After a decline for the sector in its last financial report for the year, Life Insurance Association (LIA) president Dennis Tan (pictured above) has laid out the association’s plans for addressing 2024’s challenges.
In the first part of his interview with Insurance Business Asia, Tan discussed his “insightful” first year at the helm. Now, Tan sets his sights on the important trends for the coming year, especially as challenges and risks continue to evolve in Singapore’s life insurance sector.
Earlier this year, Singapore announced the establishment of four “systemically important” insurers, a new framework which includes AIA Singapore, Income Insurance, Prudential Assurance Company Singapore, and Great Eastern Life Assurance Company.
These insurers and their classification mark a significant development as it will subject these firms – otherwise known as domestically systemically important insurers (D-SII) – to elevated regulatory standards and closer supervision.
Tan noted that this designation will ultimately benefit and protect the interests of consumers and affirm Singapore’s position as a global financial hub.
“The D-SII framework is a positive step in ensuring the continued stability and resilience of the life insurance industry across more generations to come, especially given the significant consumer base of the all four D-SIIs combined,” he said. “This move will further minimise the potential of systemic risks that may impact a large group of consumers in Singapore.”
As a premier financial hub, Singapore is at the forefront of any major developments towards sustainability, with net-zero goals often a focus. Tan said that LIA is committed to the country’s net-zero transition goals.
“The Singapore government has set a target of achieving net-zero emissions by 2050,” Tan said. “This is expected to have a significant impact on the life insurance sector, as insurers will need to invest in sustainable assets and develop new products and services that support the net-zero transition.”
He said progress is underway with individual member companies also setting their own sustainability goals.
The implementation of the new financial standard, IFRS 17, was also a hot topic across the industry this year.
Tan said that LIA will continue to work with member companies on its adoption as the association works towards greater consistency across the industry. Tan also said that LIA is working on ways to minimise the new standard’s impact on affected businesses.
“The implementation of IFRS 17 is intended to make financial statements of insurers more relevant, comparable and transparent3 for all stakeholders and investors,” he said. “There are significant changes required, and we expect that it will be an ongoing process to get to the level of consistency for reporting across all insurers.”
New business premiums for the life insurance sector in Singapore took a hit in half year results, especially compared to the previous period in 2022.
Addressing this, Tan said these results are from a drop in single premium policies amid macro-economic uncertainties.
“This is not unique to the life insurance industry, as reflected in Singapore’s growth forecasts revised downwards for the second half of 2023 because of continued downside risks in the global economy, inflation and ongoing geopolitical tensions,” he said. “In August 2023, the Ministry of Trade and Industry (MTI) revised Singapore's 2023 gross domestic product (GDP) growth forecast to a range of 0.5% to 1.5% from the previous projection of 0.5% to 2.5%.”
There were some positive results.
Tan pointed out that annual premium policies grew by 26.3% as the sector renews its focus on protecting consumers. He expects to see this continued uptake for the rest of 2023 as consumers continue to prioritise their healthcare needs and take steps to close their protection gaps.
“The industry is also exploring initiatives and taking actions to better address the protection needs of people in Singapore based on insights gleaned from the Protection Gap Study 2022,” he said.
Tan said the study found that there are opportunities to enhance the understanding and reach of insurance policies through product innovations and simplification of policy materials.
“There is also the adoption of a customer profile and needs-based understanding approach to develop tailored customer segment-led propositions, product solutions and distribution approaches aimed at supporting specific groups with medium to high protection gaps,” he said.
Tan said the sector also aims to boost consumer awareness and understanding about protection through public education initiatives.
“Lastly, we want to make it easier for underserved members of the public (e.g. platform workers) to reach accessible touchpoints to better understand and address their protection and financial planning needs,” he said.
The increased adoption of artificial intelligence (AI) to bolster technological capabilities has also been on Tan’s radar.
“AI – alongside data analytics, predictive modelling, and machine learning – has emerged as powerful tools that equip underwriters to analyse vast datasets effectively, enabling them to make more informed decisions when assessing risks,” he said. “While the life insurance industry has been incorporating AI to enhance efficiencies in the way we do business in the last decade, the significant progress in AI technology is enabling us to leverage it faster and more effectively now.”
Through automation and a continued streamlining of the process, Tan said that life insurers in the country are expediting the underwriting process and offering more customised and tailored insurance products to meet the specific needs of individual customers.
“In addition to improving risk assessment, AI is also instrumental in transforming other aspects of the insurance business,” he said. “Within the industry today, AI and machine learning is already expediting claims processing, significantly reducing the turnaround time from claims submission to settlement.”
Tan said this is also helping firms detect fraudulent or suspicious claims.
AI’s continued evolution through broader use applications across the sector will also bring in a better insurance process, Tan said. Tan said that AI-powered lead generation and targeted marketing show how technology can be leveraged to enhance customer engagement and satisfaction.
“Life insurers are committed to ensure the use of AI is consistent with ethical principles and values, such as fairness, transparency, accountability, and respect for privacy,” he said. “These principles are essential to building trust and credibility with customers and regulators.”
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