Life insurance sales bounce back in Q2

Following two quarters of dismal results in the wake of the financial meltdown of September 2008, the Life Insurance Association today reported an upturn in sales in the second quarter of 2009, heralding optimism that the worst may indeed be over.

The life insurance industry recorded $304 million of total weighted* new business premiums during the second quarter of 2009, representing a 38 per cent increase over the preceding quarter (Q1 2009) and a slight increase (3 per cent) over Q4 2008.

Mr Darren Thomson, President of the LIA, said that the upward turn in sales while market conditions are still on the mend presents a bright spark after a few quarters of declining sales. “Like most businesses, our industry has had to brace itself to ride out the storm. The latest sales figures indicate that continued recovery may well be in sight.”

The industry’s collective relief over the last quarter performance comes after a decline in sales since 2008.

Sales were boosted in the first half of 2008, partly driven by the then impending CPFIS restrictions which took effect in April of last year. This contrasted with the downward spiral in the global financial markets in September, which took its toll on the industry. Sales for the first half of this year totaled $524 million of total weighted* new business premiums, representing a drop of 46 per cent compared with the same corresponding period in 2008.

Mr Thomson said that the anomalies between the first half of 2009 and the same period in the previous year do not allow for a fair analysis of sales. “The environment and consumer sentiment were starkly different at these points in time.”

Compared to the previous quarter, single premium sales increased 39 per cent from $644 million to $897 million. The annual premium sales also went up by 37 per cent to $238 million in the second quarter from $174 million in the first quarter.

CPF Investment Scheme (CPFIS) sales also perked up, following a big dip in sales when CPFIS restrictions took effect in April 2008. This sector accounted for $164 million (18 per cent) of total single premium sales in the second quarter, registering a 53 per cent increase over the first quarter of this year.

Sales for non-linked products reached $850 million, up by 33 per cent, compared to previous quarter of $640 million.

The investment-linked sales also improved by 60 per cent, from $178 million in the first quarter to $284 million in the second quarter. Noting this, Mr Thomson said that he was optimistic that ILP products would continue to regain ground on the back of improving market performances.

Other Highlights (January to June 2009)

Health Insurance

Health insurance for the first half of 2009 increased by 40 per cent over the same period last year to reach $70 million.

Distribution Channels

The tied agency channel contributed to the bulk of new business, with tied representatives being responsible for 59 per cent of new weighted business sales for the first half of the year.

The share of new business sold through the bank distribution channel accounted for 24 per cent of sales. Licensed Financial Advisers contributed 12 per cent whilst other channels, including direct sales, accounted for the remaining 5 per cent.

Claims Payout

Up to end June 2009, the industry paid out a total of $2.48 billion to policyholders or beneficiaries. Of this figure, $189 million was in respect of death, critical illness or disability claims whilst the remaining $2.29 billion was on policies that matured. The average claims payout under the death benefit worked out to approximately $39,521 per policy in the second quarter of 2009.

Average Sum Insured

In the second quarter of 2009, the average sum insured worked out to approximately $41,828 for single premium and $48,708 for regular premium policies. Observing that both figures have been increasing since the past two quarters, Mr Thomson believed that people were going back to basics, and were beginning to realize the importance of having protection cover at all times.

Fact-Find Experience

Sixty-one 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 first quarter of 2009, the life insurance industry was managing assets amounting to approximately $90.9 billion, a drop of 11 per cent compared with a year ago. Non-linked business accounted for assets of $73.7 billion, whilst the remaining $17.2 billion represented the funds held for investment-linked policies.

Manpower In The Industry

As at 30 June 2009, member companies of the LIA employed 5,030 office staff and thirteen thousand eight hundred and ninety-nine (13,899) representatives who had exclusive contracts with companies, maintaining the strength of its manpower over the last two years.

Looking Forward

Darren Thomson said that LIA members are optimistic about the improvement in sales in Q2 compared to the two preceding quarters. “We are a lot more confident that people better understand and recognize that life insurance can support so many facets of our life cycles.”

“Naturally there are segments of individuals who are shying away from making additional financial commitments while the economic outlook is still uncertain. We would advise that the decision to purchase a life insurance plan is not put on hold as it is fundamentally to provide a safeguard against unexpected and unfortunate events.”

Consumer understanding of life insurance matters will continue to be a priority. The LIA is in the process of enhancing its website to give consumers a comprehensive ‘first stop’ understanding of life insurance pre- and post-discussions with their financial advisors.

The LIA is also producing a Consumer’s Guide to provide clarity to the changes in the framework pertaining to the Nomination of Beneficiaries which is expected to be gazetted in September 2009.

“The industry will continue to introduce innovative new products and solutions to meet the financial objectives of people from all walks of life and in tandem with their changing circumstances in the fast moving global marketplace,” said Mr Thomson.

In Summary

New Business Sales

Note: DPS business is excluded.

*   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

About the Life Insurance Association, Singapore

Life's worth PROTECTING. INVEST in it.

The Life Insurance Association, Singapore is the not-for- profit trade body of life insurance product providers and life reinsurance providers based in Singapore and licensed by the Monetary Authority of Singapore. Its 19 members comprise 16 life insurers and three life reinsurers.

Member companies see it as their common vision to provide individuals with peace of mind and to promote a society where every person is prepared for life’s changing cycles and for those situations unforeseen.

They are committed to being a progressive life insurance industry by collectively enhancing consumer understanding, promoting industry best practices, and through the association fostering a spirit of collaboration and mutual respect with government and business leaders.

Shared values underpinning the association and its members are:

• Unified in our resolve to deliver innovative solutions where every individual’s needs are best met.
• Professional in the way we conduct ourselves and in the counsel we give.
• Ethical in ensuring our policyholders’ interests are managed with utmost integrity.
• Fair in how we strive to provide favourable outcomes to both our policyholders and shareholders.
• Open & honest in all that we do to build an environment of trust and transparency.
• Proactive in the steps we take to give our people the skills and knowledge to provide sound solutions at all times.

For more information, please contact:

Ms Pauline Lim
Executive Director, Life Insurance Association, Singapore
Tel: (65) 6438 8900

Email: pauline.lim@lia.org.sg 

Ms Margaret Cunico | Ms May Yang
Weber Shandwick Worldwide
Tel: (65) 6825 8007 | (65) 6825 8073
Mobile: 9277 5456 | 9782 9054
Email: mcunico@webershandwick.com | myang@WeberShandwick.com