What was the rationale behind launching the Singapore Zurich Life Insurance subsidiary in April?
We were looking at setting up a branch of Zurich International Life in Singapore back in 2002. We achieved that at the start of 2006, when we were the first international provider to be granted a defined market segment licence.
At the time, we were interested – as Zurich International Life still is – in serving the needs of expatriates and internationally-minded individuals of any nationality. The subsidiary came about because we wanted to help grow the market in Singapore.
During the first half of 2012, the Singapore market grew by about 11%. It was even better last year – growing over 20%. So it is a growth market and an established market.
With the licence we have for Zurich International Life, we are restricted in what we can do. The total market last year was just over S$2bn ($1.6bn), and 5% of that was the defined market segment that Zurich International plays in – so there’s another 95% to go for.
A Towers Watson survey, put together on behalf of the Life Insurance Association Singapore (LIA), said that there is still an average protection gap in working Singaporean adults of around $200,000, or approximately 3.7 times annual income. That gives us a massive opportunity.
As the first mover into the high-net-worth, high-earnings space for an international insurer, we believed that we were well-placed. We wanted to build on that by offering more solutions to that style of investor and saver. And also to come slightly further down in the market – not into the mass market, but into what we call the ‘emerging affluent’.
Is there an awareness of Zurich among emerging affluent consumers?
Our research said that the Zurich brand was not unknown to a Singaporean, but it was not well known, so we embarked on a campaign. We started with the launch, which was about raising awareness of Zurich and the core of what we are trying to bring to consumers – simplicity, clarity and surety.
Consumers are well-educated in Singapore, so bringing them clarity, simplicity and being sure of the company that they are investing with, is part of our overall branding campaign.
We have advertised on billboards, TV and the MRT (Mass Rapid Transit system) stations, and we’re going through the process of working out what has been the most successful part of the campaign. The thing that everybody mentions to me is that Zurich is on the taxis, which is quite remarkable.
How are sales so far?
Sales for this year are in-line with expectations. We have built a subsidiary in less than a year, and we are building out yet more capability. As every month goes by, those expectations start to get challenged.
In terms of the overall group, the insurance arm reported a business operating profit of $2.5bn, and net income attributable to shareholders of $2.2bn, for the first six months.
There was a fall in single-premium sales in Singapore in the first half of 2012, but healthy growth in the regular premium sector. Was that pattern mirrored in Zurich’s sales?
Zurich International Life has always concentrated on regular-premium, unit-linked sales and protection. And certainly the global
life strategy, in terms of product and product development, is one of unit-linked and protection. Those are the two core pieces of our product strategy around the world.
One thing we have seen is a double-digit increase in protection business sold by Zurich in Singapore this year. That is pleasing because we’re here to try and bridge the protection gap. At the same time, the market has been volatile. But in terms of regular premiums, a volatile market is not necessarily a bad thing. Our sales continue at levels that we are happy with.
Singapore regular-premium sales grew by more than 20% in 2011 and again in the first six months of 2012 year-on-year. Are such growth rates sustainable?
I can’t see those increases being sustainable. Looking at last year overall, growth was 22% (for single premium and regular premium sales combined). But we did see that growth slow in the last quarter. And that certainly followed into the first half of this year in Singapore. At the same time, the GDP growth forecast has been revised downwards by the government. So there is a slowing, but it is not a significant slowing. Are 20%-plus growth rates in Singapore sustainable over the long term? We would argue not. We see the late teens as being closer to the mark in 2012.
Are there any areas of the Zurich offering in Singapore that you think could be improved?
We are close to launching a new product and we will have added six new products to our range over the course of the year – plus seven new protection riders available across those products.
So by the end of the year, we will be in a good place in terms of the coverage that we have – in both savings and investments, and protection business.
But we are investing heavily in Singapore and there are many more opportunities for product development. Before this interview, I sat with our project team, looking at those opportunities. We have products booked in for both 2013 and 2014.
What factors do you consider when developing new products?
We find that when we talk to customers, their top concern is lack of transparency and lack of clarity. So in all of what we are doing this year and next, our products will be built around transparency and clarity. It is really important, irrespective of what regulation evolves over the next couple of years.
If customers can clearly understand what we are offering and be sure of what is coming in the future – what they can expect when they have to make a claim, what they can expect when they need to make a fund switch, what they can expect when they wish to increase cover – that is how we will win. Everything else is simply product components.
We prefer to see what we are doing as creating propositions that people can value. We recently added a concierge service to our protection products, so that when you have an individual with a large-ish sum assured, we give them what we call ‘prestige services’.
We use a limousine to pick them up for any particular test that they require – that type of thing. There are plenty of other things we can do to ensure we are creating propositions, rather than just straight products.
The Monetary Authority of Singapore [MAS] began its Financial Advisory Industry Review [FAIR] this year. Do you see this as a positive or negative development for the financial services sector?
Personally, I see it as positive. I think as a company we see it as positive. It is important for consumers to have total trust and understanding of what they are purchasing. We need consumers to be able to trust in what they are buying.
It has been a broad-ranging review, from all stakeholders – from the press to the regulator through to consumers. Everybody has been involved. It has been six months of debate and discussion. And until we see from the FAIR panel exactly what its conclusions are, it is too early to take a concrete view.
We have supported the LIA. We have been involved in committees to ensure that the views of the life insurance industry are heard, together with the views of Zurich. The person at the heart of this is the customer – the person on the ground. In all of our deliberations and discussions, we have tried to put ourselves in the shoes of the customer and what they are looking for.
Would you support a ban on commission payments?
We would support the findings of the review panel in a market that we wish to play. We think it is a very exciting market and we are investing heavily in Singapore.
Over the past year, we have employed over 50 people, the majority of whom are Singaporean. But underlying that, we think that customers need choice.
One of the key considerations is, if you start talking about fees or commission, is it appropriate for that person’s circumstances at any given time? If you are a young individual, looking to buy a fairly low-priced savings policy, are you going to be interested in paying a fee?
I don’t know the answer. I would say perhaps you would be more inclined to understand that the cost was rolled-up in the cost of the products you are buying. Certainly we support the disclosure of any remuneration, because it is important we are clear with customers on what it is costing them.
We are certain that the conclusions arrived at will be the right ones for the Singapore market. And we are convinced that whatever those conclusions are, our commitment to Singapore and the investment we are making here will not waiver.
