Life insurance industry sustains steady growth for the first half of 2014

Singapore, 05 August 2014

The Life Insurance Association Singapore (LIA Singapore) today announced the industry results for the period January to June 2014 (1H2014) with a total of S$1,315.7 million achieved in weighted1 new business premiums, a one per cent increase over the same period in 2013.

The increase can be attributed to a robust 20 per cent growth to S$378.4 million of weighted single premium products, of which 15 per cent comprised CPF-funded policies. Sales of annual premium products totaled S$937.3 million in weighted new business premiums, a decrease by five per cent over the same period in 2013.

Dr. Khoo Kah Siang, President of LIA Singapore said, “The life insurance industry continues to grow, contributing to our nation’s economic stability and progress. In addition, our financial strength, pro-active efforts and close collaboration with key stakeholders ensure that we are well-placed and ready to implement industry changes that will benefit all parties. It is our role and commitment as the industry association to continue spearheading efforts which elevate industry standards, ensuring the financial well-being and peace of mind of individuals and companies in Singapore.”

The financial needs of approximately one in two individuals in Singapore are being addressed by the life insurance industry, ranging from long-term protection, savings, investment, wealth management and retirement funding needs. The life insurance industry paid out a total of S$3.34 billion to policyholders and beneficiaries as at end June 2014. Of this, S$273 million was for death, critical illness or disability claims, and the remaining S$3.07 billion for policies that matured.

Recent initiatives by LIA Singapore to improve the well-being of individuals and companies in Singapore include updating the Critical Illnesses (CI) benefit framework, preparing for the introduction of direct purchase protection products under the Financial Advisory Industry Review (FAIR) recommendation, and increasing public understanding of Integrated Shield Plans (IPs) under the MediShield Life reform.

LIA Singapore and its member companies continue to be in close consultation with the Monetary Authority of Singapore (MAS) on enhancing Singapore’s Risk-based Capital framework (“RBC 2”).

Other Highlights (For period January to June 2014)

Total Sum Assured

The total sum assured for new business increased by 10 per cent to S$40.5 billion for the first half of 2014 compared to the same period in 2013.

Health Insurance

A total of 2.72 million lives were covered with paid up premiums amounting to S$1.5 billion as at 30 June 2014. The amount of new health insurance premiums decreased by 28 per cent in the first half to S$138 million compared to the same period last year, stabilising after a significant increase in 2013 due to premium revisions of Integrated Shield Plans (IPs) by member companies following MediShield enhancements, which were effective 1 March 2013. Ninety-two (92) per cent of new health insurance premiums went to IPs and IP riders.

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 41 60
Bank Distribution 39 16
Financial Advisers 16 10
Others (without intermediaries, e.g. ElderShield) 4 14

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

Product Classification

Participating (“par”) products accounted for 54 per cent of new sales while non-par products accounted for 29 per cent. Investment-linked products made up the remaining 17 per cent.

Product License Classification

As at 30 June 2014, insurers holding “Normal” licenses contributed 95 per cent of new sales, while the “Defined Market Segments” (DMS) insurers2 made up the remaining five per cent. The six companies are:

  • Friends Provident International Ltd (Singapore Branch)
  • Generali International Limited, Singapore Branch
  • Royal Skandia Life Assurance Ltd, Singapore Branch
  • Standard Life International Limited, Singapore Branch
  • Transamerica Life (Bermuda) Ltd. (Singapore Branch)
  • Zurich International Life Limited (Singapore Branch) 

Fact-Find Experience

For the period January to June 2014, policies taken up were based on the following choices of the customers:

  • Comprehensive Planning3: 11 per cent
  • Specific Need(s) Planning4: 84 per cent
  • No Needs Analysis Purchase5: 5 per cent

Other Highlights (In force as at June 2014)

Group Insurance

Total annual premiums in force for group insurance business rose by nine per cent compared with a year ago, amounting to S$881 million.

Assets

As at end March of 2014, the life insurance industry was managing assets6 of approximately S$139.6 billion, up four per cent compared with a year ago. Assets of non-investment linked business accounted for S$113.5 billion, while the remaining S$26.1 billion were assets held for investment-linked business.

Manpower in the industry

As at 30 June 2014, a total of 5,529 office staff were employed by member companies of the LIA and 13,618 representatives held exclusive contracts with companies that operate a tied agency force.

Looking Forward

The life insurance industry is focused on the implementation of the various regulatory changes to ensure that systems and procedures being put in place are practicable and robust.

Singapore’s demographic is also evolving such that the value and importance of life insurance will gain wider recognition and acceptance.

Firstly, Singapore’s increasing level of affluence will lead to a greater need for protection and savings. Singapore is now the fastest growing wealth hub globally with its share of global offshore wealth expected to outstrip Switzerland by 2020, according to Wealth Insight7. In addition, Singapore’s “emerging affluent” class - defined as having S$50,000 to $200,000 investible assets - is a fast-growing segment expected to expand by 10 per cent annually in the next three years. Approximately 500,000 individuals fall into this bracket as at 20138.

Secondly, Singapore’s population is rapidly ageing and there is a need for varied retirement solutions. This major demographic change is rapid. The number of senior citizens aged 65 and above will triple to 900,000 by 2030 and they will be supported by a smaller base of working-age citizens9.

The investment environment is still fragile and could change, causing severe depression in asset value. However, the life insurance industry in Singapore is financially sound and well-tested to withstand such shocks, as shown by Singapore-based insurers, which weathered the Global Financial Crisis of 2008 without adverse impact.

In Summary

New Business Sales (Weighted Basis)

Comparison with Corresponding Period

Jan – Jun 2014
S$

Jan – Jun 2013
S$
Change
Single Premium 378.4 million 314.2 million 20%
Annual Premium 937.3 million 983.8 million -5%
Total 1,315.7 million 1,298.0 million 1%
Comparison with Corresponding Quarter

Apr – Jun 2014
S$

Apr – Jun 2013
S$
Change
Single Premium 210.2 million 181.4 million 16%
Annual Premium 450.1 million 554.8 million -19%
Total 660.3 million 736.2 million -10%
Comparison with Last Quarter

Apr - Jun 2014
S$

Jan – Mar 2014
S$
Change
Single Premium 210.2 million 168.2 million 25%
Annual Premium 450.1 million 487.2 million10 -8%
Total 660.3 million 655.4 million11 1%

  Weighted new business premiums measures premiums collected on new policies by taking into account (1) 10 per cent of the value of single premium products, (2) all of a year’s premiums for annual premium products, and (3) adjusted value for products with premium payment durations of less than 10 years.
The figure is calculated as follows: 10% Single Premium Insurance + 100% Annual Premium Insurance + Adjusted premium for Insurance with premium payment durations of less than 10 years

  DMS insurers are registered by MAS to conduct only non-CPF business and with minimum policy size.

3   Under comprehensive planning, the customer completes the full fact-find and he receives the representative’s recommendation on suitable product(s).

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

5   Under no needs analysis purchase, the customer does not undergo any needs analysis and is responsible for choosing the product(s) he finds suitable for himself. However, the representative is required to explain product features, its fees and charges to the customer.
6   www.mas.gov.sg 

7    http://www.ibtimes.com/singapore-now-worlds-fastest-growing-wealth-management-hub-not-free-tax-evasion-other-crimes-1556309

8    http://news.asiaone.com/News/Latest%2BNews/Singapore/Story/A1Story20130405-413861.html

9    http://population.sg/key-challenges/#.U7yw-fmSx8F

10   Updated figures, due to revisions made after release of Q1 results

11   Updated figures, due to revisions made after release of Q1 results