Average Insurance Needed

Power point presentation of a insurance coverage study done by Prof David Yee (NTU), commissioned by the Life Insurance Association.

The results of the study is that an average working Singaporean adult will need $495,000 protection but according to national statistics, the average coverage of working adults is only $165,628.

Although it shows a huge shortfall, i have to question the relevance of applying this statistics. By using averages, it does not have a direct relation to an individual. Everyone's circumstances is different and it is constantly changing, therefore it is not possible to base one's protection needs on an average.

However, the study did reveal some interesting points:

• About 1 in 3 Singaporeans have absolutely no coverage at all.
• Remaining 2 in 3 Singaporeans rely mainly only on Employer Insurance and CPF Dependent Protection Scheme for their coverage.
  
• Average amount of liability in terms of outstanding loans (car loans, housing loans) is about 265% disposable income.
• Average unpaid services (outstanding taxes, bills) yearly is 10% of annual income.
  
• Dependent (aged parents and children) needs will be shifted to the remaining surviving adults in the household both financially and attention (time) required.

These grim statistics is due to two key issues:

1. General public perception about insurance.
   
   • Many choose to ignore, believing that nothing will ever happen to them.
   • Placing its priority in their time and expenses commitment as a "good to have later" rather than a "urgent necessity".
     
   • Assuming one policy, insuring $50,000 - $100,000, is sufficient for their needs.
   • Requiring cash values and returns from their insurance.
     
   
   
2. The way insurance is sold.
   
   • Consumers are not informed and educated of the importance by agents.
   • Haphazardly sold at road shows with free gifts to entice.
   • No proper Financial Needs Analysis carried out and explained.
   • Investment Linked, Traditional and Endowment policies with cash values yield higher commission than term policies for the same level of coverage.

Hopefully the results of the study will evolve the industry for the benefit of consumers as well as advisers like me who take their roles seriously and provide responsible, objective advice.