Insurance has always been a hot-button issue in Singapore. Primarily, it’s because every single individual requires insurance protection, but also because of prevalent misconduct in the industry leading many to incur hefty financial losses.
This has led the government to introduced CompareFIRST – a gateway for consumers to learn about their insurance needs as well as to compare the costs of getting common insurance policies from the main insurers in Singapore.
The Life Insurance Association (LIA), with members comprising the 22 life insurers and seven life reinsurers, is mainly responsible for charting the direction of the life insurance industry in Singapore.
Yesterday, it released its half-year 2018 results which highlighted five interesting things happening in the life insurance industry.
# 1 People Are Buying More Life Insurance Coverage
Just as recently as the 2nd quarter of 2018, the LIA released new statistics highlighting that people in Singapore still face a mortality and critical illness protection gap of close to $900 billion.
While the gap could still remain significant, it would seem that people are starting to heed this gap with a record premium, of nearly $2 billion, collected in the year-to-date for life insurers. This amount trumped preceding periods in 2017 and 2016 by 20% and 33% respectively.
This brings the total sum that people in Singapore are assured for to over $66 billion, which is 19% higher than it was at the same time last year.
Several factors could have contributed to this, including increasing financial understanding and literacy among people in Singapore, as well as better communication of the problem and sales and marketing efforts by agents and life insurers.
# 2 Non-Participating Life Insurance Policies Continue To Be More Popular
While people in Singapore were spending more on insurance, and more on each type of insurance, the market share of non-participating policies continue to be more popular than participating policies. Even investment-linked policies seem to be getter a larger slice of the pie.
For those not familiar to insurance lingo, non-participating policies tend to be term insurance, where policyholders do not get bonus returns from a fund performance or have a maturity value at the end. For these reasons, they tend to be cheaper than participating policies.
Non-participating policies seem to be getting more traction, which may point to more people wanting to get exposure to investments – either via linked policies (which also grew in market share) or on their own (buy term, invest rest).
# 3 Investment-Linked Policies Bucked Recent Declining Trend To Shoot Up
Back when we attended this briefing in 2016, it was highlighted that premium from investment-linked policies were actually declining. This year, as we can see from the same pie chart above, we investment-linked policies has made a strong come back in the past two years.
A spokesperson at the LIA briefing mentioned that this could have been due to the markets looking on the up in the past few years, including the first half of 2018. However, he also mentioned that economic challenges may be felt in the coming quarters.
# 4 Direct Purchases Of Life Insurance Are Still Negligible
With the proliferation of digital in our lives, it feels strange that it doesn’t play a bigger role in the purchase of life insurance policies, which is an incredibly important part of our protection needs.
When we quizzed the folks at LIA why this was the case. The main gist of it was really because people never just thought of suddenly buying insurance in the past, and they still don’t suddenly think of buying life insurance now.
The short version is that we have to be actively sold insurance – by agents (here’s the long version). In the table below, we can see that insurance bought directly or via digital platforms aren’t a large enough to warrant its own segment – they’re likely clumped under the “Others” segment.
Another interesting point to note is that Independent Financial Advisors (labelled as FA Representatives below), have seen their market share of sales increase against Tied Representatives (who sell insurance primarily from one company). On the other hand, bank Representatives has seen their market share dip the most.
# 5 More People Are Being Hired In The Life Insurance Industry
Headcount for both Tied Representatives and employees increased by 3% and 12% respectively. One question on everyone’s mind was – shouldn’t automation/ digitalisation/ technology mean that headcount should be reducing?
A portion this increase could be accounted for due to the higher number of policies being sold. In terms of productivity, each Tied FA brought in more in terms of Total Weighted Premiums on average in this period compared to last year.
A higher headcount for employees was mainly due to handling compliance with new regulations as well as for new areas of expansion such as digital and data analytics.
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