Direct purchase insurance (DPI), a type of life insurance policy sold without commissions and financial advice, was launched in Singapore last year. However, the product’s popularity has yet to pick up among customers.
DPI premiums are around 10 to 20% cheaper than similar conventional plans, due to the lack of commissions and services of a financial adviser. The lower price was expected to draw customers, but so far, it has not achieved the desired effect.
According to the Life Insurance Association (LIA), only 435 DPI policies were bought in the first six months of 2016. This is equivalent to US$275,400 in weighted new premiums. Meanwhile, weighted new business premiums for the half-year went up by 13%, reaching US$1.13 billion.
Around 95% of new DPI sales were regular-premium term life policies, with the rest being whole life plans. Since DPIs were launched in April 2015, only 1,081 sales were made, amounting to only 200 sales each quarter.
“As an industry, we are pleased this is one of the channels offering choice to customers,” Khoo Kah Siang, LIA president, told the Straits Times
. “There will be different segments of customers, and we'll let the free market develop.”
Khoo described the demand as “steady”, but the industry refused to set any expectations. The demographics of DPI customers were not made available by the insurers’ association.
It seems like customers still prefer having the personal touch of a financial adviser or a broker, and some industry executives think that people who need higher coverage seek out expert advice due to their different needs.
Despite less-than-stellar DPI sales, the insurance industry is keen to keep it on the menu.
According to Khoo: “[DPI] continues to offer choices. There will always be people who want the self-service choice, but not everyone is the same. We continue to be able to serve those people, and they are buying the products at a cheaper rate than buying through intermediaries.”
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