A survey on Singapore’s life insurance industry.

The life insurance industry in Singapore performs a couple of very important macroeconomic functions including accumulation, redistribution, stimulation and control function. (2009) Singapore has one of the most developed insurance markets in Asia in terms of density. In 2008, the market grew by 7% to reach a value of $11.5 billion. The steady increase in penetration rate signifies the growing economic significance of the life insurance industry in Singapore. (2009) The market is oligopolistic in nature with four main players. There is strong rivalry in the market and players are mutually dependent. However, insurers are still able to generate supernormal profits with each competing in terms of customer service and branding due to the homogeneity of life insurance products. It is noted that Singaporeans are grossly underinsured with an aggregate underinsurance gap of $526 billion across the working population aged 20 to 64. On average, the Singaporean working adult is underinsured by $329,223 which is 67% of the protection needs requirement. (Yong, E. X. Y, Loh, K. C. C,2008) Using the expected utility model and the state preference approach, we analyse the reasons and consequences for the underinsurance situation. Amongst others, asymmetric information and affordability have been identified as the key reasons for underinsurance. Recommendations to bridge the underinsurance gap include public education, lowering premiums and fiscal policies implemented by the government.Bachelor of Art