Sales of endowment products sold through banks have surged as more savers, despairing of low interest rates, buy them for their higher returns.
Endowment or savings-like products have always been around but because they are very long term, typically 10 years or more, they are regarded as insurance, rather than savings.
Indeed, endowment plans are packaged with a protection component, like a death benefit, but their more recent popularity seems to be due to two factors – more banks are selling them and so are able to tap into their vast pool of depositors, and the historic low interest rates.
“Such products will continue to have their appeal as the low interest rate environment is impetus for consumers to seek savings alternatives beyond traditional deposits,” said Evelyn Yeo, OCBC Bank, head of bancassurance.
“Additionally, not only do policyholders get to enjoy the protection benefit of endowment plans, these plans also generally yield around 2.50 per cent to 3.50 per cent per annum which is very attractive vis-à-vis current interest rates,” added Ms Yeo.
Fixed deposits for 12 and 36 months pay 0.25 per cent and 0.65 per cent, respectively.
OCBC is the top bancassurance player with a market share of 34 per cent, she said. OCBC sells insurance products manufactured by its insurance unit Great Eastern.
Based on weighted premiums, OCBC’s bancassurance business went up 53 per cent last year to $230 million, she noted.
Regular premium endowment products which act like a savings alternative with protection benefits are the most popular, pointed out Ms Yeo.
United Overseas Bank (UOB) found that its bancassurance sales last year enjoyed healthy double-digit growth.
Gemma Tay, UOB head for deposits, investments and insurance, said more of the bank’s retail customers look for bancassurance products that offer flexibility and meet the twin goals of protection and wealth accumulation.
“In particular, savings products have been well-received by our customers. These savings products offer our customers the ability to save while enjoying insurance coverage,” she explained.
Customers also have the flexibility of paying their premiums within a shorter period, she added.
UOB in 2010 teamed up with Prudential Singapore, one of the top life insurance companies here, to distribute its products.
In fact, UK-owned Prudential Singapore’s record-breaking performance last year was propelled by bancassurance sales. Its results in 2011 rose 29 per cent to a record $473 million in new business premiums with 49 per cent coming from bancassurance.
“Prudential Singapore saw its new business from its established tied agency channel grow by 6 per cent. On the bancassurance front, its partnerships distribution division saw an outstanding increase of 82 per cent in new business,” the company said last month when it posted 2011 results.
In addition to UOB, Prudential distributes via three other partners – Maybank, Standard Chartered Bank and SingPost.
“UOB is our strongest bank partner in terms of sale,” said Tomas Urbanec, Prudential Singapore chief marketing and partnerships distribution officer.
“The partners put us in a very unique position to have a very wide reach from high net worth individuals, to the affluent and the mass market,” added Mr Urbanec.
According to the Life Insurance Association of Singapore, agents brought in 49 per cent of sales in 2011.
The bancassurance channel accounted for 34 per cent of sales, up by 7 percentage points from that achieved in the previous year. Financial advisers contributed 14 per cent and other channels, including direct sales, made up the remaining 3 per cent.
Source: BT Invest
