Life Insurance Industry Reports Healthy Growth of 106% in the First Half of 2001

Single Premium Sales Increased Three-fold
Singapore, 14 August 2001

In the first half of this year, total new business premiums (weighted*) more than doubled to $777 million, up from $377 million in the first half of last year. The increase was primarily due to the liberalization of the use of CPF members’ Ordinary and Special Accounts since the beginning of this year.

Actual New Business Sales

Single Premium

In absolute terms, single premium sales totaled $6,020 million in the first half of this year, an increase of 298% over the first half of last year. About 45% went into investment-linked policies, while non-linked policies accounted for 55%. About 78% of single premium sales came from CPF members’ accounts - $2,444 million from their Ordinary Accounts and $2,249 million from the Special Accounts.

Said Mr Tan Beng Lee, President of the Life Insurance Association (LIA), "We did expect the growth in new business to continue into the second quarter but at a reduced pace compared to the first quarter. In the first quarter, a record volume of $3,395 million of single premium sales was registered: the second quarter with $2,625 million saw a drop of 23% over the first quarter of this year. For the rest of this year, I expect the prospects of growth to continue to be good, albeit at a reduced rate. With greater publicity and public education, the public will become more aware of the need for financial planning."

Annual Premium

New annual premium sales dropped by 14% from $199 million in the first half of 2000 to $171 million this half year, while new limited premium sales (ie. premiums for periods of less than 10 years) dropped by 88%, from $103 million last year to $12 million this year. This is due mainly to the fact that CPF funds can no longer be used for annual insurance premiums.

Distribution Channels

The bulk of new business continued to come from the traditional channel, i.e. tied agents. The agency force brought in 86.4% of all new individual business sales. Bancassurance accounted for 11.1% of the sales, up from last quarter’s 10%, while brokers and others handled the remaining 2.5%. Mr Tan said, "Bancassurance as a distribution channel will be a force to be reckoned with when it has overcome its slow start in tapping the CPF funds."

Improvements in Transparency and Professionalism 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. The public is therefore given information on the total distribution cost which includes agents’ commission, bonuses, and other cost of providing benefits and services to agents or other distribution channels. Also disclosed is the reduction in yield as a result of deductions for the expected mortality and morbidity costs, surrender charges, management expenses, shareholders’ profits, tax payments and total distribution cost.

Mr Tan said, "LIA is pleased with the smooth implementation of this disclosure requirement. The improved information flow is a step in the right direction. Over time, it will result in improved market conduct and greater efficiency in the distribution of life insurance products."

He added, "The additional training and competence requirements for all new and existing life insurance agents and supervisors have enhanced the quality and professionalism of our tied agents and supervisors. This augers well for both the insuring public and the life insurance industry, and will go a long way to help establish Singapore as a premier insurance hub."

In Summary

Actual New Business Sales

  1st Half 2001 1st Half 2000 Change
Single Premiums $6,020 million $1,513 million 298%
Annual Premiums $171 million $199 million -14%
Limited Period Premiums $12 million $103 million -88%
Total Premium $6,203 million $1,815 million 242%
Total Premium (Weighted) $777 million $377 million 106%
  2nd Qtr 2001 2nd Qtr 2000 Change
Single Premiums $2,625 million $898 million 192%
Annual Premiums $91 million $105 million -14%
Limited Period Premiums $5 million $57 million -91%
Total Premium $2,721 million $1,060 million 157%
Total Premium (Weighted) $356 million $210 million 70%

*   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.