Life Insurance Industry Sees Good Increase In Third Quarter Sales

 Continuing the upturn in business from the last quarter, the life insurance industry achieved $426 million of total weighted* new business premiums during the third quarter of 2009, representing a 40 per cent increase over the preceding quarter (Q2 2009) and an increase of 94 per cent over Q1 2009.

The positive showing was due to single premium sales earned in the third quarter of 2009 amounting to $1.85 billion.

Mr Darren Thomson, President of the Life Insurance Association (LIA), said that the upswing in sales across two consecutive quarters is encouraging. “The financial meltdown of September 2008 affected the life insurance sector,” he said. “The latest results reflect a more upbeat consumer sentiment against an improved outlook for the Singapore economy as a whole.”

Almost 90 per cent of the single premium policies were bought using cash. Following the investment restrictions imposed on CPFIS-OA and CPFIS-SA balances from April 2008 onwards, CPFIS included single premium business dipped to the current level, which is anticipated to form the benchmark going forward. This sector accounted for $201 million (10 per cent) of total single premium sales in the third quarter, registering a 22 per cent increase over the preceding quarter.

Annual premium sales also fared reasonably well, increasing by 15 per cent to $274 million in the third quarter, and up from $238 million in the second quarter, indicating that consumers appreciate the particular role and unique value of long term life insurance.

Strong quarter-to-quarter recovery has effectively placed the industry back to the levels before the global recession.

The weighted new business premiums for the first nine months of this year totaled $0.95 billion, representing a drop of 33 per cent compared to the corresponding period in 2008. This is reflective of the impact of last year’s fall in global financial markets.

Non-linked products were popular with consumers, constituting 80 per cent of all life insurance sales up to the third quarter of 2009.

Other Highlights (January to September 2009)

Health Insurance

Health insurance for the first nine months of 2009 increased by 26 per cent over the same period last year to reach $106 million. The continuing growth demonstrates the on-going spread in awareness among consumers of the essential role and benefits of having health insurance to pay for their healthcare expenses.

Distribution Channels

The tied agency channel contributed to the bulk of new business, accounting for 61 per cent of weighted new business sales in the first nine months of the year.

The share of new business sold through the bank distribution channel accounted for 23 per cent. Licensed Financial Advisers contributed 11 per cent whilst other channels, including direct sales, made up the remaining 5 per cent.

Claims Payout

Up to end September 2009, the industry paid out a total of $3.72 billion to policyholders or beneficiaries. Of this figure, $296 million was in respect of death, critical illness or disability claims whilst the remaining $3.42 billion was on policies that matured. The average death benefit worked out to approximately $47,027 per policy in the third quarter of 2009, the highest in recent memory and indicative that policyholders are progressively increasing their coverage in the event of untimely death. This figure nonetheless shows that Singaporeans are still significantly under-insured.

Average Sum Insured

In the third quarter of 2009, the average sum insured worked out to approximately $42,130 for single premium and $44,790 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 remained stable over the last five quarters.

Assets**

As at the second quarter of 2009, the life insurance industry was managing assets amounting to approximately $98.0 billion, a drop of 4 per cent compared with a year ago. Non-linked business accounted for assets of $77.6 billion, whilst the remaining $20.4 billion represented the funds held for investment-linked policies.

Manpower In The Industry

As at 30 September 2009, member companies of the LIA employed 4,983 office staff. Fourteen thousand and eleven (14,011) representatives had exclusive contracts with member companies. The manpower base has remained stable over the last two years.

Looking Forward

LIA’s President said that the third quarter sales suggest that consumer confidence is returning and that they are ready to invest in the broad range of life insurance products as part of their protection, savings and investment portfolio.

“New business sales over the last six months is a shot-in-the-arm for our industry, which has had to contend with a number of hurdles impacting recent earnings,” said Mr Thomson. “We also see some interesting trends.”

“For instance, the average payout for death benefits is moving upwards, reaching its highest of $47,027 per policy this quarter. While this is by no means adequate for the average family in Singapore, at least we see a positive trend in terms of narrowing the protection gap.”

“Some of our members are also observing a trend that clients are starting to move money from cash into single premium ILPs. All these trends augur well for the industry, indicating that there is much more widespread awareness of the role of life insurance in financial planning.”

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