Life insurance industry off to a good start for 2010

The life insurance industry started the year on a high note. The first quarter recorded a total of $315 million in weighted* new business premiums, representing an impressive 43 per cent increase over the corresponding quarter in 2009.

The strong performance was boosted by robust sales across all products. Regular premiums sales reached $244 million, registering a 40 per cent growth over the figures achieved for the same period in 2009. Single premium sales soared to $1.01 billion in the first quarter, marking a significant 56 per cent improvement over the same period last year.

The CPF Investment Scheme (CPFIS) accounted for 21 per cent ($212 million) of total single premium sales.

Health insurance sales in the first quarter of 2010 totaled $41 million, up 69 per cent over the corresponding quarter last year. The continuing robust take-up rate suggests increasing consumer awareness of the need for medical coverage in the face of rising medical costs.

The overall share of investment-linked sales increased by 5 percentage points over the corresponding period in 2009 to 27 per cent. Sales of linked products are gaining momentum in tandem with improving market sentiments.

Mr Tan Hak Leh, President of the Life Insurance Association, said that the current performance should be viewed against the first quarter of 2009, which bore the full brunt of the fallout from the global financial crisis. "The downward slide in sales at that point in time was swift but thankfully short-lived," said Mr Tan. "We are now in that position where we are seeing strong year-on-year growth."

Other Highlights

Distribution Channels

Tied agency continues to be the major distribution channel, accounting for 58 per cent of weighted new business sales for the first quarter of 2010, while new business sales through banks accounted for 23 per cent of sales.

Licensed Financial Advisers contributed 13 per cent whilst other channels, which include direct sales, made up the remaining 6 per cent.

Claims Payout

The life insurance industry paid out $856 million to policyholders and beneficiaries. Of this, $99 million was in respect of death, critical illness or disability claims whilst the remaining $757 million was in respect of policies that matured.

The average death benefit payout worked out to be $48,276 per policy in the first quarter of 2010.

Average Sum Insured

In the first quarter of 2010, the average sum insured was $42,698 for single premium and $43,507 for regular premium policies, both figures indicating that Singaporeans are still under-insured.

Fact-Find Experience

Concerted efforts by insurers to instill the importance of fact-finding when determining the most appropriate policies for their needs are beginning to see some positive outcomes. During the first quarter of this year, 66 per cent of life insurance applications were completed with a full or partial fact-find, registering an improvement of 7 per cent over the preceding quarter.

Assets**

As at the fourth quarter of 2009, the life insurance industry was managing assets** amounting to approximately $108.9 billion, up by 18 per cent compared with a year ago. Assets of non-linked business accounted for $85.2 billion, whilst assets held for investment-linked policies totaled $23.7 billion.

Manpower In The Industry

As at 31 March 2010, a total of 4,847 office staff were employed by member companies of the LIA and 13,581 representatives held exclusive contracts with companies that operate a tied agency force.

The strength of the industry's workforce has remained stable over the last two years.

Outlook for 2010

On the outlook for 2010, Mr Tan Hak Leh, President of the Life Insurance Association said that the industry remains optimistic. "Positive growth in recent quarters indicate that this trend is likely to continue throughout 2010. Improving consumer sentiments, stronger economic recovery and positive market conditions augur well for the industry."

Mr Tan added that the LIA remains concerned that Singaporeans are some way from closing the gap on their life protection and retirement needs. "With Singapore's gross domestic product now close to 3 per cent above its last peak in Q1 2008 and the observation that the drivers of growth are likely to be sustained in the next few quarters, it is an opportune time for Singaporeans to start planning for their future financial and retirement needs. Individuals with existing financial products should review them to ensure that they remain appropriate to their needs."

In an effort to build a more financial-savvy society, Mr Tan said that the LIA will be embarking on a series of 'Know Your Financial Health' workshops in the second half of 2010. These workshops will highlight the value of the fact-find process with one's financial adviser to tailor the most suitable and affordable insurance plans that are aligned to their protection and retirement needs.

"Spearheaded by LIA industry experts, the workshops aim to help consumers take concrete steps towards securing their financial future. Our goal is to see retirement planning on the agenda of every Singaporean, as well as getting them adequately covered against unfortunate events," said Mr Tan.

In Summary

New Business Sales

*   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