Life insurance surpasses $2 billion in sales for 2012

Four straight quarters of gain in 2012 boost performance by 8 per cent
Singapore, 06 February 2013

Four back-to-back quarters of growth has strengthened the life insurance industry last year. Insurers received a total of $2,176.0 million in weighted* new business premiums to conclude the year with an eight per cent increase from the previous year.

The overall performance was driven by quarter-on-quarter growth in the sale of regular premium products, which reached a total $1,589.8 million, up 18 per cent over the same period in 2011.

Single premium business, however, dipped 11 per cent to $586.2 million due to weak market sentiments and a more subdued economy. Of this amount, 16 per cent comprised CPF-funded sales. 

Mr Tan Hak Leh, President of the Life Insurance Association (LIA), said, “The industry remained buoyant despite the economic climate we faced throughout 2012. This is a good indication that the industry is continuing to reach out to more Singaporeans and residents who have needs for protection and longer term savings.” 

Other Highlights (January to December 2012)

Total Sum Assured

The total sum assured for new business stood at $79.1 billion for 2012, a 16 per cent increase over the same period last year.

Health Insurance

At 31 December 2012, 2.61 million lives were covered by health insurance with paid up premiums amounting to $1.0 billion. New health insurance sales increased by 13 per cent to $186 million compared to the previous year. The bulk of this - 88 per cent - went to Integrated Shield Plans and riders.

“We observe that purchase of health insurance has consistently increased in recent years, showing that more people are making sure they get adequate cover to meet rising medical costs”, added Mr Tan.

Distribution Channels

Tied agents continue to be the main channel of distribution for new business. By policy count and weighted premiums, tied agents contributed 59 per cent and 46 per cent of the business respectively.

The uptrend in bank sales has stabilised, with the banks accounting for 35 per cent of weighted premium sales, up by one percentage point from the previous year. It contributed 15 per cent of the total number of policies sold.

Financial Advisers contributed 16 per cent of sales while other channels, including direct sales, made up the remaining 3 per cent. By policy count, Financial Advisers accounted for 10 per cent of the business and the other channels took up the remaining 16 per cent.

Product Classification

Of the new sales, participating (“par”) products accounted for 53 per cent while non-par products accounted for 28 per cent. Investment-linked products made up the remaining 19 per cent.

Product License Classification

At 31 December 2012, 96 per cent of new sales were contributed by insurers holding “Normal” licenses. The “Defined Market Segments” (DMS) insurers contributed the remaining 4 per cent.

(Explanatory note: DMS insurers are registered by MAS to conduct only non-CPF business and with minimum policy size.)

Claims Payout

Up to the end of December 2012, the life insurance industry paid out a total of $6.27 billion to policyholders and beneficiaries.

Of this, $424 million was for death, critical illness or disability claims, whilst the remaining $5.85 billion was for policies that matured. 

Fact-Find Experience

For the period August to December 2012, policies were sold based on the following choices of the applicants:

  • Comprehensive Planning: 7 per cent
  • Specific Need(s) Planning: 86 per cent
  • No Needs Analysis Purchase: 7 per cent

(Explanatory Note: Revised LIA Application Types took effect on 1 August 2012

Under comprehensive planning, the client completes the full fact-find where he receives the representative’s recommendation on product suitability.

For specific need(s) planning, the client completes a full fact-find for at least one of his needs that he wishes to receive the representative’s recommendation on the suitability of the product.

Under no needs analysis purchase, the customer does not undergo any needs analysis and is responsible for choosing the product he finds most suitable for himself.  However, the representative is required to explain the product features, its fees and charges to the customer.)

Other Highlights (In force as at December 2012)

Group Insurance

Total annual premiums in force for group insurance business rose by 11 per cent compared with a year ago, amounting to $778 million.

Assets

In the first three quarters of 2012, the life insurance industry was managing assets** of approximately $129.4 billion, up 9 per cent compared with a year ago. Assets of non-linked business accounted for $105.6 billion, while the remaining $23.8 billion were assets held for investment-linked policies.

Manpower in the Industry

At 31 December 2012, a total of 5,499 office staff were employed by member companies of the LIA and 13,528 representatives held exclusive contracts with companies that operate a tied agency force.

Outlook for 2013

“Our outlook for the life insurance industry in 2013 is that of tempered optimism, given that the Singapore economy is likely to grow at a slower pace,” said Mr Tan. ”Nevertheless, we expect to see continued demand for health insurance, protection and long-term savings plans.”

“Educating the public on the importance of life insurance continues to be the key focus for the LIA and its members in 2013. In the last five years, our industry narrowed the gap between the amount of coverage needed for the average working adult and the amount of protection they actually have. There is still a way to go and the industry is resolute in helping Singaporeans close their protection gap. Our consumer education initiatives will be shared at our Annual Luncheon in March.”

In reference to the FAIR Panel review and recommendations, Mr Tan said it was a valuable exercise for the financial advisory industry. “The life insurance industry has and will continue to enhance the quality of financial advisory and increase value to our customers.”

In Summary

New Business Sales (Weighted Basis)

  Jan – Dec 2012 Jan – Dec 2011 Change
Single Premium $586.2 million $655.1 million -11%
Annual Premium $1,589.8 million $1,352.3 million 18%
Total $2,176.0 million $2,007.4 million 8%
  Oct – Dec 2012 Oct  – Dec 2011 Change
Single Premium $138.9 million $156.5 million -11%
Annual Premium $441.4 million $386.4 million 14%
Total $580.3 million $542.9 million 7%

*   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.

**  Source: MAS