Revealed – Singapore critical illness gap

How does it compare to five years ago?

Revealed – Singapore critical illness gap

Life & Health

By Kenneth Araullo

Research findings reveal a mortality protection gap of SG$373 billion and a critical illness protection gap of SG$579 billion in Singapore, translating to a 21% mortality protection gap and a substantial 74% critical illness protection gap in the country for the year 2022.

The Life Insurance Association (LIA) of Singapore revealed the results of the Protection Gap Study (PGS), highlighting significant mortality and critical illness protection gaps among economically active (EA) Singaporeans and permanent residents, including platform workers (PWs). The study draws from two main sources: analysis of policy data provided by life insurers and a supplementary market survey involving 775 economically active individuals.

PGS 2022 offers insights to develop actionable strategies that address individuals’ protection and financial planning needs, according to LIA Singapore. This is particularly pertinent due to increased life expectancy and the unpredictable socio-economic landscape facing the community.

The study also takes into account the protection needs and gaps of platform workers, acknowledging their growing presence in the community. As the study found, the average platform worker faces more substantial mortality and critical illness protection gaps compared to the average economically active individual in Singapore.

Addressing the results, LIA, alongside Singapore’s life insurance sector, plans to explore initiatives in several areas, including enhancing insurance policy understanding and accessibility, developing tailored propositions for specific customer segments, boosting consumer awareness through public education initiatives, and providing accessible touchpoints for underserved members of the public, such as platform workers.

Narrowed gap, but still some areas to address

The study revealed that EA individuals in Singapore have approximately 79% of their mortality protection needs met, with a slight decrease in the mortality protection gap from 23% to 21% between 2017 and 2022. This decrease is attributed to rising income levels, a 47% increase in Central Provident Fund (CPF) savings, and an 11% rise in life insurance coverage.

Additionally, the average mortality coverage per policyholder increased to approximately SG$331,200 in 2022, equivalent to about 3.6 times the average annual income, with policyholders holding an average of three policies for mortality protection.

Regarding critical illness protection, the gap among EA individuals narrowed by 7% to 74% in 2022, from 81% in 2017. The average critical illness coverage per policyholder increased to approximately SG$193,300 in 2022, around 2.1 times the average annual income. This reduction in the critical illness protection gap was mainly driven by a 63% increase in coverage since 2017.

On average, critical illness policyholders own fewer standalone policies, typically relying on whole-of-life policies or riders to supplement their primary life insurance policies.

The study also reveals substantial mortality (59%) and critical illness (91%) protection gaps among platform workers. This is primarily attributed to lower CPF and deposit savings and reduced insurance coverage compared to economically active individuals.

Other key takeaways from the supplementary market survey include indications that many platform workers are not covered under group insurance offered by platform providers, with some being unaware of any group insurance coverage. Platform workers also expressed a desire for accessible touchpoints within the life insurance industry to seek guidance and support for their financial planning and insurance protection needs, suggesting potential touchpoints, such as roadshows at platform providers’ offices.

“The Protection Gap Study 2022 shows that while mortality and critical illness protection gaps persist, there has been progress recorded since our last study in 2017. There is greater awareness and appreciation of the value of insurance in Singapore, and more individuals are taking actions to better meet their protection needs,” LIA Singapore president Dennis Tan said.

“While this progress is encouraging, we know more can and must be done to support different members of our community, such as our platform workers. The life insurance industry will continue leading the charge on these efforts, leveraging insights from the study to inform initiatives for the Association, our member companies, and other relevant stakeholders to pursue and to get more individuals better insured,” he said.

A few weeks ago, LIA also announced the industry results for the half year ending June 2023, revealing a total of $2.2 billion in weighted new business premiums for H1 2023, a significant decline of 16.7% compared to 2022.

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