Decline hits Singapore unit-linked sales
Sales of unit-linked life insurance business in Singapore fell by 21% in 2016 with total premiums of S$465m APE compared with S$585m in 2015, ending the steady growth seen in recent years and reducing the five-year growth figure to only 6%
Single premium sales increased by 3% in the second half of 2016 but finished the year down 10% against 2015 at S$226m APE, although this represents a 41% increase since 2012. New regular premiums ended the year 29% down on 2015 at S$239m, contributing to a 14% fall over the last five years.
The fall in sales in 2016 coincides with the phased implementation of various measures implementing the Monetary Authority of Singapore’s (MAS) Financial Advisory Industry Review (FAIR). The next stage of implementing FAIR is the introduction of the spreading and capping of commission (SCC) rules that are expected to have a further negative effect on regular premium unit-linked life sales from this year.
Compared with the decline in unit-linked sales, the Life Insurance Association of Singapore (LIAS) reported that 2016 non-linked single premium new business increased year on year by 15% and regular premium non-linked business increased by 17%.
Total new business premiums for linked and non-linked life products in 2016 increased by 10% to S$3,286m APE, with investment-linked products accounting for a 14% share of the market by value compared with 19% in 2015. The ‘defined market segment’ of Singapore’s insurance industry, which is made up of just six companies including Friends Provident International, Generali International and Old Mutual International, accounted for only 3% of sales compared with 6% in 2015. The LIAS figures show that tied agents accounted for 37% of new business APE in 2016, down from 40% in 2015, with financial advisers increasing their share from 19% to 21% and banks up from 37% to 38%.
Downward spiral driven by regulatory changes
The Hong Kong and Singapore new business figures for 2016 suggest that unit-linked life sales will decline rapidly in jurisdictions where regulators act to deliver better outcomes for customers.
New business levels of traditional life company savings and investment products will fall in direct correlation to the extent of the changes imposed by individual regulators to increase product transparency and disclosure, and to restrict the commissions that advisers can take from products and funds (or ultimately ban commissions in favour of fees).
It will be interesting to see if the Insurance Authority in the UAE is prepared to sacrifice some of its consumer protection ambitions in order to sustain the business models of the life companies and advisers that it regulates.
One key factor is that modern-day multi-currency investment platforms now offer a secure online alternative to traditional unit-linked life products, enabling advisers and their clients to access a huge choice of funds without the cost of an often unnecessary life insurance wrapper. However, in jurisdictions where there isn’t a single regulator overseeing the retail financial services market, such as the UAE, perhaps such factors won’t carry too much weight.
