Life insurance industry achieves robust performance in 2014

Total sum assured for new business increased by S$5.8 billion, up seven per cent in 2014
Singapore, 06 February 2015

The Life Insurance Association Singapore (LIA Singapore) today announced industry results for the period January to December 2014 with a robust seven per cent increase in the overall sum assured for new business, totalling S$88.7 billion compared to 2013.

Overall, the industry achieved a total of S$2,788.8 million in weighted new business premiums1  for the year ended 31 December 2014. In 2014, there was a significant 23 per cent increase in sales of single premium products, totalling S$860.8 million. This was attributed to a significant 40 per cent increase in uptake of new single premium participating (“par”) products.

In the same period, weighted annual premium sales saw an eight per cent dip to S$1,928.0 million when compared to 2013. 2013 saw a spike in premiums as a result of the re-pricing exercise of Integrated Shield Plans (IPs). Weighted annual premium sales have stabilised since the first quarter of 2014.

As at end December 2014, the life insurance industry paid out S$6.79 billion to policyholders and beneficiaries. Of this amount, S$6.19 billion was for policies that matured. The remaining S$602 million was for death, critical illness or disability claims, which represented a 13 per cent increase from 2013 – an additional indication that the industry is providing increased protection to the Singapore market.

On health insurance, approximately one in two individuals in Singapore (2.75 million lives) has health cover with total premiums amounting to S$1.6 billion as at 31 December 2014.

Dr. Khoo Kah Siang, President of LIA Singapore said, “The life insurance industry has registered robust performance in 2014 and we are glad that our efforts in increasing the financial literacy of consumers to bridge the protection gap have translated into sustainable growth for the industry. We are seeing increasing consumer understanding of life insurance and remain committed to continue educating consumers moving forward. In addition, as we prepare for the implementation of upcoming initiatives and regulatory changes which include the FAIR recommendations and MediShield Life, LIA Singapore will continue to work closely with policymakers and relevant bodies to ensure that these changes are comprehensive, robust and beneficial to all.”

Last week, the Singapore Parliament passed the MediShield Life Scheme Bill into law, officially introducing universal health insurance in Singapore on a national scale. As we gear up for the launch of MediShield Life at end 2015, LIA Singapore and IP insurers will continue to work in close collaboration with the Government to further improve public education on health insurance and how MediShield Life and IPs work, and their relationship with each other. The insurers are also developing the standard B1 plan jointly with the Ministry of Health (MOH).

To allow for a smooth transition, the five IP insurers have committed not to increase the top-up portion of IP premiums for plans covering Class B1 and A wards of public hospitals for one year following the implementation of MediShield Life. Supporting the cost management efforts for IP premiums, IP insurers will collaborate with policymakers and relevant bodies to improve price transparency of professional fees within the healthcare industry, review and apply global pricing benchmarks, as well as leverage data analytics to allow for better scrutiny of unusually high healthcare bills.

LIA Singapore is working with the Monetary Authority of Singapore (MAS) to study the impact of the Risk-based Capital 2 (“RBC2”) framework on the industry and public. The association is also working closely with MAS to launch the Web Aggregator and Direct Purchase Insurance (DPI) products in 2015.

Other Highlights (for period January to December 2014)

Total Sum Assured

The total sum assured for new business increased by seven per cent to S$88.7 billion for 2014 compared to the same period in 2013.

Health Insurance

The amount of new health insurance premiums in 2014 totalled S$266 million. There was a 42 per cent dip in 2014 compared to the same period in 2013, stabilising after a significant increase in 2013 due to a re-pricing exercise of the Integrated Shield Plans (IPs), following from MediShield enhancements in early 2014.

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 43 61
Bank Distribution 36 14
Financial Advisers 18 11
Others (without intermediaries, e.g. ElderShield) 3 14

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

Product Classification

Par products accounted for 53 per cent of new sales while non-par products accounted for 28 per cent. Investment-linked products made up the remaining 19 per cent.

Product License Classification

As at 31 December 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
  • Old Mutual International Isle of Man Limited 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 December 2014, policies taken up were based on the following choices of the customers:

  • Comprehensive Planning3: 23 per cent
  • Specific Need(s) Planning4: 69 per cent
  • No Needs Analysis Purchase5: 8 per cent

Comprehensive planning grew by 8 percentage points in 2014. This affirms an increased number of policyholders who underwent comprehensive planning financial advisory process with their financial adviser (FA).

New Guidelines

In August 2014, LIA Singapore announced changes to the Critical Illnesses (CI) benefit framework aimed at providing Singapore residents with more varied CI products.

This was part of the regular guidelines refresh for LIA Singapore. The aim of updating guidelines on a regular basis not only ensures that insurance products meet the long-term financial and insurance needs of all, but enables LIA Singapore and member companies elevate industry standards, working towards an even more effective self-regulated environment.

Other Highlights (In force as at December 2014)

Group Insurance

Total annual premiums in force for group insurance business rose by seven per cent compared with a year ago, amounting to S$909 million.

Assets

As at end December of 2014, the life insurance industry was managing assets6 of approximately S$147.1 billion, up nine per cent compared with a year ago. Assets of non-investment linked business accounted for S$120.0 billion, while the remaining S$27.1 billion were assets held for investment-linked business.

Manpower in the Industry

A total of 5,813 office staff were employed by member companies of the LIA and 14,224 representatives held exclusive contracts with companies that operate a tied agency force, as at 31 December 2014.

New Member

St. James’s Place International plc Singapore Branch (“SJPI”) joined LIA Singapore as the association’s seventh defined market segments (DMS) insurer, providing more opportunities for growth in this market. SJPI was licensed by MAS in January 2015.

Looking Forward

Dr. Khoo Kah Siang, President of LIA Singapore said, “Overall, the life insurance industry is on track to continue its growth momentum. We are well-placed to implement regulatory changes to ensure smooth transitions and these include the FAIR recommendations such as Direct Purchase Insurance products, and MediShield Life. We will remain prudent by closely monitoring the rapidly changing investment environment for potential global headwinds to ensure that the Singapore life insurance industry remains financially sound. We are also seeing greater opportunities to widen our customer base within the high-net-worth (HNW) segment, and will look to capitalise on this growth and in doing so, support Singapore’s leading position as the regional life insurance hub.”

In Summary

New Business Sales (Weighted Basis)

Comparison with Corresponding Period

Jan – Dec 2014
S$

Jan – Dec 2013
S$
Change
Single Premium 860.8 million 700.6 million 23%
Annual Premium 1,928.0 million 2,088.2 million -8%
Total 2,788.8 million 2,788.8 million 0%
Comparison with Corresponding Quarter

Oct – Dec 2014
S$

Oct – Dec 2013
S$
Change
Single Premium 219.8 million 178.2 million 23%
Annual Premium 544.5 million 562.5 million -3%
Total 764.3 million 740.7 million 3%
Comparison with Last Quarter

Oct - Dec 2014
S$

Jul - Sep 2014
S$

Change
Single Premium 219.8 million 259.2 million -15%
Annual Premium 544.5 million 446.2 million 22%
Total 764.3 million 705.4 million 8%

  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