Life insurance industry records 13 per cent decline in sales due to COVID-19 pandemic

11 Aug 2020

Supporting Singaporeans through pandemic remains foremost priority for industry; accelerating digital and workforce transformation key to adapting to new normal.

The Life Insurance Association, Singapore (LIA Singapore) today announced a set of industry results for the period January to June 2020 (1H2020).

Singapore’s life insurance industry recorded a total of S$1.66 billion in weighted new business premiums1 for 1H2020, a drop of 13 per cent from the same period in 2019.

The ongoing recession stemming from the COVID-19 pandemic has resulted in demand- and supply-side shocks to the Singapore economy. The life insurance sector was not exempted from subsequent economic repercussions, which has impacted results for the period of April – June 2020 (2Q2020).

1H2020 encompassed both ‘Circuit-Breaker’ and ‘Phase 1’ periods where strict social distancing measures were enforced. As a result, annual premium business recorded a 25 per cent drop from the same period last year. This amounted to a total S$1.04 billion in total weighted annual premiums. Sales for the second quarter was significantly impacted – the amount of premiums collected was only half of the level in the same period last year.

The silver lining came in the form of increased single premium sales which helped cushion the impact caused by the decrease in annual premium business. In 1H2020, a 17 per cent year-on-year increase in weighted single premiums amounting to S$622.9 million in total was achieved.

a) Single premium par and non-par products comprised 75 per cent; single premium linked products made up the remaining 25 per cent

b) CPFIS-included products comprised 16 per cent; cash-funded products took the remaining 84 per cent

More short-term single premiums products were sold in tranches. These products are simple to understand, and they do not require medical underwriting. Representatives were able to bring customers through the sales process electronically and close sales despite the challenging situation.

The total sum assured for new business rose by one per cent year-on-year, amounting to S$65.7 billion in 1H2020.

“Since the beginning of the COVID-19 outbreak in Singapore, the life insurance sector has and continues to work closely with the relevant authorities to ensure Singaporeans receive the protection they need during this challenging period,” said Mr. Khor Hock Seng, President, LIA Singapore.

“Proactive support measures such as the Deferred Premium Payment scheme which allows premium payments to be deferred up to six months, complimentary access to telemedicine services, and supplementary activities to encourage healthy living during the circuit-breaker period are just some of the initiatives put in place to help Singaporeans cope with the changes to their financial situation and lifestyle needs,” he added.

Integrated Shield Plans (IPs) remain a significant component of health insurance 

51,000 more Singaporeans and Permanent Residents were covered by IPs and riders as at 30 June 2020. In total, 2.81 million lives – approximately 69 per cent of Singapore residents – are protected by IPs and riders, which provide coverage on top of MediShield Life.

Total new business premiums2 for individual health insurance for 1H2020 amounted to S$173.0 million. Overall, IPs and IP rider premiums accounted for 87 per cent (S$149.9 million) and the remaining 13 per cent (S$23.1 million) comprised other medical plans and riders.

Life insurance industry doubles down on workforce transformation efforts

Employment in the life industry rose by four per cent, compared to the corresponding period in 2019, with 368 net new hires. This brings Singapore’s life insurance industry’s workforce to 8,650 employees as at 30 June 2020. New hires have primarily been attributed to the expansion of Distribution and Sales teams, as well as project and product management roles.

Member companies are working together at the industry-level to provide selected training for their staff.

With growing and sustained demand for talent in the technology and digital space, member companies are leveraging on the SG United Traineeships Programmes to provide internship placement opportunities for tertiary students, including career opportunities in data science and digital analytics.

Within the same period, 14,787 representatives held exclusive contracts with companies that operate a tied-agency force.

Reduced uptake of retirement policies

There was a 36 per cent decrease in the uptake of retirement policies in 1H2020 compared to the same period last year, reversing the upward trend in recent years. A total of 16,582 retirement policies3 were purchased as at 30 June 2020.

Accounting for approximately nine per cent of total weighted premiums for 1H2020, retirement policies totalled S$148.8 million in weighted premiums for the first six months of 2020.

 

OTHER HIGHLIGHTS FOR 1H2020

Product Classification

Par products accounted for 40 per cent of new sales while non-par products accounted for 39 per cent. Investment-linked products made up the remaining 21 per cent.

Distribution Channels

The contribution of new business by the different channels is as follows:

Distribution Channel By Weighted Premium (%) By Number of Policies (%)
Tied Representatives 36.1 48.9
Bank Representatives 30.3 10.0
Financial Adviser Representatives4 26.7 26.3
Online Direct Channel5 2.6 6.0
Others (products sold without intermediaries, e.g. DPI, ElderShield) 4.3 8.8

Product License Classification

As of 30 June 2020, insurers holding “Normal” licenses contributed 98 per cent of new sales, while “Defined Market Segments” (DMS) insurers6 made up for the remaining two per cent of new sales in 1H2020.

