Life insurance sales grew by a healthy 38 per cent in first half year

Sales in bancassurance drives growth
Singapore, 04 August 2011

Following positive sales in the first quarter of this year, the life insurance sector saw growth momentum continue into its second quarter. The industry registered a total of $941.5 million in weighted* new business premiums for the first half of 2011, representing a significant 38 per cent improvement over the corresponding period in 2010.

The strong performance was driven by growth of bancassurance of 100 per cent year-on-year. Weighted regular premiums sales hit $620.2 million, registering a 31 per cent growth over the same period last year, while single premium business doubled by 54 per cent to $321.3 million. Of this amount, 21 per cent comprised CPF-funded sales.

“The first half year’s performance was buoyed by growth in bancassurance, mostly from sales of savings-oriented products. Growth through other channels maintained a healthy 20 per cent,” said Mr Tan Hak Leh, the President of the Life Insurance Association (LIA).

New health insurance sales increased by 3 per cent to $79 million compared to the first half of last year. The bulk of this - 86 per cent - went to Integrated Shield Plans and riders. As at 30 June 2011, a total of 2.42 million lives were covered by health insurance with paid up premiums amounting to $810 million.

Other Highlights (January to June 2011)

Distribution Channels

Tied agents contributed to nearly half of the new business, bringing in 48 per cent of weighted new business sales for the first half of the year.

The industry also saw a steady uptrend of business sold through banks. The channel achieved 34 per cent of sales, up by 10 percentage points from the same period the previous year.

Financial Advisers contributed 13 per cent of sales whilst other channels, including direct sales, made up the remaining 5 per cent.

Product Classification

Of the new sales, participating (“par”) products accounted for 54 per cent while non-par products accounted for 23 per cent. Investment-linked products made up the remaining 23 per cent. The percentage shares of these product types have remained fairly stable over the last three years.

Product License Classification

As at 30 June 2011, 95 per cent of new sales were contributed by insurers holding “Normal” licenses. The “Defined Market Segments” (DMS) insurers, represented by four companies, contributed the remaining 5 per cent. The trend has been consistent for the past three years. 

(Explanatory note: DMS insurers are registered with the MAS to conduct only non-CPF business and with minimum policy sizes.)

Claims Payout

Up to the end June 2011, the life insurance industry paid out a total of $2.34 billion to policyholders and beneficiaries. 

Of this, $218 million was in respect of death, critical illness or disability claims, whilst the remaining $2.12 billion was for policies that matured.

Fact-Find Experience

During the second quarter of this year, 80 per cent of life insurance applications were completed with a full or partial fact-find, an improvement of 3 per cent over the preceding quarter.

“Albeit a small increase quarter-on-quarter, it is worth noting that fact-finding or ‘knowing your client’ is gaining momentum and has attained its current level,” said Mr Tan. “The industry strongly believes in the value of the fact-find process and our representatives are actively engaging buyers to undergo the process in order to make informed choices of suitable products. Our efforts to promote the fact-find will continue.”

Other Highlights (In force as at June 2011)

Group Insurance

Total annual premiums in force for group insurance business rose by 17 per cent compared with a year ago, amounting to $671 million.

Assets

In the first quarter of 2011, the life insurance industry was managing assets** of approximately $119.9 billion, up 8 per cent compared with a year ago. Assets of non-linked business accounted for $95.1 billion, while the remaining $24.8 billion were assets held for investment-linked policies.

Manpower In the Industry

As at 30 June 2011, a total of 4,999 office staff were employed by member companies of the LIA and 12,866 representatives held exclusive contracts with companies that operate a tied agency force.

Looking Forward

The industry’s consumer awareness campaign has hit the airwaves. A 13-week radio series by the LIA focuses on the value of fact-find when consumers seek financial solutions for financial protection, savings and investment, and wealth management. Consumers can also check its enhanced website for information.

Under the new MAS Notice on Recommendations on Investment Products (FAA-N16), investment-linked life insurance policies (ILPs) are classified as an unlisted "Specified Investment Product" (SIP).
 
Representatives are required to conduct a "Customer Knowledge Assessment" (CKA) to assess whether the customer has the relevant knowledge or experience to understand the risks and features of an unlisted SIP.
 
Taking effect from 1 January 2012, a customer who is assessed to possess the knowledge or experience may decide to purchase an unlisted SIP without receiving advice. However, the representative is required to offer to provide advice to such customers in every case. President Tan Hak Leh said, “We welcome this measure. It supports the life insurance industry's drive to move away from "no advice" sales to business based on the provision of good advice.”
 
For customers who are assessed to not possess the knowledge or experience, they may not purchase an unlisted SIP without receiving advice. Such customers may buy on condition that advice has been provided.
 
For the customer who is positively assessed, he may buy more of the same or similar product during the ensuing one year from that representative who had assessed him without having to undergo fresh CKAs. In all other situations, the CKA is to be conducted for each and every sale.
 
Mr Tan viewed the measures as positive and commented that, “We see that these strong regulatory requirements taken together will pave the way for financial advisory to become widespread and accepted by ordinary Singaporeans. The life insurance industry will continue to be an important stakeholder in providing suitable products and good advisory to its customers.”

In Summary

New Business Sales (Weighted Basis)

  Jan – Jun 2011 Jan – Jun 2010 Change
Single Premium $321.3 million $208.8 million 54%
Annual Premium $620.2 million $472.4 million 31%
Total Premium $941.5 million $681.2 million 38%
  Apr – Jun 2011 Apr  – Jun 2010 Change
Single Premium $155.3 million $107.9 million 44%
Annual Premium $326.2 million $250.9 million 30%
Total Premium $481.5 million $358.8 million 34%

*   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