More buying life insurance online, but agents still preferred: LIA

ONLINE purchases of life insurance products have jumped to account for 40.7 per cent of all new policies taken up in the first nine months of 2022, but agents still account for the bulk of high-premium policies.

The Life Insurance Association, Singapore (LIA) shared on Thursday (Nov 10) that 603,116 online purchases of life insurance policies were made in this period. This is a significant jump from the 370,528 recorded in the equivalent period a year ago. 

However, direct online purchases only amounted to S$106 million – or 2.7 per cent of the S$3.87 billion weighted new business premiums accrued by Singapore’s life insurance industry in the first nine months of this year. 

Bank representatives ranked as the preferred channel for high-premium insurance policy purchases. Despite accounting for only 6.1 per cent of new policies, they contributed S$1.4 billion, or 35.1 per cent, of weighted new business premiums for the period.

Tied representatives came in second, contributing 30.8 per cent of new policies and accounting for 32.6 per cent of new business premiums. Meanwhile, financial adviser representatives brought in 18.9 per cent of new policies and made up 26.5 per cent of weighted new business premiums.

Overall employment in the industry rose 4.8 per cent year to date, bringing Singapore’s life insurance workforce to 9,145 employees. As at Sep 30, a total of 14,353 representatives held exclusive contracts with companies that operate a tied-agency force.

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In total, 1.5 million new policies were taken up in the first nine months of 2022, representing a 12.8 per cent year-to-date increase. This was despite the industry posting a fall in weighted new business premiums to S$3.87 billion, 5.9 per cent lower than the S$4.1 billion recorded a year ago.

Single-premium products saw a 31.7 per cent fall in weighted premiums in the third quarter of FY2022 compared to the same period last year. The value fell to S$514.2 million from S$752.9 million, leading to a 3.9 per cent year-to-date dip in single weighted premiums.

The primary cause of the decline is global market volatility affecting investment-linked products, said LIA. It added that rising interest rates intensified the competition for shorter-term endowment products.

Investment-linked products accounted for 22 per cent of the industry’s new sales. Participating and non-participating products made up 43 per cent and 35 per cent respectively.

Participating funds pool premiums paid under participating policies and policyholders receive “dividends” or “bonuses” through investment profits made by the life insurer.

Policyholders of policies within non-participating funds are not entitled to profits the fund makes. Instead, a linked fund pools premiums paid under investment-linked portfolios and invests in assets. Policyholders can sell their units in such a fund to make a profit if the fund’s investments perform well.

The mix of investment-linked, participating, and non-participating products in 9M FY2022 has remained stable from the year before, said LIA.

While the insurance industry saw a notable dip in weighted premiums for single-premium products, there was an uptick in annual premium product purchases.

Sales of annual premium products rose by 7.2 per cent in Q3 to S$724.1 million, from S$675.1 million in the same quarter the year before. This narrowed the year-to-date gap in annual weighted premiums – it currently stands at S$1.9 billion, compared with S$2.1 billion in 9M FY2021.

Among the new business premiums acquired in 9M FY2022, individual health insurance products contributed S$255.8 million, down 4.6 per cent from S$268.2 million a year ago. 

Nonetheless, premiums for integrated shield plans (IPs) and riders rose quarter on quarter by 13 per cent to S$86 million from S$76.1 million. This indicates that IPs remain a priority health insurance product, said LIA.

The association also reported that insurance providers have been paying out more claims year on year. Between January and September 2022, the industry paid out S$8.7 billion to policyholders and beneficiaries, up 14.8 per cent from the claims paid out in the equivalent period in 2021.

Of this amount, S$7.6 billion were for policies that matured, while the remainder went to claims for death, critical illness, and total and permanent disability.

LIA president Khor Hock Seng expects the business climate for the life insurance industry to remain challenging in the short to medium term. 

Despite highlighting concerns of continued market volatility and inflationary pressures, he remains confident of the resilience of Singapore’s life insurance industry.