Earlier this month, the Life Insurance Association, Singapore (LIA Singapore) announced their industry results for the first half of this year (January to June 2019).
We won’t bore you with things like weighted new business premiums, proportion of single vs regular premium plans, and par products. If you’re interested, you can check out the LIA Singapore 1H2019 industry results press release for yourself.
However, something did catch our eye in this otherwise routine industry results announcement. It was a new data point in the breakdown of distribution channels for life insurance products.
From January 2019, products sold by Online Direct Channels will be reflected, which 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”.
To be clear, this category does not include policies purchased directly from insurance companies, such as Direct Purchase Insurance or life insurance bought from brokers like MoneyOwl, even if these transactions were done online.
How Are Digital Insurers In Singapore Faring?
As you can see, Online Direct Channels account for 0.5% of the total number of new policies sold for 1H2019. According to LIA Singapore, this works out to 2,945, out of 584,741 in total.
In terms of weighted premiums value of new business, digital insurers account for 0.2%. In dollar terms, this works to $3 million, compared to $1.972 billion in total.
SingLife is the biggest (and possibly only) contributor to the Online Direct Channel sales. Launched in 2017, SingLife has raised US$50 million in 2017 and another US$90 million in July 2019, which brings its $3 million in new life insurance premiums for the first half of 2019 in stark relief.
As you can see, despite the fanfare and excitement over the potential of using technology to streamline operations and pass on cost savings to consumers, it appears that Singapore consumers haven’t quite been putting their money with digital insurers, despite the massive resources and investment of digital insurers.
Here are some reasons why digital insurers face such an uphill task in getting customers, despite the supposed advantages of convenience, cost, and digital marketing dollars.
#1 Life Insurance Is Sold Not Bought
We’ve all heard this common saying before that life insurance is most frequently sold, and not bought. Unless something happens in our lives, most of us don’t wake up and suddenly have the desire to spend money on life insurance.
Just as an exercise buddy can be helpful to keeping us on track for our fitness goals, many Singaporeans improve their awareness about the importance of insurance and retirement planning thanks to the efforts of financial advisers and the conversations they spark.
Digital insurers have to rely on customers making the conscious decision to visit their website, overcome the wish for instant gratification, and decide to commit to paying thousands of dollars in premiums over the next few decades. It’s a mammoth task.
#2 People Still Want Financial Planning Advice
Unlike more straightforward products like travel insurance, many of us would still prefer a proper financial planning session with a financial adviser we trust, in case we miss any thing.
We might think all we want is a term life plan, but may want a seasoned professional to either confirm that our decision is correct, or show us alternatives we might not have considered.
And to get the benefit of financial planning advice, we have two main choices: pay for fee-based financial advisory services from firms like Providend or buy insurance from a licensed representative of an insurance company or financial advisory firm.
#3 Branding Can’t Compare With The Heritage Of The Incumbents
In Singapore, all insurers are tightly regulated by the Monetary of Singapore. This means that we can have a degree of peace of mind that our life insurance policies will be honoured when the time comes for us to make claims.
However, we must also recognise the fact that despite their branding efforts, digital insurers do not have benefit of name recognition and trust that can only be built up over the years, through both market highs and recessions.
Compare this with incumbents like AIA, which celebrates its 100th anniversary this year, and other insurers that have a heritage that span more than a century or at least over multiple decades, the first digital insurer in Singapore is only 2 years old.
#4 Lack Of Truly Innovative, Superior Products By Digital Insurers
Singaporeans want the benefits that online marketplaces provide: ease of buying, having all the information easily accessible 24/7, and perhaps lower prices. Major insurers have responded by creating mobile apps, allowing downloading of benefit illustrations online, and even allow insurance policies to be purchased directly online
Digital insurers haven’t done enough to differentiate themselves and their products from the incumbent insurers. What makes a digital insurer’s life insurance policy’s better than the range of other products in the market, all of which have been fine-tuned and adjusted over the years after customer feedback, market research, and actual sales data?
Unless digital insurers can harness technology to truly offer something unique and superior (which they haven’t shown to be able to do), then their lacklustre showing would likely continue in the foreseeable future.
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