Life insurance industry starts the year on a high note

The life insurance industry gets off to a good start in 2008. The first quarter recorded a total of $503 million of new business premiums on a weighted basis*, representing a strong 52 per cent increase over the corresponding quarter in 2007.

Both single premium and regular premium businesses recorded healthy growth in the first quarter. Regular premium sales reached $238 million, representing a 48 per cent growth over the figures achieved for the same period in 2007.

The performance was further boosted by strong single premium sales, which soared to $2.76 billion in the first quarter, marking a significant improvement of 54 per cent over the same period last year.

The CPF sector accounted for 63 per cent ($1.72 billion) of single premium sales. In the first quarter 2008, single premium sales increased by 6 per cent over the previous quarter.

The share of investment-linked sales dropped by one percentage point, to 64 per cent compared with the corresponding period in 2007.

Distribution Channels

The tied agency channel contributed to the bulk of new business. Tied representatives were responsible for 66 per cent of new business sales (weighted basis) for the first quarter of 2008.

Bank distribution saw its share improve by 9 percentage points to 26 per cent. Licensed Financial Advisers contributed 5 per cent. Other channels including direct sales accounted for the remaining 3 per cent.

Claims Payout

The Singapore life insurance industry paid out $1.07 billion to policyholders or beneficiaries in the first quarter of 2008. Of this total, $82 million was in respect of death, critical illness or disability claims whilst the remaining $990 million was on policies that matured. The average claims payout for death worked out to be approximately $37,479 per policy.

Average Sum Insured

For the first quarter 2008, the average sum insured worked out to be approximately $26,754 for single premium and $48,428 for regular premium policies.

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 remained constant over the past few quarters.

Assets**

As of the fourth quarter 2007, the life insurance industry was managing assets amounting to approximately $107.8 billion, an increase of 16 per cent compared with a year ago. Non-linked business accounted for assets of $80.3 billion, whilst the remaining $27.5 billion represented the funds held for investment-linked policies.

Manpower In The Industry

As of 31 March 2008, member companies of LIA employed 5,037 office staff. Thirteen thousand one hundred and sixty-two (13,162) representatives had exclusive agency contracts with companies that used this channel.

Outlook For 2008

Mr Mark O’Dell, President of the Life Insurance Association said that the life industry has shown strong and continued growth from the start of 2007. He said that he expects growth going into 2008, albeit possibly tempered by certain factors.

“We anticipate that the CPF Investment Scheme (CPFIS) market sector will experience the impact of the Board’s Investment Restrictions of $20,000 imposed on CPFIS-OA and CPFIS-SA balances, which took effect from 1 April 2008.

The fundamentals of the Singapore economy remain strong. However, inflation and global economic sentiment may impact moderated growth in the life insurance sector.

Nonetheless we remain optimistic as Singaporeans increasingly place greater value on life insurance for long-term financial planning.

There is still plenty of room for growth in seeing that Singaporeans get adequate protection cover. We cannot emphasise enough that Singaporeans are grossly under-insured. The death payout averages under $40,000 - clearly inadequate for a family to make ends meet in the untimely death of the breadwinner.”

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