AIA Singapore has announced a new initiative to improve customers’ understanding of their insurance policies and enhance financial literacy as part of broader efforts to address Singapore’s protection gap.
This program, which aims to encourage Singaporeans to obtain adequate coverage, comes at a time when the life insurance sector is experiencing significant growth.
A recent survey commissioned by AIA Singapore found that more than 40% of customers are not fully familiar with the details of their insurance policies.
The study also revealed that many customers tend to skim through policy documents, citing reasons such as the complexity of the information, time constraints, and the convenience of relying on insurance representatives for advice.
Irma Hadikusuma, chief marketing and proposition officer at AIA Singapore, said that clear communication is essential for financial literacy – the initiative’s goal.
“Minimising jargon in our policy documents and simplifying them will enable everyone to better understand what their policies cover and don’t cover, allowing them to identify their protection gaps,” she said.
The launch of this initiative takes place against the backdrop of a significant protection gap in Singapore.
According to the Life Insurance Association of Singapore’s (LIA Singapore) 2022 Protection Gap Study, there is a 74% gap in critical illness coverage and a 21% gap in mortality coverage.
The protection gap is particularly pronounced among young adults aged 20 to 24 and recent graduates, who, despite showing interest in purchasing insurance, often lack the knowledge needed to make informed decisions.
The survey also highlighted that using plain language in policy documents boosts consumers’ confidence in making independent insurance purchases.
Hadikusuma said AIA Singapore’s latest initiative, which complements its ongoing efforts to enhance the skills of its insurance representatives, is designed to empower customers.
“This initiative serves as an avenue for us to enable our customers to proactively protect themselves against financial uncertainties – especially amid rising costs of living and healthcare,” she said.
AIA Singapore’s initiative will be implemented in phases, starting with revisions to the AIA HealthShield Gold Max (AIA HSG) policy materials.
In parallel with AIA Singapore’s efforts, the overall life insurance sector in Singapore has seen robust growth in the first half of 2024.
The sector reported S$2.86 billion in new business weighted premiums, marking a 30.4% increase from the previous year, according to the LIA Singapore.
Growth was noted across both single-premium and annual premium policies, with single-premium policies reaching S$918 million and annual premiums totalling S$1.94 billion during the first six months of the year. Group life and health insurance premiums rose by 11% to S$2.4 billion, while individual health insurance premiums increased by 7.1% to S$220.7 million.
Consumer behaviour has also evolved, with tied representatives, bank representatives, and financial advisers driving the majority of policy sales. At the same time, there has been a noticeable shift toward online direct channels and non-intermediated sales.
The total sum assured by the industry reached S$70.2 billion, a 6.7% increase, with financial advisers contributing S$27.5 billion. The sector also recorded a substantial rise in claims payouts, disbursing S$10.96 billion in the first half of 2024, an 82.8% increase from the previous year.
