The Evolving Landscape of the Insurance Space in Singapore 2019
The life insurance industry in Singapore grew by 3% in 2018 where new business premiums clocked SG$4.2 billion. Notably, there was marked an increase in demand for premiums as well as stability in the performance of the existing premiums. However, this growth is also indicative of the changing landscape of the industry brought about by constant innovation.
The life insurance market is dominated by premiums that target protection and health coverage. Notably, this is driven by the huge demand for such products. Interestingly, the Life Insurance Association (LIA) said in a release that demand for health coverage and protection products strengthened during the year. Also, insurance for new businesses registered 7% growth compared to the previous year.
An emerging segment of mass affluent and millennials leading the charge for change
However, this growth is not going to mask the dynamism that is taking shape in the industry. In particular, the Investment-Linked Policy (ILP) sector is witnessing a fundamental shift from fixed ILP products to ones that extend flexibility and liquidity to policyholders. This is in response to the changing needs in the market. Notably, millennials and the mass affluent are flooding the insurance market with a preference for products that offer much more flexibility than the traditional setup.
Tokio Marine Life Singapore (TMLS) is among the first movers in the industry to introduce flexible products that cater to the emerging segment of policyholders. Notably, this new segment which includes the mass affluent and the millennials takes a different approach to financial planning.
Speaking in a telephone interview TMLS’ Chief Transformation Officer, Bevan Cheong, said the emerging segment of the market gives particular attention to what is going to happen to their lives.
“They always think about financial planning in terms of life stages, what’s going to happen next in their lives, whether its career, whether its marriage, buying a house, buying a second house, kids coming along,” Cheong said. “They want a product that meets some of these needs, but at the same time, they struggle to pinpoint exactly when these milestones are going to happen.”
Flexibility and liquidity
In this light, TMLS is launching products that cater to these needs. The insurer said in a release that the new products are targeting unmet needs in the insurance sector. As per the statement, TMLS will begin offering two types of ILPs that deliver the flexibility that millennials are demanding. Notably, the firm is offering TM Atlas Wealth as well as TM Atlas Classic.
The TM Atlas package provides flexibility as well as liquidity so that policyholders can get access to their money if and when they need it. Particularly, the inspiration behind the TM Atlas policy is the emerging trend of consumers juggling multiple priorities. As such, they are more likely to want to review their plans as need might demand. Notably, the policy will have such customers covered in that they can withdraw the sum that they need to accomplish certain milestones at different stages of their lives.
New regulatory requirements affected premium sales
In the traditional ILP policies, once a policyholder takes up a premium, they will have to wait for maturity access the funds. This means that if one takes a 10-year policy, one’s funds will be locked up until the elapsing of the period. Obviously, this implies that such kind of money will not be available to the consumer. Therefore, it is this illiquidity that is fueling the need for innovative products like the TM Atlas policy.
According to the Life Insurance Association (LIA), premium sales in the last quarter of 2018 dropped significantly. Notably, between October and December 2018, premium sales slid to S$308.2 million from S$430.5 million garnered in the previous quarter. Further, the sales fell 45% year-on-year, with premium sales for the whole year tanking 3%.
In particular, the marked fall in premium sales was as a result of a conflation of various reasons including regulatory changes. Notably, the regulators require that insurers reduce the sales charge for purchases of products from the Central Provident Fund Investment Scheme (CPFIS). Further, the insurance market witnessed a number of turbulences including subdued demand for premium sales. However, another reason that sticks out is the fact that consumers in the market are not getting the products they desire.
Bonuses to encourage uptake by potential policyholders
Therefore, it is clear why TMLS went ahead of the Atlas Policy. For both Atlas Wealth and Atlas Classic, customers will enjoy Initial and Loyalty bonuses. Under Atlas Classic, policyholders will receive up to 110% Initial bonus of annualized regular premium which will be paid out over the first five years of joining the program. Further, the Loyalty bonus will comprise of up to 0.5% per annum payouts for the rest of the period after the first five years.
The Atlas Wealth policy will include an Initial bonus where customers will access up to 97.5% regular premium annualized over the first five years of joining. Notably, customers will enjoy the bonus only after TMLS receives their premium payments. Also, policyholders will access a loyalty bonus to the order of 0.3% every year. This will be calculated according to the accumulated units account value. What is more, the break-even yield for the policies is fair and allows customers the ability to access sufficient liquidity.
Feedback is encouraging so far
Interestingly, Cheong said that the market reception of the products is encouraging. Further, the company anticipates requests for the policy to begin trickling in soon as consumers get to understand the products well. Also, advisors are showing a good level of interest in the products.
“We’ve gotten quite a lot of positive feedback from advisors as well. They’re asking a lot of questions and looking to study the details of this product, and that’s a good sign, that there is genuine interest in this product,” Cheong noted.
This is evidence that the market is shifting fundamentally. Perhaps, this could be one of the reasons the industry record poor numbers during the last quarter of 2018.