Posted on Feb 14, 2012 by Sergio Ulloa
Singapore's life insurance industry has been able to weather volatile global capital markets to great affect this past year, with new business premiums crossing the S$2 billion threshold for the first time in 2011 according to a new report.
In their year-end dataset
released this week, the Life Insurance Association of Singapore (LIA) revealed that the country's life insurance industry grew by 22 percent in 2011. The LIA is a non-profit trade body licensed by the Monetary Authority of Singapore (MAS) that works to represent the interests of 16 major life insurers and 3 life reinsurers in the Southeast Asian country. This year represents the association's 50th anniversary.
According to the LIA, sustained growth over four consecutive quarters enabled the Singaporean life insurance sector to realize S$2,007.4 million (US$1.6 billion) in 'weighted' new business premiums during the 2011 reporting period, up from the S$1,651.3 million (US$1.3 billion) recorded in 2010. The LIA calculates the weighted new business premium figure by adding 10 percent of the Single Premium Index (SPI) to 100 percent of the Annual Premium Index (API), with an additional modifier for premium payment terms of less than 10 years.
Despite this considerable year-on-year progress
however, the LIA noted that new business growth did in fact decline slightly for Singapore life insurers during the fourth quarter. This period was marked by a strong divergence in demand between annual-premium and single-premium life insurance products in Singapore. From October to December 2011, sales of annual-premium products, which are insurance plans with long-term savings components, reached S$386.4 million (US$30.9 million), a 19 percent annual increase. Single premium businesses, or short tenure plans, meanwhile experienced a sharp 23 percent annual decline to S$156.5 million (US$124.7 million), according to the LIA, quite a turnaround from the 16 percent growth rate experienced last quarter. Combined, sales of both types of products which reached S$542.9 million (US$432.7 million), yielded only a 3 percent growth rate for Singaporean life insurers over the same fourth quarter period last year.
Singapore's life insurance sector is divided into companies with normal licenses and those classified as 'defined market segment' (DMS) insurance companies. DMS insurers are specifically registered with the MAS to conduct only non CPF-related business (the country's mandatory savings and retirement fund) and are required to stay within certain minimum policy sizes. The following multinational insurers are currently DMS classified companies in Singapore: Friends Provident International, Generali, Royal Skandia, Transamerica and Zurich International. According to the LIA statement, these DMS insurers have contributed 5 percent of new sales for the year, while insurers holding normal licenses represented the other 95 percent.
Up to the end of December 2011, Singapore's life insurance industry paid out a total of S$3.69 billion (US$2.94 billion) to associated policyholders and beneficiaries. Of these payouts, the LIA detailed that only S$467 million (US$372 million) came as a result of death, critical illness or other disability claims, while the remaining S$4.74 billion (US$3.78 billion) were for policies that matured. The association also noted that, as of September 2011, Singapore life insurers were managing assets worth approximately S$118.3 billion (US$94.3 billion), up 1 percent annually. Assets of non-linked business accounted for S$96.4 billion and investment-linked policies made up the remaining $21.9 billion (US$17.45 billion) in assets. In terms of overall manpower, LIA member companies in the Singaporean life insurance sector now employ 5,147 office staff and 13,221 sales representatives in total.
In explaining the updated insurance market statistics, Mr. Tan Hak Leh, President of the Life Insurance Association (LIA), acknowledged that while the performance of Singapore's insurance sector would continue to be impacted by global economic volatility, the rising protection and investment needs of Singapore's middle-class population should be able to provide local insurers with enough momentum to achieve sustainable premium growth in their home market going forward. The fact that Singapore's life insurance industry has delivered four consecutive quarters of growth is evidence of this. "The overall results point to the fact that the industry remains in a strong position. The economy as well as consumer sentiment went through uncertain times during 2011, and it's good to note that the industry has remained resilient. We owe this to a combination of the resourcefulness of our industry in delivering pertinent products and quality servicing and consumer confidence in life insurance solutions for their financial plans." Mr Tan Hak Leh commented.
In addition to life insurance data, the LIA year-end report managed to highlight several other trends occurring in the Singaporean insurance market during 2011. According to the report, new health insurance sales grew by 6 percent last year, bringing in S$165 million (US$131.5 million) in premiums. Of these new health insurance sales, the majority, 88 percent, went into Integrated Shield Plans and associated riders, Singapore's equivalent of Medicare insurance. This growth in new health insurance sales has been attributed to rising medical costs in Singapore and increased awareness amongst the populace of greater medical protection policies. The LIA was pleased to note that, as of December 31 2011, over 2.48 million people are now covered by health insurance in Singapore, well over half the island's population, with paid up premiums totalling S$877 million (US$698.9 million). "It is assuring to note the steadily increasing take-up rate for health insurance over the past three years. Consumers are taking steps in the right direction to get health insurance coverage to meet rising medical costs," Tan added.
The report also detailed several distribution channel trends occurring in the Singapore insurance market. The LIA noted that the country's 13,000-strong tied agency force remains the main avenue of distribution in Singapore. Agents have contributed to nearly half of all the new business written by life insurers, bringing in approximately 49 percent of all weighted new business sales in 2011, according to the LIA. This performance was followed by an uptick in the number of insurance products and services sold through banks, commonly referred to as bancassurance. Indeed, according to the LIA, bancassurance now accounts for around 34 percent of insurance sales in Singapore, up 7 percent on last year's report. Financial advisers in the country meanwhile have contributed 14 percent towards new insurance sales this year, while other channels, including direct sales channels, have made up the remaining 3 percent of business.
The LIA furthermore observed that Singapore consumer preferences
over different types of life insurance products have remained fairly consistent over the past few years. Participating (par) whole-life insurance products are the most popular policies, making up 52 percent of new sales, with non-participating annuities and investment-linked products splitting the remaining business between them, at 25 and 23 percent of recent sales respectively. Singaporean consumers have consistently demonstrated a clear preference for the dividend options that mutual life insurance companies can provide.
In the concluding remarks, LIA President Tan Hak Leh recapped that during these volatile global economic times, the demand for robust long term planning and savings solutions increases, and it will incumbent on Singapore's insurers to adequately meet and capitalize on these needs. "Amidst continuing global economic uncertainties, it is critical for life insurance companies to remain vigilant and proactively manage their business to safeguard the long-term financial soundness of the industry," said Mr Tan.
Founded in 1962, the LIA works to further develop Singapore's life insurance industry. Since its establishment, the organization has launched public education initiatives, improved industry guidelines, conducted valuable market research, and held numerous conferences and seminars for the professional development of the industry.