Life Insurance Industry Achieves 27 per cent Growth in the First Half of 2008

The life insurance industry saw sales climb by 27 per cent in the first half of 2008 with total weighted* new business premiums at $978 million, up from $767 million in the corresponding period in 2007.

The strong showing was due to robust single premium sales during the first six months of 2008. In absolute terms, single premium business totaled $4,985 million, representing a 14 per cent improvement over the same period in 2007. The CPF Investment Scheme (CPFIS) sector accounted for 48 per cent ($2.39 billion) of single premium sales.

During the second quarter of 2008, 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 felt in the CPFIS market sector.

While CPFIS sales slumped by 61 per cent, compared to the previous quarter, its impact was compensated for by a very strong showing in non-CPFIS single premium sales, recording $1,562 million of new premiums – the highest figure in this category for five past quarters.

Compared to the first quarter of 2008 and the corresponding quarter of 2007, non-CPFIS single premium sales were up by 52 per cent, and 65 per cent respectively.

Regular premium sales were similarly outstanding during the first six months of 2008. Regular premium sales showed a significant jump of 44 per cent, boosting total new premiums to $498 million, up from $346 million a year ago.

Non-linked products appear to be regaining popularity with consumers. The proportion of non-linked sales reached 49 per cent, up by 17 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 61 per cent of new business sales (weighted basis) for the period under review.

The industry saw a spike in the share of new business sold through the bank distribution channel. It now accounts for 29 per cent of sales, an 11 percentage point increase compared to the previous period. Licensed Financial Advisers contributed 7 per cent and other channels, including direct sales, accounted for the remaining 3 per cent.

Claims Payout

Up to end June 2008, the Singapore life insurance industry paid out a total of $2.34 billion to policyholders or beneficiaries. Of this total, $168 million was in respect of death, critical illness or disability claims whilst the remaining $2.18 billion was on policies that matured. The average claims payout under the death benefit worked out to be approximately $35,814 per policy in the second quarter of 2008.

Average Sum Insured

In the second quarter of 2008, the average sum insured worked out to be approximately $35,763 for single premium and $48,218 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 first quarter of 2008, the life insurance industry was managing assets amounting to approximately $102.2 billion, an increase of 5 per cent compared with a year ago. Non-linked business accounted for assets of $78.5 billion, whilst the remaining $23.7 billion represented the funds held for investment-linked policies.

Manpower In The Industry

As at 30 June 2008, member companies of LIA employed 5,064 office staff. Thirteen thousand four hundred and twenty-seven (13,427) representatives had exclusive agency contracts with companies that used this channel.

Looking Forward

Mr Mark O’Dell, President of the Life Insurance Association (LIA) noted that the industry was heartened by the strong growth in non-CPFIS single premium sales, which compensated for the anticipated slump in CPFIS sales following investment restrictions which took effect at the start of the second quarter of the business year. “While we expected that the restrictions would have an immediate impact on business, the strong surge in single premium sales from non-CPFIS funds exceeded expectations, registering the strongest quarter yet in this category.”

Mr O’Dell said that the LIA will continue its efforts in enabling Singaporeans to make better informed decisions when purchasing life insurance plans for their personal and family needs.

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