New Business Premiums in Life Industry Grew by 53% in 2001

Singapore, 08 February 2002

Total new business premiums (weighted*) for the whole year of 2001 registered an increase of 53% to $1,286 million, up from $838 million in 2000. On a quarter-on-quarter basis, the growth in new business slowed down to 4.5% in Quarter 4, from the record highs of 152% in Quarter 1 and 70% in Quarter 2 and a slower growth of 16% in Quarter 3.

Actual New Business Sales in Absolute Terms Single Premium

In absolute terms, single premium sales totaled $8,996 million last year, an increase of 171% over the year 2000. About 45% went into investment-linked policies, while non-linked policies accounted for 55%. About 72% of single premium sales came from CPF members’ accounts - $3,594 million from their Ordinary Accounts and $2,870 million from the Special Accounts.

Annual Premium

New annual premium sales dropped by 17% to $375 million in 2001, from $455 million in 2000, while new limited-premium sales (i.e. premiums for periods of less than 10 years) dropped by 87%, from $211 million in 2000 to $28 million in 2001. These declines are the result of the new CPF rule which disallow CPF funds for investment in insurance policies with annual premiums with effect from 1 January 2001.

Annuities

 For 2001, a total of $448 million in new business sales in annuities were registered, an increase of 68% over the preceding year. When compared over the last three years, the growth is even more spectacular – it is now nearly 5-fold what it was three years ago. Mr Tan Beng Lee, President of the LIA said, "This is a very positive development. With increased awareness, more Singaporeans are now taking an active role in planning for their retirement".

Distribution Channels

The bulk of new business continued to come from the traditional tied agency channel. Tied agents brought in 82.3% of all new individual business sales (weighted) for the year in review. Bancassurance accounted for 15.1% of the sales, while brokers and others handled the remaining 2.6%. Mr Tan said, "Bancassurance is gaining a foothold in the life insurance industry. We see its share growing steadily quarter on quarter – from 10.2% in Quarter 1, to 13.1% in Quarter 2, 16.8% in Quarter 3 and 25.7% in Quarter 4. As a distribution channel, it is slowly becoming more successful in attracting bank customers to consider insurance products."

Improvements in the Industry Have Benefited the Policyholders

The industry has successfully implemented the recommendations of the Committee on Efficient Distribution of Life Insurance (CEDLI) in 2001. A summary of the various CEDLI recommendations is appended below:

1 Jan 2001
  • Needs-based Sales Process whereby all insurance advisors are required to undertake a fact-finding process and a financial needs analysis in a prescribed document before recommending any insurance product. The recommendation must be signed off by the agent’s supervisor.
  • All new advisors are required to undergo at least 30 hours of basic training and 10 hours of Continuing Professional Development training within the first 12 months. Existing advisors and supervisors are required to undergo 30 hours of Continuing Professional Development training per annum, every year.
1 Apr 2001
  • All insurers have to formalise their Company’s Training & Competence (T&C) Plan to chart out training for their advisors and supervisors. They should have in place a proper system to assess the competence of their advisors/supervisors, and to regularly monitor and review their T&C Plan.
  • The limits on the size of the agency units are removed to allow insurers to determine the span of control for the agency unit according to "best practice", and to set their own criteria for their agency groups on recruitment and termination.
1 Jul 2001
  • All life insurance companies have to disclose the total distribution cost incurred in the distribution of their life insurance products, as well as the total deductions made on their life insurance policies. Deductions include, for example, paying for the cost of life insurance protection.
  • All prospective advisors must pass the examinations for the Certificate in Life Insurance, Certificate in Life Insurance (Investment-linked Life Insurance Policies) and Financial Needs Analysis (FNA) before they can be contracted. All existing agents must complete a 15-hour FNA course and be successfully assessed by 31 Dec 2001
1 Oct 2001
  • The minimum entry requirement for prospective advisors is raised from 3 GCE "O" level passes to 4 "O" level passes.

Mr Tan said, "With all these measures in place, LIA is pleased to observe an improvement in the quality and efficiency of distribution of life insurance products. All agents are now formally trained and disciplined in delivering sales on a needs basis and in a consistent and documented way through the processes of fact-find and financial needs analysis. Also, the greater transparency has helped to raise the level of professionalism and efficiency in the distribution of life insurance products. "

Challenges Ahead

Mr Tan concluded, "In the years ahead, there will be greater convergence in the distribution of financial products. Insurers and banks will be competing for the same pool of investment funds. This will be particularly advanced with the promulgation of the Financial Advisers Act, whereby licensed financial advisors will be allowed to provide a wider array of financial products, including unit trusts, investment-linked insurance products as well as the more traditional insurance products. The changing regulatory environment in Singapore has significantly increased the need for greater sophistication in distributing financial products. It is therefore imperative that insurers intensify their training efforts and improve the distribution channels to ensure that they remain competitive in the new liberalised environment."

In Summary

Actual New Business Sales

  Jan - Dec 2001 Jan - Dec 2000 Change
Single Premiums $8,996 million $3,318 million 171%
Annual Premiums $375 million $454 million -17%
Limited Period Premiums $28 million $211 million -87%
Total Premium $9,399 million $3,983 million 136%
Total Premium (Weighted) $1,286 million $838 million 53%
  4th Qtr 2001 4th Qtr 2000 Change
Single Premiums $1,430 million $1,009 million 42%
Annual Premiums $106 million $131 million -19%
Limited Period Premiums $8 million $35 million -77%
Total Premium $1,544 million $1,175 million 31%
Total Premium (Weighted) $252 million $241 million 4.5%

*   The weighted new business premium figure is calculated as follows:
    10% SPI + 100% API with adjustment for premium payment terms of less than 10 years.