Robust 27 per cent growth for life insurance

Annual premium business is pillar of sustained growth
Singapore, 07 November 2013

The life insurance sector posted strong results for the first nine months of 2013, hitting $2 billion in weighted* new business premiums, a 27 per cent increase over the same period in the previous year.  The growth was driven by healthy sales across all product lines.

Sales of annual premium products were particularly strong, totaling $1.5 billion for the first three quarters of 2013, up by a sizeable 31 per cent over the same period in 2012. 

Sales of single premium products also increased by 17 per cent to reach $0.5 billion of weighted single premiums.  Of this amount, 16 per cent comprised CPF-funded sales.

"We've seen three straight quarters of growth this year," said Dr Khoo Kah Siang, President, Life Insurance Association. "Growth in both annual premium and single premium products is indicative of encouraging market sentiment and strong consumer confidence in life insurance. 

"Our industry is delivering more innovative and tailored solutions to meet a suite of needs among the diverse consumer segments. With rising educational levels and financial literacy comes a demand for more customised financial planning solutions among Singaporeans. At the same time we also must meet the needs of consumers who seek basic insurance products which in turn will help to narrow the protection gap."  

Other Highlights (January to September 2013)

Total Sum Assured

The total sum assured for new business increased by four per cent to reach $59.1 billion for the first nine months of 2013.  

Health Insurance

New health insurance premiums shot up by a strong 132 per cent in the first nine months to $320 million compared to the same period last year. The bulk of this - 94 per cent - went to Integrated Shield Plans and riders. 

Sharp increases in new health premiums continued as batches of integrated shield plans reach their policy anniversary dates to be renewed at revised prices**.  

As of 30 September 2013, a total of 2.66 million lives were covered with paid up premiums amounting to $1.3 billion.  

Distribution Channels

The contribution of new business by the different channels of distribution is as follows:  

Distribution channel By weighted premium (%) By number of policies (%)
Tied agents 45 61
Bank Distribution 34 15
Financial Advisers 17 10
Others 4 14

By weighted premiums and by policy count, tied agents continue to be the main channel of distribution for new business.  

Product Classification

Participating ("par") products accounted for 53 per cent of new sales while non-par products accounted for 31 per cent. Investment-linked products made up the remaining 16 per cent.  

Product License Classification

As at 30 September 2013, insurers holding "Normal" licenses contributed 96 per cent of new sales, while the "Defined Market Segments" (DMS) insurers, represented by six companies, contributed the remaining four 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 September 2013, the life insurance industry paid out a total of $5.86 billion to policyholders and beneficiaries.

Of this, $399 million was in respect of death, critical illness or disability claims, whilst the remaining $5.46 billion was for policies that matured.  

Fact-Find Experience

For the period January to September 2013, policies were sold based on the following choices of the applicants:

  • Comprehensive Planning: 7 per cent
  • Specific Need(s) Planning: 87 per cent
  • No Needs Analysis Purchase: 6 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 September 2013)

Group Insurance

Total annual premiums in force for group insurance business rose by 10 per cent compared with a year ago, amounting to $830 million.

Assets

As at end June of 2013, the life insurance industry was managing assets*** of approximately $131.7 billion, up six per cent compared with a year ago. Assets of non-linked business accounted for $107.3 billion, while the remaining $24.4 billion were assets held for investment-linked policies.

Manpower in the Industry

As at 30 September 2013, a total of 5,363 office staff were employed by member companies of the LIA and 13,907 representatives held exclusive contracts with companies that operate a tied agency force.  

Looking Forward

In light of a more optimistic economic outlook, the industry is expecting the uptrend in new sales growth into the close of the year.

In the wake of the MAS's 'Response to Public Consultation on Recommendations of the Financial Advisory Industry Review', Dr Khoo said the Association and its members will collaborate with MAS to implement the recommendations in a practical manner so that the industry can achieve the following objectives:

a) Improve the quality of advice provided by the FA representatives and at the same time continue to ensure that consumers are able to access financial advisory, which is an important part of the process in meeting consumers' need for protection and long term savings.
b) Enhance transparency and information on key aspects of products so that consumers can make informed choices.

We believe that the role of FA representatives would grow in importance if they can provide good quality value-added services to the consumer and hence it is critical for the industry to be able to attract good quality people to join the profession. This can be achieved through structured training programmes, and fair and equitable rewards structure that is linked to the services they provide to their customers.

In Summary

New Business Sales (Weighted Basis)

  Jan – Sep 2013 Jan – Sep 2012 Change
Single Premium $0.5 billion $0.4 billion 17%
Annual Premium $1.5 billion $1.2 billion 31%
Total $2.0 billion $1.6 billion 27%
  Jul – Sep 2013 Jul – Sep 2012 Change
Single Premium $209.0 million $153.7 million 36%
Annual Premium $541.9 million $408.6 million 33%
Total $750.9 million $562.3 million 34%

*   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.

**  Shield participating members enhanced the coverage of their shield plans with premium revisions in response to better coverage provided by the national Medishield scheme which took effect from 1 March 2013.

 

***  Source: MAS