Purchasing Insurance Online

The idea of buying direct purchase insurance (DPI) - simple life policies sold without commissions and financial advice - has yet to take off in an explosive way.

The Life Insurance Association (LIA) noted that only 435 DPI policies were sold in the six months to June 30. This was about $371,000 of weighted new premiums for the first half of 2016. By comparison, weighted new business premiums - a key performance gauge - for the half-year rose 13 per cent to $1.52 billion over the same period last year.

The LIA noted that 95 per cent of new DPI sales comprised regular-premium term life policies, while the rest were whole life plans. Since the option to buy DPI was launched on April 7 last year, 1,081 policies have been bought, or about 200 sales every quarter.

"As an industry, we are pleased this is one of the channels offering choice to customers. We need to do that. There will be different segments of customers, and we'll let the free market develop."LIA president Khoo Kah Siang described the demand as "steady", but the industry has long refrained from setting any expectations.

Details of the demographic of DPI buyers were not available. As such policies are sold without commissions and financial advice, the premiums are about 10 to 20 per cent lower than comparable life insurance products, the LIA said at a recent briefing. That could have been a draw for more people to get insured, but the effect has been muted.

Eternal Financial Advisory chief executive Viviena Chin had said the initial release of DPI had alarmed the industry, seeing it as a potential competitor to existing products. "It doesn't seem to have turned out that way, and the thing is, insurance is still being sold, not bought, and it's not easy to understand."

DPI products are term life and whole life insurance policies with total and permanent disability cover, as well as optional critical illness riders attached. They can be bought from insurers' customer service centres or websites, and compared on portal CompareFirst. This allows consumers to study similar life insurance products across a range of insurers.

SingCapital chief executive Alfred Chi said the success of DPI cannot be based on the take-up rate, even if it is easily available online.Even though consumers still prefer the personal touch when it comes to insurance purchase, he believes this will be a trend, and the portal - a joint effort by the Monetary Authority of Singapore and industry bodies - helps to promote factors such as transparency and keeping insurers on their toes.

However, consumers can insure themselves for up to only $400,000 - with a maximum coverage of $200,000 for whole-life direct purchase insurance - with each insurer, based on estimated average protection needs.

Ms Chin said that could be a factor for people who feel they need higher coverage. "I also handle higher-net-worth clients, who may know a lot but they still seek advice as they have different needs. Someone in his 30s who is IT-savvy did all his comparisons, but still decided to ask me about DPI and said it was not easy to understand."

Even though DPI uptake has been less than exponential, its presence should grow slowly but surely. It also serves as a reminder that consumers have options, something they will appreciate as their knowledge about insurance becomes more sophisticated.

Dr Khoo said: "It 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."