In a post-Covid world, micro-insurance addresses flexibility in cash flow, says Income’s chief digital officer Peter Tay. A product like SNACK can lower the entry barrier for consumers to build up their insurance portfolio, despite diverse financial backgrounds.
In addition, the top three banks in Singapore by total assets—DBS Bank, OCBC Bank, United Overseas Bank (UOB)—and Standard Chartered Bank cut their interest rates for their flagship savings accounts in the first week of July.
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Naturally, consumers would be more keen to explore newer and more flexible options to maximise their savings. This could play to Singlife’s and other life insurers’ advantage. However, the general low interest rate environment doesn’t mean financial products offered by insurers, especially guaranteed return savings ones, could remain unaffected for long.
According to Kapron, there may be an initial wave of consumers moving from banks’ savings products to the ones offered by insurers. But sooner or later, insurers may have to adjust their returns as well.
“The banks can only lend at a certain rate (between 4.25% and 6.25%), which in turn affects the interest rates of savings deposit accounts, as banks seek to maintain their profitability. And the insurance industry is no exception to such a rule in the financial world,” says Kapron.
de Oude is not too worried, though. Compared to banks, he says, insurers have a much wider avenue to invest on behalf of their customers. “Clearly, markets are not what they were, and interest rates are very low. Singlife invests the customers’ account values in a portfolio of assets to create stability and liquidity. Short-term fixed income investments form a significant part of this portfolio.”
Future plans
Singlife has to quickly establish its branding across Singapore. In a competitive market like the Lion City, consumers are highly likely to trust a significant portion of their savings with an established insurer. It helps that Singlife has a life insurer licence from regulator MAS (We’ve written about Singapore’s digital banking landscape).
The city-state boasts a high insurance penetration of 7.82% (premiums as a % of GDP), slightly ahead of the global average of 6.1%, according to a 2019 report by Swiss Re Institute, the research arm of Zurich-headquartered reinsurer Swiss Re.
In other words, many people in the country have their savings tied up with insurers. Which is why the regulator had carefully put together a risk-based supervision to evaluate insurers. “The last thing that the government wants is allowing the insurance industry to fail,” says Kapron.
Meanwhile, de Oude hints that Singlife is looking to roll out a new product in the third quarter of 2020, while keeping an eye out for potential acquisitions.
It already snapped up the business portfolio of Zurich Life Singapore in January 2018, giving it scale, some cash, and revenue, as the portfolio contained policies worth S$6 billion (US$4.3 billion). de Oude says he would look to make similar acquisitions in other markets to “build on an existing scale”. The same goes for markets where licences are hard to be acquired.