Muted Third-Quarter Growth of 16% in Life Industry

Singapore, 16 November 2001

The growth in total new business premiums (weighted*) slowed down to 16% in Quarter 3, from record growths of 152% in Quarter 1 and 70% in Quarter 2. However, because of the robust growth in the first half of the year, total new business premiums for the year up to September 2001 still managed to register an increase of 73% to $1,034 million, up from $597 million in the corresponding period last year

Actual New Business Sales

Single Premium

In absolute terms, single premium sales totaled $7,567 million in the first nine months of this year, an increase of 226% over the corresponding period last year. About 46% went into investment-linked policies, while non-linked policies accounted for 54%. About 76% of single premium sales came from CPF members’ accounts - $3,085 million from their Ordinary Accounts and $2,652 million from the Special Accounts. Said Mr Tan Beng Lee, President of the Life Insurance Association (LIA), "After the good sales in the first half of the year, the slowdown was not unexpected. However, it was exacerbated by the recession and drop in confidence after the Sept 11 attacks against the US."

Annual Premium

New annual premium sales dropped by 17% to $269 million in the first nine months of this year from $323 million last year, while new limited-premium sales (i.e. premiums for periods of less than 10 years) dropped by 89%, from $176 million last year to $20 million this year. These declines are the effect of the new CPF rules which disallow CPF funds for the payment of annual premiums since the beginning of this year.


For the first nine months of this year, a total of $321 million in new business sales in annuities were registered, an increase of 65% over the corresponding period last 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 said, "This is a very positive development. It is especially important as our baby boomers are fast approaching retirement. Today, over 20% of the population are above 50 years of age. LIA has started an education programme this year by producing a booklet advising would-be retirees to use annuities as one way of maximising and stretching their retirement funds. I am pleased that an increasing number of people are becoming more concern about this and are taking a personal responsibility for their financial security during their retirement years."

Distribution Channels

The bulk of new business continued to come from the traditional tied agency channel. Tied agents brought in 84.8% of all new individual business sales (weighted) for the first 9 months of this year. Bancassurance accounted for 12.5% of the sales, while brokers and others handled the remaining 2.7%. Mr Tan said, "Bancassurance is slowly gaining a foothold in the life insurance industry. We see its share growing steadily each quarter – from 10.2% in Quarter 1, to 13.1% in Quarter 2 and now 16.8% in Quarter 3. As a distribution channel, it is slowly becoming more successful in attracting bank customers to consider insurance products."

Improvements in Transparency Have Helped the Industry

With effect from 1 July 2001, all life insurance companies in Singapore have to disclose the total distribution cost and other expenses incurred in the distribution of their life insurance products. Mr Tan said, "LIA is pleased with the smooth implementation of this disclosure requirement in the third quarter of this year, although initially some policyholders did not quite understand the Effects of Deductions information. The market has become more mature: policyholders welcome this initiative while agents are comfortable with the disclosure standards. We can now look forward to improved market conduct and greater efficiency in the distribution of life insurance products." A survey will be conducted next year to gauge the feedback from members of the public on the disclosure process.

Needs-based Sales Training Has Enhanced Agents’ Professionalism

With effect also from 1 July 2001, all new insurance agents must pass the examinations for the Certificate in Life Insurance, Certificate in Life Insurance (Investment-linked Life Insurance Policies) and Financial Needs Analysis (FNA). All existing agents (and brokers) must complete a 15-hour FNA course and be successfully assessed by 31 Dec 2001. This requirement will ensure that all life insurance advisors or agents are professionally competent to deliver minimum professional standards in the quality of service when recommending life insurance products. The FNA requirement is new and covers the process from fact-finding to product recommendation. The training will help provide agents or life insurance advisors with the skills to correctly identify the financial needs or objectives of their clients or prospects, before recommending the coverage and products required to achieve those objectives. Mr Tan said "Our life insurance advisors or agents are now trained on Needs-selling rather than Product-selling. This will help them deliver needs-based sales in a consistent and documented way through the fact-find and needs analysis. I am pleased to report that over 85% of our agency force have passed or successfully completed this mandatory course. I expect the remaining agents to clear by year-end." To raise the standards of the life insurance advisors or agents, LIA will continue to implement enhanced training schemes and competency tests to ensure that they remain relevant and professional. Also, as a start, LIA has raised the entry requirements for prospective agents from 3 to 4 GCE "O" level passes.

Assistance to Policyholders

To assist the policyholders during this recession, a number of insurance companies have put in place their "Premium Holiday" scheme whereby they temporarily suspend the premium payments for policyholders who are unable to pay them for whatever reason, while still providing them with the full insurance protection. Life companies also offer an "Automatic Premium Loan" scheme whereby if a premium payment is not received within the 30-day grace period for payment, the insurer will automatically advance a premium loan to keep the policy in force, for as long as there is a positive cash value in the policy. And lastly, policyholders can easily take a policy loan of around 90% of the cash value.

Challenges Ahead

Mr Tan concluded, "For the remaining months of this year, the life industry expects muted growth. We will use this period to intensify our training efforts and improve our service level so that policyholders can be assured of good service from their life insurers."

In Summary

Actual New Business Sales

  Jan - Sep 2001 Jan - Sep 2000 Change
Single Premiums $7,567 million $2,318 million 226%
Annual Premiums $269 million $323 million -17%
Limited Period Premiums $20 million $176 million -89%
Total Premium $7,856 million $2,817 million 179%
Total Premium (Weighted) $1,034 million $597 million 73%
  3rd Qtr 2001 3rd Qtr 2000 Change
Single Premiums $1,547 million $804 million 92%
Annual Premiums $99 million $124 million -20%
Limited Period Premiums $7 million $72 million -90%
Total Premium $1,653 million $1,000 million 65%
Total Premium (Weighted) $257 million $221 million 16%

*   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.