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Singapore Insurance Market – Boom or Bubble about to Burst?

Singapore Insurance Market – Boom or Bubble about to Burst?

05-04-2016
Submitted by global_admin on Tue, 04/05/2016 - 14:29
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The past few years have been exciting times for the Singapore Life Insurance market, for example, banks having exclusive partnerships with insurance providers and new players setting up shop in Life insurance. Even as I write, new entrants continue to eye the Singapore scene.

The DBS-Manulife partnership, which went live on 1 January this year dominated news in the market for Q3/4 last year. Additionally, Standard Chartered Bank renewed its 15 year region wide tie up with Prudential Assurance in 2014, while Citibank entered into a US$ 1 Billion agreement with AIA in 2013. Etiqa Insurance took over Prudential as Maybank’s exclusive distributor and we saw the entrance of China Life Insurance last year. Sounds like a booming market? Is it a case of everything you touch turns to gold for Insurance providers? However, 2015 also bade farewell to 2 international firms - Zurich life insurance and Standard Life insurance who cited regulatory changes that impacted profitability as one of the reasons for their exit from Singapore.

The LIA of Singapore recently released its industry performance for 2015 with 14 per cent increase in new business and almost $3 billion in new business premium. With a bumper crop of insurers vying for a slice ofthis pie, what does the future hold for insurance in Singapore? Are we in a market boom or is this a bubble that is about to burst?

Rapidly changing regulatory landscape 
The introduction of the Financial Advisory Industry Review (FAIR) 3 years ago sought to raise industry standards and bring about more transparency in terms of the products and sales process. While this was on the whole, welcomed in the industry - which viewed increased regulations as a step in the right direction - it also led to an exodus in sales talent, especially in the Banking segment where sales commissions were most drastically cut.

Changing business model - direct purchase 
One of the key recommendations from the Monetary Authority of Singapore (MAS) was the introduction of direct purchasing for insurance products. While the majority of insurance professionals we spoke to felt that Singapore is not ready for such a model, a number of companies have expressed interest in creating a direct purchase model for the life segment to both combat rising operating costs and bypass the problem of attracting and retaining talent.

High net worth landscape - demand for specialists
The demand for specialist talent in the high net worth segment continues, especially in the sales segment, albeit at a slower pace. While employers remain open to strong specialist profiles, the increasingly uncertain market also means tighter recruitment criteria such as:

  • Stable profiles - movements within 1 - 1.5 years are usually scrutinised and some employers have been known to request for proof of job performance / track records.
  • Strong track record - this relates both in terms of sales performance but also career progression that makes sense. For instance, opportunist candidates who make the leap for a small increment in pay will find the current market challenging.

2016 and beyond
Both DBS and OCBC declared a bumper year for their Bancassurance teams last year while Manulife found strong demand for its Universal Life product launched last year. Looking forward, market sentiments remain uncertain in the short term; until we realise the full impact of the regulatory and market changes impacting the market, the outlook remains conservative. However, with a low life insurance penetration rate of approximately 4%, there's still tremendous potential in the Singapore market, for those insurers that can get it right.

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