Uptake of new direct-purchase insurance plans still low

Singapore

WHEN it comes to buying insurance, consumers still prefer seeking financial advice to buying direct-purchase plans - even if direct-purchase plans mean lower premiums, since neither financial advisors nor commissions are in the picture.

Khoo Kah Siang, president of the Life Insurance Association (LIA) Singapore, said on Thursday that interest in direct-purchase insurance (DPI) plans - the suite of basic life insurance products sold without financial advice - has been lukewarm. Since its launch last month, the 12 life insurers offering DPI have received enquiries, but recorded a "pretty small" volume of purchases, he said.

Speaking on the sidelines of a media briefing during which LIA announced industry results for the first quarter of 2015, Dr Khoo declined to give exact DPI sales numbers when asked, saying: "It's still too early to tell."

Seah Seng Choon, executive director of the Consumers Association of Singapore (Case), told The Business Times: "This is a new initiative and consumers will take some time to warm up to this new way of buying insurance."

He suggested that more publicity be undertaken to raise consumers' awareness, and called for products such as endowment policies to be added to the list of coverage plans sold this way.

On MediShield Life, the beefed-up national health insurance programme to be launched this year, replacing MediShield, Dr Khoo said that since last month, five insurers providing Integrated Shield Plans (IPs) have been sending information to policyholders about MediShield Life and the additional benefits they can get if they purchase IPs. (IPs comprise basic MediShield coverage and additional coverage from private insurers.)

The Ministry of Health has also been working with the industry to design a standardised IP, based on coverage for treatment in Class B1 wards. The standardised B1 plan will be unveiled in the first half of 2016, after MediShield Life debuts end-2015.

Dr Khoo said the details of the standardised IP are not yet ready because it takes work to ensure that something as large-scale is rolled out smoothly; he added, however, that "decent progress" is being made on the plan.

As for the industry's first quarter results, Singapore's life insurance business dipped 1 per cent to S$649.4 million in total weighted new business premiums. The marginal change came from a 22 per cent surge in sales of single-premium products being offset by a 9 per cent fall in sales of annual-premium products.

Sales of single-premium products for the quarter hit S$204.4 million. The LIA said the growth in this area, coupled with a 4 per cent rise in the total sum assured, has put the industry in good stead for the year ahead.

Totalling S$445 million, the sales for annual-premium products fell as the first quarter of 2014 was benefiting from the spike in premiums from the IP re-pricing in 2013; Q1 2014 will be the last quarter to feel the effect of the higher premiums.

As at end-March, the industry paid out S$1.41 billion to policyholders and beneficiaries. Sales of IPs slowed down as consumers took a wait-and-see approach towards buying new policies. This led to a 49 per cent fall in new health insurance premiums.

The LIA has made preparations for the smooth implementation of MediShield Life its priority this year. It will also work with the government to improve public education on health insurance, MediShield Life and IPs.

At its annual general meeting on Wednesday, eight members were elected to a new management committee which replaces a 21-member one. The smaller panel aims to be nimbler in decision-making.

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