28 November 2017 |

Desired Product Features and the Distribution Model of Retirement-Focused Life Insurance Products

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Wealthy Asians are increasingly turning to life insurance for retirement planning purposes, according to a survey by Transamerica Life Bermuda and Asian Private Banker, which surveyed a total of 456 RMs, wealth managers, independent asset managers, brokers and clients from private banks, family offices and brokerage firms in Hong Kong and Singapore between April and July 2017. The report shows that nearly half of all HNW and UHNW individuals in the region do not have a retirement plan in place.

Amid growing interest from HNWIs/UHNWIs in retirement-focused life insurance products, and with brokers highlighting the promising outlook for this market, different segments of our sample population prioritise different criteria when selecting life insurance products as part of their retirement planning efforts. In particular, price remains a particular issue for clients when selecting retirement-focused life insurance products. On a scale of 1 to 5, pricing ranked first with a score 4.56.

Chart 1: Importance of criteria when selecting life insurance provider

On the other hand, most brokers we interviewed suggested that pricing is not equally important for all clients. For UHNWIs, pricing is not a first priority given their levels of wealth. One broker suggested that under certain circumstances, high premiums can make life insurance even more attractive for certain clients. The broker used HSBC’s life insurance product suite as an example, saying that while the bank’s products are slightly more expensive than others, they are particularly attractive to some UHNWIs, who think of them as superior.

From a geographical perspective, a meaningful number of brokers noted that clients from Mainland China and non-resident Indians (NRIs) are more sensitive to pricing compared to clients from Hong Kong and Singapore. This was attributed to cultural differences and to different levels of maturity amongst these two groups of clients.

For clients, high coverage amounts, regular income payouts, death benefits and lifelong coverage are the most important features that a retirement-focused insurance solution should address.

Chart 2: Needs that clients would want a retirement-focused insurance solution to address

Similarly, when asked about their criteria for choosing a retirement-focused insurance solution, clients ranked stable, regular income payouts as most important, followed by multi-generational planning and access to premium financing.

The distribution model of life insurance products is based on the interaction between RMs clients and brokers. One needs to keep in mind that the relationship between RMs and client is usually long-standing and based on mutual trust. 68.8% of responding end-clients have been with their current RMs for more than five years, while 76.5% of them answered that they trust their current RMs to present solutions that fit their needs/wants.

Chart 3: How long have you been with your current RM?

Chart 4: Do you trust your current RM to present the solutions that fits your needs/ wants?

It is also important to note that RMs appear satisfied with the features of existing retirement-focused insurance products. When asked to assess the importance of a number of product characteristics, most RMs said that the features in question have been adequately addressed.

Chart 5: RMs’ insights about what issues retirement-focused insurance solutions should address

In parallel, brokers are enthusiastic about life insurance products, particularly universal life and to a lesser extent whole life insurance. In all of our interviews with brokers, their optimism that the life insurance market is robust hinges on burgeoning demand.

For brokers, a number of features are equally important when it comes to retirement-focused insurance, and these features are similar to those desired by clients. They view premium financing and guaranteed income as issues of high relevance for retirement-focused insurance. Premium financeability, annuity payout/income flexibility and whole life features are also highly important factors motivating brokers to sell retirement solutions. All in all, premium financing appears to be very highly valued by brokers, and this should be considered alongside their expressed concerns about access to premium financing.

Chart 6: Importance of factors that motivate brokers to sell a retirement solution

Despite the fact that RMs are satisfied with existing retirement-focused insurance products, and despite the close relationship between RMs and clients, together with the high relevance of retirement and retirement-related issues, the percentage of clients that RMs have referred for a HNW retirement planning insurance solution remains relatively low: for 67.8% of RMs, the percentage does not exceed 10%.

Chart 7: Percentage of clients that RMs have referred for a retirement solution

Yet, despite the fact that RM-client relationships tend to be well established, a considerable group of RMs (40%) have not had a discussion with their end-clients about retirement planning insurance solutions. Within this group, 58% of RMs are not aware of any HNW retirement products. In other words, at least 23% of RMs are not aware of any HNW retirement products. What is more, 40% of RMs have not been introduced to HNW retirement-planning insurance solutions by brokers, while 58% of RMs have not received training related to HNW retirement insurance.

Meanwhile, most brokers do not provide training and product introduction initiatives. In particular, 54% of responding brokers have never conducted training sessions with clients that focused on HNW retirement solutions.

These findings underscore the untapped potential of training and promotion programmes for retirement-focused life insurance products. This is not to say that brokers do not allocate resources to this segment of the insurance market, as a meaningful portion of brokers described how they have been engaging with the banking community via lunch-and-learn events, product introduction initiatives and networking events. What is more, part of an ongoing initiative on behalf of brokers is to target Mainland Chinese clients, with the aim of boosting their appreciation for the value of retirement planning and life insurance at an early age. What we can conclude, though, is that current initiatives do not go far enough to meet growing appetite for the promotion of life insurance policies as retirement planning solutions, to quote a Singapore-based broker.

All in all, despite existing challenges, the region has been undergoing the largest wealth transfer in history” and the demand for retirement planning solutions will remain robust. Insurance providers can boost their market share by introducing new retirement-focused life insurance solutions that can address the retirement needs of HNWIs and UHNWIs. New retirement-focused life insurance products should help clients ensure economic security for their family and maintain their lifestyle. In parallel, without overlooking the importance of pricing, insurance providers should focus on issues such as premium financeable and transparency of pricing calculations. Furthermore, it is important to give priority to certain product features such as guaranteed issuance, regular income payout, lifelong and multi-generational coverage as well as high benefit.

Read Part 1 of the report, “Asia’s wealthy turning to life insurance for retirement planning: Survey” published in October 2017.

Read Part 2 of the report, “HNWIs’/UHNWIs’ Attitudes Towards Retirement Planning” published early November 2017.

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