Life insurance industry achieves 21 per cent growth in the first nine months of 2008

During the first nine months of 2008, the life insurance industry recorded $1.42 billion of total weighted* new premiums - this sales figure represents an increase of 21 per cent over the corresponding period in 2007.

The good showing was due to robust annual premium sales during the first nine months of 2008. Regular premium sales showed a significant jump of 36 per cent, boosting total new premiums to $775 million, up from $571 million a year ago. There has been steady quarter-to-quarter growth for this business line.

Up to the third quarter of 2008, single premium sales totaled $6.83 billion, up 7 per cent from the same period last year. The CPF Investment Scheme (CPFIS) sector accounted for 39 per cent ($2.65 billion) of single premium sales.

During the third quarter of 2008 itself, 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. CPFIS sales slumped by 62 per cent, compared to the previous quarter, and by almost 80 per cent over the same quarter in 2007.

The impact was however compensated for by a very strong showing in non-CPFIS single premium sales, recording $1.60 billion of new premiums – the highest figure in this category for five past quarters. Compared to the third quarter of 2007, non-CPFIS single premium sales were up by an overwhelming 104 per cent.

Non-linked products appear to be regaining popularity with consumers. The proportion of non-linked sales reached 59 per cent, up by 26 percentage points, compared with the corresponding period in 2007.

Distribution Channels

The tied agency channel contributed to the bulk of new business, with tied representatives responsible for 60 per cent of new weighted business sales for the period under review.

The share of new business sold through the bank distribution channel continues to improve. It now accounts for 28 per cent of sales, a 10 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

Up to end September 2008, the Singapore life insurance industry paid out a total of $3.65 billion to policyholders or beneficiaries. Of this total, $270 million was in respect of death, critical illness or disability claims whilst the remaining $3.38 billion was on policies that matured. The average claims payout under the death benefit worked out to be approximately $44,554 per policy in the third quarter of 2008.

Average Sum Insured

In the third quarter of 2008, the average sum insured worked out to be approximately $44,338 for single premium and $45,714 for regular premium policies.

Fact-Find Experience

Fifty-eight per cent of life insurance applications were received on the basis of a full fact-find or partial fact-find. The experience has remained constant over the past few quarters.

Assets**

As at the second quarter of 2008, the life insurance industry was managing assets amounting to approximately $101.6 billion, a drop of 2.5 per cent compared with a year ago. Non-linked business accounted for assets of $78.5 billion, whilst the remaining $23.1 billion represented the funds held for investment-linked policies.

Manpower In The Industry

As at 30 September 2008, member companies of LIA employed 5,032 office staff. Thirteen thousand five hundred and forty-nine (13,549) representatives had exclusive agency contracts with companies that used this channel.

Looking Forward

Mr Darren Thomson, President of the Life Insurance Association of Singapore (LIA), said that the life industry was buoyed by the strong showing in single premium sales despite the restrictions on CPFIS funds which kicked in on April 1 this year. “New non-CPFIS single premiums totaled nearly $1.6 billion, the highest in five quarters and over $800 million more compared to the same period last year. This is a positive for single premium business which was largely dominated by CPFIS sales pre-April.”

Mr Thomson added that “We however anticipate that for the upcoming months, sales will be affected by the current global financial bedlam but the fundamentals of life insurance remains strong. The purpose of insurance is to make sure that you and your family are taken care of in adverse situations where protection is of the utmost importance. The current economic climate should not be reason for deferring one’s protection needs. Of course it is prudent that people should stay within their means and invest in what they can afford.”

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

The Life Insurance Association is a trade association whose 19 members comprise 16 direct insurers and three reinsurers, licensed by the Monetary Authority of Singapore (MAS) to transact life insurance or life reinsurance business in Singapore.

Its objective is to promote the growth and development of the Singapore life insurance industry and to protect interests shared by life insurers and life insurance policyholders. To meet these objectives, the LIA undertakes various activities each year with emphasis on:

• Development of the life insurance industry
• Promulgation of standard industry practices
• Promotion of public awareness of life insurance

For more information, please contact:

Ms Pauline Lim
Executive Secretary, Life Insurance Association, Singapore
Tel: (65) 6438 8900
Email: pauline.lim@lia.org.sg

Nicholas Ferguson / Margaret Cunico
Weber Shandwick Worldwide
Tel: (65) 6825 8080 / (65) 6825 8007
Mobile: 9452 0613 / 9277 5456
Email: nferguson@webershandwick.com / mcunico@webershandwick.com