Insurance Industry Statistics Q1 2011

Life Insurance Association of Singapore (LIA) has recently released statistics for the insurance industry in Singapore for the first quarter of year 2011. Such reports are published every three months and I always find myself eager to read and learn about the industry numerically.

I usually skip past most of the sales figures though. It’s usually the same thing: industry does well, lots of insurance policies are sold, and more people are getting insured – or so it seems. Sales has never been a good indication of how well Singaporeans are insured. In fact, a high sales figure may well mean that Singaporeans are buying overpriced policies that leaves them under-insured.

The most interesting statistic I look out for is under the section of Distribution Channels. People who have been following my blog will know that I have strong thoughts about the way financial products like insurance are sold and marketed in Singapore. While I expected tied agents’ share of the market to continue the trend of falling, I did not expect it to decrease so drastically to 48%, going below the symbolic 50% mark quicker than I have expected. Here’s a history of the statistics (percentages do not add up to 100% as there are other distribution channels classified as “Others”):

Q1 of Year Tied Agencies Non-tied FA Banks
2001 88% 2% 10%
2002 72% Not stated 26%
2003 Not stated Not stated 27%
2004 70% Not stated 26%
2005 69% Not stated 26%
2006 70% Not stated 23%
2007 71% Not stated 17%
2008 66% 5% 26%
2009 59% 11% 25%
2010 58% 13% 23%
2011 48% 12% 37%

Evidently, banks were the main culprit for the reduction in market share for tied agents, increasing very significantly from 23% to 37%. We will see if this is an one-off occurrence or if they can sustain it over the second quarter of this year. I believe this to be an “out of the frying pan and into the fire” scenario, as I feel that banks provide less financial advice than even tied agents. It does make for a good business environment for IFAs like myself, though. Non-tied FAs’ market share remain relatively stagnant, although maintaining the same percentage in a growing sales volume is still growth.

I have previously predicted that non-tied FAs will soon distribute all insurers’ products in 5 years’ time when tied agencies become a less effective sales channel for the insurance companies. Based on the current statistics, I think I can revise my prediction to be more optimistic – about 3 years before such distribution occurs, and about 5 years for the tied agency to become all but extinct.

Another interesting statistic is this – the life insurance industry paid out a total of $1.39 billion to policyholders, of which only $88 million was for actual claims. The rest were paid out as maturing policies – policies with cash value and savings elements. My goodness! People are buying insurance to save and invest instead of – you know – actually using it to insure themselves. A real classic example of why financial planning in Singapore is screwed up.

Thumbs up to keep me writing more!