SINGAPORE (Aug 6): Fewer people are buying insurance in the wake of a slowing economy in both Singapore and around the world, a recent study by the Life Insurance Association found.
The Protection Gap Study also found that people in Singapore have a mortality gap of 20% and a critical illness protection gap of 80%.
Speaking at a media briefing on Tuesday, Nishith Majmundar, Deputy President of the Life Insurance Association, said there was a 2% drop in the life insurance industry to $1.97 billion in 1H2019 from $2.02 billion for 1H2018.
According to the study, this was becaused people preferred savings over the protection afforded by insurance policies as insurance premium payments were perceived as a “loss”.
There is also an inherent expectation that others – such as the family or government – will bail one out during times of crisis, said Majmundar.
The overall decline in 1H2019 was brought on by a 22% drop in single premium policies, to $531.9 million, from the $677.7 million recorded in 1H2018.
This was mitigated, marginally, by a 7% uptake in annual premium policies from $1.34 billion in 1H2018 to $1.44 billion in 1H2019. Such a policy requires customers to pay premiums on over a period of time. A single premium policy, on the other hand, requires only a one-time payment.
Retirement policies were the most popular, registering a 78% increase in 1H2019. As at end June, a total of 25,757 policies were purchased, 11,252 more than the 14,505 policies purchased in 1H2018.
This accounted for some 12% of the total weighted premiums in 1H2019, nearly double the 6% it accounted for in 1H2018.
As for insurance providers, tied representatives -- someone representing products of one insurance company -- and financial advisors -- people advising policies by several companies -- made the most sales, accounting for 51.4% and 21.3% respectively.
Based on weighted premiums – based on 10% for single premium policies and 100% for annual premium policies - banks and tied representatives made the most commission, making up 38.8% and 33.7% respectively.
In its outlook, Khor says he “is not able to forecast how the insurance industry will perform for the full year” but adds that both he and his colleagues are maintaining a conservative outlook for the rest of the year, amid global uncertainty and a slowing domestic economy.
Meanwhile, given the rising number of people diagnosed with chronic illnesses at younger ages, the LIA will soon launch a protection calculator which individuals can use to assess their coverage needs, based on their risk levels, healthcare needs and responsibilities.
“We seek to help individuals here understand the importance of taking a long-term view and having their protection needs adequately met through ongoing public education efforts as well as the upcoming digital protection calculator,” says Khor Hock Seng, President of the LIA.
