Good showing sustained in the fourth quarter 2009

The upturn in business continued into the fourth quarter, making it three consecutive quarters of positive gains. The life insurance industry achieved $449 million of total weighted* new business premiums during the fourth quarter of 2009, representing a 6 per cent increase over the preceding quarter.

Annual premium sales made a strong contribution of $303 million, up by 10 per cent compared to the previous quarter of $274 million. Single premium sales fell slightly to $1.79 billion in the fourth quarter, a 3 per cent drop over the preceding quarter.

CPF Investment Scheme (CPFIS) single premium sales continued to regain ground following an immediate dip in sales when CPFIS restrictions took effect in April 2008. This sector accounted for $311 million (17 per cent) of total single premium sales in the fourth quarter, which is a 55 per cent increase over the preceding quarter.

The strong fourth quarter performance contrasts sharply with the same period in 2008, when industry earnings took a dive in the wake of the financial tsunami that swept the world. The decline continued into the following quarter before sales pick up again.

The good finishing quarter enabled the life insurance industry to register $1.41 billion of weighted new business for the year of 2009.

Whilst this figure represented an 18 per cent shortfall when compared to 2008, it can be said the industry rode out the September 2008 financial crisis with reassuring resilience.

“This attests to the fact that the fundamentals of life insurance reverberates with Singaporeans from all walks of life,” said Mr Darren Thomson, President of the Life Insurance Association. “The robust framework within which we operate was put to the test during those difficult times but it helped us emerge stronger, and similarly consumer confidence has grown stronger.”

Sales of non-linked products reached $4.84 billion whilst sales of investment-linked products amounted $1.34 billion for the whole of 2009.

The proportion of sales for non-linked products, popular with consumers, reached 78 per cent, up by 16 percentage points compared with 2008.

Health Insurance

Health insurance sales in 2009 totaled $146 million, up 31 per cent over 2008. The robust take-up rate reflected consumers’ personal concern and keen awareness of the need for medical coverage in the face of ever increasing medical costs.

Distribution Channels

The tied agency channel continued to be the main avenue of distribution, being responsible for 61 per cent of weighted new business sales for 2009.

New business sold through the bank distribution channel accounted for 22 per cent of sales. Licensed Financial Advisers contributed 12 per cent whilst other channels, which include direct sales, made up the remaining 5 per cent.

Claims Payout

In 2009, the industry paid out $4.87 billion to policyholders and beneficiaries; $422 million of this was for death, critical illness or disability claims and the remaining $4.44 billion was paid on policies that matured.

The average death benefit payout was $58,204 per policy in the fourth quarter of 2009, the highest amount to-date.

Average Sum Insured

In the fourth quarter of 2009, the average sum insured was $43,595 for single premium and $55,572 for regular premium policies.

Fact-Find Experience

Fifty-nine per cent of life insurance applications were received on the basis of a full fact-find or partial fact-find. The experience has been similar for the last five quarters.

Assets

As at the third quarter of 2009, the life insurance industry was managing assets** amounting to approximately $105.6 billion, up by 8 per cent compared with a year ago. Assets of non-linked business accounted for $83.1 billion, whilst $22.4 billion represented the assets held for investment-linked policies.

Manpower In The Industry

As at 31 December 2009, 4,789 office staff in total were employed by member companies of the LIA and 14,088 representatives were exclusively contracted with some of the companies. The strength of the industry’s workforce has remained stable over the last two years.

Looking Forward

Heartened by the short-lived slump following the financial crisis of 2008 and the strong performances of the last three consecutive quarters, the industry is re-focusing its efforts to offer Singaporeans a broader and more diverse portfolio of life insurance solutions to meet their fast-changing financial planning needs.

“The industry continues to deliver innovative solutions ranging from protection that is affordable to the general public to specialized financial advisory services to high net worth individuals residing in Singapore or anywhere in the world for their long-term financial and estate planning,” said Mr Thomson. “The recent entry of specialized players has also helped to accelerate the development of our industry.”

Mr Thomson said that the LIA will continue with its various initiatives to ensure best consumer outcomes.

Next year will see even more of a focus on the FAA-G11 Guidelines on Fair Dealing, which in 2009, represented a major effort by the Authority to underpin the enhanced sale and marketing regime by placing the responsibility on the Board and Senior Management to deliver fair dealing outcomes to customers.

The Guidelines apply to the selection, marketing and distribution of investment products and the provision of advice for these products. They also cover after-sales services and complaints handling. The Guidelines set out five fair dealing outcomes.

One critical issue that calls for an industry philosophy and position to be forged concerns the remuneration structure of representatives and to what extent is it true that traditional schemes tend to incentivise sales based on the adviser’s self interest rather than the customer’s need.

The LIA and the individual companies will have dual responsibility in making the Fair Dealing Guidelines part and parcel of what we do in Singapore for the benefit of our policyholders and our future customers.

In Summary

New Business Sales

*   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