Life Insurance Industry Posts Three Per Cent Growth For 2008

The life insurance industry saw a silver lining in its 2008 results posting a three per cent growth for 2008. On a weighted basis*, the industry chalked up a total of $1.71 billion of new business premiums in 2008.

The main contributing factor to this positive result was steady quarter to quarter annual premium sales. A total of $995 million of annual premium sales were made, representing a remarkable 21 per cent growth over 2007.

Single premium sales totaled $7.64 billion, a 14 per cent drop over 2007. The CPF Investment Scheme (CPFIS) sector accounted for 36 per cent ($2.77 billion) of single premium sales. The impact of the CPF Board’s investment restriction of $20,000 imposed on CPFIS-OA and CPFIS-SA balances, which took effect from 1 April 2008, was fully felt in the CPFIS market sector during the second half of 2008.

During the tumultuous fourth quarter of 2008 itself, annual premium sales were $228.8 million, whilst single premium sales totaled $811 million, the performance representing a drop of 16 per cent and 69 per cent respectively, over the same quarter in 2007.

The proportion of sales for non-linked products, popular with consumers, reached 62 per cent, up by 30 percentage points compared with 2007.

Annuity sales in 2008 totaled $554 million, up 38 per cent over 2007. The Life Insurance Association (LIA) believes that the increase reflects Singaporeans’ growing demand for annuities as a relevant source of retirement income.

Distribution Channels

The tied agency channel contributed to the bulk of new business, with tied financial planners responsible for 61 per cent of new weighted business sales for 2008.

The share of new business sold through the bank distribution channel continues to improve. It now accounts for 27 per cent of sales, an 8 percentage point increase compared to the previous period. Licensed Financial Advisers contributed 8 per cent and other channels, including direct sales, accounted for the remaining 4 per cent.

Claims Payout

In 2008, the Singapore life insurance industry paid out a total of $5.12 billion to policyholders or beneficiaries. Of this total, $359 million was in respect of death, critical illness or disability claims whilst the remaining $4.76 billion was on policies that matured.

The average claims payout under the death benefit worked out to be approximately $38,380 per policy in the fourth quarter of 2008.

Average Sum Insured

In the fourth quarter of 2008, the average sum insured worked out to be approximately $36,386 for single premium and $36,650 for regular premium policies

Fact-Find Experience

Fifty-three per cent of life insurance applications were received on the basis of a full fact-find or partial fact-find.

Assets**

As at the third quarter of 2008, the life insurance industry was managing assets amounting to approximately $97.8 billion, a drop of 9 per cent compared with a year ago. Non-linked business accounted for assets of $77.7 billion, whilst the remaining $20.1 billion represented the funds held for investment-linked policies

Manpower In The Industry

As at 31 December 2008, member companies of LIA employed 5,058 office staff. Thirteen thousand four hundred and eighty-two (13,482) representatives had exclusive agency contracts with companies that used this channel.

Looking Forward

In the wake of muted economic growth in 2008 and a grim outlook for 2009, the industry urges Singaporeans to continue factoring life insurance into their budgets.

“Our one message is that life insurance, in fact now more than ever, is essential. Policyholders and their families need protection against loss of income, loss of assets, and other unforeseen events as well as having appropriate medical coverage,” said Mr Darren Thomson, President of LIA.

“Surrendering your policy should not be an option as far as possible. There is a slew of existing policy options available to policyholders who may have difficulty in keeping up with their premium payments such as taking premium holidays or policy loans. Policyholders should contact their insurance representatives for advice.”

Mr Thomson also said that insurers are recognizing particular concerns and issues of policyholders and are designing a range of schemes to assist policyholders during these trying times.

Some examples include:

• Low-cost relief schemes that offer policyholders coverage against death, critical illness and permanent disability; and
• Extended premium holiday for whole life and endowment policyholders with small one-time fees.

“The industry is mindful of tough times ahead of Singaporeans. These schemes help to keep policies in force so that policyholders will not lose their much-needed coverage in times of difficulty,” said Mr Thomson.

In Summary

New Business Sales

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