Group Insurance: Total Annual Premiums In-Force

Total annual premiums in-force for group insurance business rose by 13 per cent compared to the same period a year ago, totalling S$1.46 billion.  

 

LOOKING FORWARD

“In conjunction with the Fourth Industrial Revolution, Singapore is undergoing an unprecedented and indeterminate period of uncertainty caused by the pandemic. Life insurers need to accelerate their digitalisation efforts as these are crucial to maintain business continuity, optimise efficiency, improve customer servicing standards and enable the innovation of new products,” said Mr. Khor Hock Seng, President, LIA Singapore.

“To ensure employees benefit from this digital transformation, life insurers are investing in training and upskilling their workforce for the future,” he added.

– End –

Note to Editor: More details of the life insurance industry results for 1H2020 available at https://www.lia.org.sg/news-room/industry-performance/

 

In Summary

New Business Sales (Weighted Basis)

Comparison with Corresponding Period

Jan  Jun 2020 
S$

Jan – Jun 2019
S$

Change
Single Premium 622.9 million 531.9 million 17%
  Linked 158.1 million 103.0 million 53%
  Non-linked 464.8 million 428.9 million 8%
Annual Premium 1,038.0 million 1,382.4 million -25%
Total 1,660.9 million 1,914.3 million

-13%

Comparison with Corresponding Quarter 

Apr  Jun 2020 
S$

Apr – Jun 2019
S$

Change
Single Premium 329.5 million 307.2 million 7%
  Linked 79.6 million 54.6 million 46%
  Non-linked 249.9 million 252.6 million -1%
Annual Premium 365.6 million 729.3 million -50%
Total 695.1 million 1,036.5 million

-33%

 

Comparison with Last Quarter 

Apr  Jun 2020 
S$

Jan – Mar 2020
S$

Change
Single Premium 329.5 million 293.4 million 12%
  Linked 79.6 million 78.5 million 1%
  Non-linked 249.9 million 214.9 million 16%
Annual Premium 365.6 million 672.4 million -46%
Total 695.1 million 965.8 million

-28%

1 Weighted new business premiums measures premiums collected on new policies by taking into account (1) 10 per cent of the value of single premium products, (2) all of a year’s premiums for annual premium products, and (3) adjusted value for products with premium payment durations of less than 10 years. The figure is calculated as follows: 10% Single Premium Insurance + 100% Annual Premium Insurance + Adjusted premium for Insurance with premium payment durations of less than 10 years.

2 With effect from 1 January 2016, MediShield Life premiums have been excluded from LIA statistics. New Business premiums refer to the premium due to the new business sold in the year, as well as incremental premiums from any repricing of plans, and change in age-band of the insureds.

3 These policies are designed to provide regular payouts during policyholders’ retirement years.

4 Financial Adviser (FA) Representatives include representatives of “related FA firms”. A related FA firm is a wholly-owned subsidiary of an insurance company.

5 Online Direct Channel is a new data point from January 2019, and it refers to “any web portal or application in the internet created, developed and maintained or operated by a life insurer, on which a client may purchase a life policy”.

6 DMS insurers are registered by MAS to conduct only non-CPF business and with minimum policy size.

 

Life Insurance Association, Singapore (LIA Singapore)

Established in 1962, the Life Insurance Association, Singapore (LIA Singapore) is the not-for-profit trade body of life insurance product providers and life reinsurance providers based in Singapore and licensed by the Monetary Authority of Singapore (MAS).

Vision and Mission

The vision of member companies is to provide individuals with peace of mind and to promote a society where every person is prepared for life’s changing cycles and for those situations unforeseen.

They are committed to being a progressive life insurance industry by collectively enhancing consumer understanding, promoting industry best practices, and through the association fostering a spirit of collaboration and mutual respect with government and business leaders.

Values underpinning the association and its members

Unified

in our resolve to deliver innovative solutions where every individual’s needs are best met.

Professional

in the way we conduct ourselves and in the counsel we give.

Ethical 

in ensuring our policyholders’ interests are managed with utmost integrity.

Fair        

in how we strive to provide favourable outcomes to both our policyholders and shareholders.

Open & honest

in all that we do to build an environment of trust and transparency.

Proactive

in the steps we take to give our people the skills and knowledge to provide sound solutions at all times.

For more information, please contact:

Pauline Lim (Ms.)
Executive Director, LIA Singapore
Tel: +65 6438 8900 / +65 9648 6407
Email : [email protected]

Louise Lam (Ms.)
Ogilvy Singapore
Tel : +65 6213 6986 / +65 9739 9863
Email: [email protected]

Amanda Chong (Ms.)
Ogilvy Singapore
Tel : +65 6213 7781 / +65 8200 5363
Email: [email protected]

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