:

•Division 1 — general requirements: no direct insurer may use the word 'Shield' in an A&H policy name unless it is a Medisave-approved policy (an Integrated Shield Plan, non-Integrated Shield Plan or supplementary disability insurance policy).
•Division 1A — disclosure for A&H policies.
•Division 2 — disclosure for life policies containing A&H benefits.
•Division 3 — additional disclosure for direct insurers (benefit-illustration / product-summary standards; prescribed font of Times New Roman 10-point or larger for certain documents; disclosing policy changes in writing at least 30 days before they take effect).

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Notice 120 is a disclosure and advisory conduct notice — it does not set premium rates or underwriting limits.
The 'Shield' label is reserved for Medisave-approved policies — not tied to the insurer's domicile or the distribution channel.
Disclosure is proactive and covers all forms of remuneration, not just commission and not only on request.
A reasonable basis is grounded in the client's circumstances — not in insurer sign-off or the size of the commission.
KYC must be documented and is comprehensive — it applies to all advised clients, not just older ones.
Assuming the need and going straight to the product is product selling — the opposite of the needs-based process.
The carve-out turns on whether a recommendation is actually made — not on the product type (IP) or the intermediary's licensing status.
Detriment is about cost/benefit and suitability to the client — merely changing insurer is not itself the test.

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Exam-style questions

Within the client's 'objectives' captured for Know-Your-Client, Notice 120 specifically expects the intermediary to recordAnswer explained →Mrs. Devi, a homemaker, would need family maintenance income of S$2,500 per month for 18 years if her husband became totally and permanently disabled. Funds are expected to earn 5% while inflation runs at 2%. The Present Value of Annuity Due factor for 18 years is 14.9920 at 3% and 13.7535 at 4%. Her husband has existing TPD-benefit cover of S$120,000 and available savings of S$30,000. What additional TPD benefit is required?Answer explained →An enforceable offence under Notice 120 can arise from a breach ofAnswer explained →When helping a client select the deferred (elimination) period for a Disability Income Insurance policy, which guidance is correct?Answer explained →

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HI — Health Insurance