This is the second part of a two-part feature on Asia’s HNW insurance industry. All data comes from Asian Private Banker’s inaugural “Exploring the HNW Life Insurance Landscape” report. To read part 1, click here.
It is not much of a stretch to say that universal life (UL) structures dominate Asia’s HNW insurance market. In the past 12 months, around nine new HNW insurance providers have entered the space in Asia – and most offer UL.
But while the overall penetration rate for UL and other HNW life insurance policies remains low, relationship managers indicate that they are more likely than not to refer a client to a broker for a UL policy. However, the conversion rate for referrals is considerably lower.
Currently, 42% of RMs say that just 5-10% of their clients actually hold a UL policy, and the majority of these clients hold policies with coverage below US$10 million. Close discussions with a number of wealth planners reveal that private banks aim to boost the sales conversion rate to upwards of 20% in the near-term.
Of course, the low interest rate environment has done little to dampen demand for UL – a sentiment echoed by many wealth planners who point to the importance of premium financing when it comes to client’s decision to purchase a policy.
Even so, the survey results show that current market uncertainties can both increase and decrease life insurance policy sales, suggesting that other factors (pricing, personal circumstances) play a more significant role than structural factors.
So what lies ahead in terms of product and will UL structures continue to dominate the HNW life insurance space in Asia?
According to one wealth planning head at a European private bank in Hong Kong, heightened expectations that central banks will hike rates will likely lead to further diversification in the insurance product mix among HNWIs in Asia. Still, the demand for UL is expected to persist and increase. 56% of respondents believe that UL solutions will increase in popularity over the next 24 months, but just 26% see a rise in the popularity of whole of life insurance.
Perhaps indicative of the continuing dominance of UL in Asia, more respondents, when asked what other insurance product ideas are worth exploring, said that the universal life structure remains “the best option”. Only 5% and 3% said the same about joint life and whole life, respectively.
Next Tuesday afternoon, Asian Private Banker will host a series of panel conversations for senior RMs on how to successfully utilise and engage with an increasingly diverse universe of insurance products. Register here to network with your peers.
