Singapore plans to open up life insurance industry

Asian Economic News, August 23, 1999

SINGAPORE, Aug. 16 Kyodo

Singapore Deputy Prime Minister Lee Hsien Loong said Monday the government plans to open up the protected life insurance industry in a bid to make the island republic Asia's insurance hub by 2003.

The Monetary Authority of Singapore, the central bank, is "reviewing its approach to the insurance industry to liberalize the restrictions and allow new entrants," Lee said in a speech at an insurance industry conference here.

Lee, who also serves as the central bank's chairman, said a review will be completed in a few months.

The move is aimed at injecting competition and efficiency into the industry.

"Singapore has adopted a closed-door policy in respect of new, direct life insurers since the mid-1980s, having admitted only one direct life insurer since 1986," Lee said. "The rationale has been to prevent unhealthy competition, given the small size of the market."

He said the "closed-door" has drawbacks. "It has prevented new players with new products, more efficient distribution channels or better marketing from entering the market," he said.

As of June this year, only eight life insurance companies were operating in Singapore. The only new insurance company allowed to set up after 1986 was UOB Life Assurance, a local concern established in 1990.

Lee said the government is aiming to promote a couple of world class financial groups, centered around banks, that offer a broad range of financial services, including insurance.

This, he said, "must occur in a more open and competitive environment."

An official of a foreign insurer, speaking on condition of anonymity, told Kyodo News that while he welcomed the steps to open up the life insurance sector, a large number of Singaporeans have already bought insurance policies, making the market less attractive to newcomers compared with other countries in the region.

Foreign insurers already hold more than half the market share in both the life and general insurance industries.