Launch of life insurance online portal spells lower premiums

Singapore

SOME life insurers are sparing no effort in wooing customers with competitive pricing of premiums, now that consumers can compare more than 200 life insurance products that are available on the retail market in a few easy steps through an online portal, compareFIRST (www.comparefirst.sg).

Launched on Tuesday, the user- friendly Web portal allows consumers to drag-and-drop to compare key features and premiums of four classes of products - term life insurance, whole life insurance, endowment policies, as well as a new suite of basic life insurance products known as direct purchase insurance (DPI).

On Tuesday, 12 life insurers started selling their DPI products which comprise term life insurance, whole life insurance and optional critical illness riders.

These are available through the insurers' customer service counters. Of the 12 insurers, only Etiqa is selling their DPI via their website.

Premiums of DPI products are lower than comparable life insurance products as they are sold without financial advice, so no commission is charged.

For example, a 35-year-old consumer who is a non-smoker (male or female) looking to purchase a term life product with a coverage of S$400,000 up to age 65 or for up to 30 years, with an option to renew or not, will find that most DPI products are cheaper compared with the rest of the term life products online.

To boost sales, some insurers have adopted a competitive pricing strategy.

Using the same parameters in the example above, a check on compareFIRST found that AXA Life offered term life products with some of the lowest total premiums across the board. They range from S$13,272 to S$18,816 for DPI term life, to between S$17,840 and S$25,235 for typical term life policies.

Aviva Singapore and Zurich Life were also among those which were more competitive in terms of total premiums for DPI term life products for both sexes.

The difference in total premiums between the cheapest and most expensive DPI term life products came up to between S$15,698 and S$16,075.

Total premiums for AIA Singapore's DPI term life products were the most expensive, with amounts of S$28,970 and S$34,891 for female and male consumers, respectively.

Previously, the insurers had raised concerns that consumers would be fixated on pricing of products, which could in turn drive down premiums and result in an unsustainable business.

Said Khoo Kah Siang, president of the Life Insurance Association Singapore (LIA): "As life insurance is a long-term contract, insurers need to consider the adequacy of their pricing to ensure that the premium rate is sustainable and that they remain financially strong in the long run."

He noted that compareFIRST therefore includes the credit ratings of each company to give an indication of their financial strength.

Dr Khoo also welcomed the healthy competition within the industry, but he noted that individual life insurers will have to be strategic in ensuring that they provide value to consumers. This means they not only need to look at premium and coverage, but also services provided to customers.

Greater competition will also mean consumers pay lower premiums, said Seah Seng Choon, executive director of the Consumers Association of Singapore (CASE), who added that insurers have to "operate more efficiently to reduce cost and enhance benefits to consumers".

And one way to do so, he said, is for insurers to compete on innovative packaging by throwing in rider plans that enhance coverage.

Mr Seah also urged consumers to always read through each DPI factsheet and checklist carefully to ensure that the policy best suits their needs, instead of making their choice based on the yearly premiums.

The Web aggregator and DPI are part of a collaborative effort by the Monetary Authority of Singapore (MAS), the Life Insurance Association Singapore (LIA) and the Consumers Association of Singapore (CASE), to encourage greater transparency and efficiency in the distribution of life insurance and investment products, as well as empower consumers to make informed decisions. The two initiatives were among several recommendations made by the Financial Advisory Industry Review (FAIR) panel in 2013.

On the Web portal, consumers can also access general information on a fifth class of products - investment-linked plans - although no comparisons can be made.

To guard against mis-buying, the regulator has set a S$400,000 cap on the sum assured, with a sub-limit of S$200,000 for whole life DPI, per person per insurer. The minimum sum assured has been set at S$50,000, regardless of term life or whole life DPI.

"As life insurance is a long-term contract, insurers need to consider the adequacy of their pricing to ensure that the premium rate is sustainable and that they remain financially strong in the long run."

Khoo Kah Siang, president of the Life Insurance Association Singapore (LIA)