Singapore Life Sees "Huge" Potential For HNW Life, Critical Illness Policy Market

Tom Burroughes

31 October 2017

The potential market for critical illness cover and term life policies in Southeast Asia is “huge” and a firm has broken into the relatively tight ranks of businesses providing these services is brimming with confidence.

In June 2017, the Monetary Authority of Singapore, the regulator, gave the green light to to be a fully licensed direct life insurer. In April, Singapore Life raised $50 million in its Series A funding round, with backing from shareholders such as Chong Sing Holdings FinTech Group Limited and IPGL Limited. It has also partnered with two reinsurers – Munich Re Group and Pacific Life Re Limited. (For more on the story, see here.)

Term life policies, which provide clients with the ability to leverage an up-front investment and in a tax-efficient manner, are a useful tool particularly for high net worth and ultra-high net individuals. With critical illness cover, meanwhile, the potential net is wider from a demographics point of view, Walter de Oude, chief executive, Singapore Life, told WealthBriefingAsia in a recent call. He spoke following the firm’s products rollout.

“We think there is massive potential for this market,” de Oude said.

“While Singapore has a lot of market penetration .)

With the term life product, it works in the following way: the provider takes a single premium payment of, say, $2 million from a client with $10 million; the money is effectively “loaned” by the client to the insurer, who uses the $10 million as collateral for the premium. The money is put to work and by the expiry of a policy, the total assets of the client can be doubled, to say $20 million. De Oude said he sees more of such policies, accounting for about $5 billion of new premium per year, coming out of Singapore.

As far as critical illness cover is concerned, clients pay premium to provide themselves cover for emergencies such as the need for income during a prolonged departure from the workforce caused by treatment for a condition such as cancer, for example. (A conference held by WealthBriefingAsia in Singapore last year explored the potential for wealth managers to add critical illness cover as part of their financial advisory offerings.)

For some time a barrier to people paying for critical illness cover is that it appears a hassle to set such policies up; terms and conditions can appear complex and some advisors may not even be fully aware of how valuable to clients such policies could be.

At Singapore Life, the firm makes a point of a relatively straightforward, online platform over which clients can answer questions about health and finances and be guided into selecting an appropriate policy. And at this point de Oude made a statement that might catch some readers as paradoxical: “When people are self-disclosing we find they are more honest than when using a specific advisor.” A reason for this is that an advisor might suggest to a client a particular answer in order to generate a sale, or get a particular answers.

The insurer is the first independent, local insurer of its type to have been licenced to do business in the Asian city-state since 1970s, de Oude said, arguing that barriers to entry in this relatively “narrow” marketplace are high.

Health and wealth
With growing understanding that health problems can be devastating for even the wealthiest persons if there aren’t risk mitigation systems in place, the critical illness coverage market has big upside potential in Southeast Asia, de Oude said.

“People need cover to take time off to do what they have to do,” de Oude continued. “We think people are massively under-insured for critical illness in particular,” he said.

“Traditionally, life insurers have made these things complicated; we’ve tried to make these things as simple as possible,” he said.

Independent financial advisors are realising that these policies are important for clients – they are a significant part of the distribution channel in Asia, de Oude continued.