Report on insurance for high net worth individuals by AIA and EY shows 90% of Singapore respondents leverage insurance solutions as part of preserving wealth and legacy planning
- 78% of respondents in Singapore believe that insurance plays a significant role in creating and preserving wealth
AIA together with EY in late June launched a report providing new insights into High-Net-Worth Individuals (HNWIs), in the context of their views and adoption of insurance solutions. The report identifies specific challenges faced by HNWI’s and explores how insurance solutions can help this segment with their overall wealth management.
Ms. Ho Lee Yen, Chief Customer and Marketing Officer of AIA Singapore said, “High-Net-Worth Individuals in Singapore are starting to look far beyond basic life insurance coverage towards more holistic protection offerings including healthcare support, estate planning, tax optimisation, business succession, and debt risk mitigation. Early planning and holistic wealth management are critical in helping safeguard legacies, especially during times of economic uncertainty, and smart insurance solutions can provide a source of passive income streams as well as the asset diversification required to buffer against market volatility.”
“More critically, for many entrepreneurs struggling to maintain business continuity during this trying period, insurance solutions such as keyman insurance are now being considered as a form of long-term wealth protection for their business regardless of size and scale,” she said.
Mr. Dustin Ball, Partner and APAC Insurance Strategy Leader at EY, said, “The findings show that HNW individuals are a diverse segment and face specific challenges based on the source of their wealth. These challenges are well-suited to insurance solutions and there is an opportunity to increase the understanding and awareness of how insurance products can augment wealth planning.”
Notable findings from the report include:
- 70% of HNW respondents in Singapore said that insurance comprises more than 10% of their wealth and legacy planning, compared with the 52% indicated by their peers across Asia. This reflects the understanding that HNWI’s in Singapore have on how insurance solutions play an important role in wealth management.
- 75% of HNWIs across the region use insurance for succession and legacy planning, reflecting the relatively high financial security of insurance companies.
- 86% of Singapore-based HNWIs own medical or critical illness insurance policies, driven by a demand for coverage of medical costs as well as access to first-class healthcare support.
- 48% of HNW entrepreneurs in Singapore have business protection through insurance solutions, encompassing a range of areas including business loan protection, health and illness income protection, business transfer and legacy planning and inheritance equalization, falling short of the regional average of 54%.
- 84% of HNW entrepreneurs in Singapore have previously heard about business wealth protection, but 52% of them do not have any kind of such protection in place.
- 96% of HNW professionals in Singapore consider retirement planning as an important part of overall wealth management and essential to ensure a successful transition from working to retirement, compared to 92% in Asia.
The report produces a number of key conclusions in relation to the role of life and health solutions in preserving wealth and legacy planning for HNWIs, including:
- Preserving wealth of family and legacy planning: insurance can play an important role in protecting HNWIs’ families from issues arising from illiquid estates or outstanding debt. It can also enable HNWIs to plan ahead to allow beneficiaries to maintain their lifestyles.
- Portfolio diversification, leverage and growth: insurance solutions can help to diversify investment portfolio risk through tax deferred growth, stable returns and leveraging.
- Liquidity planning: life and health insurance can solve immediate liquidity needs through cash value withdrawal or policy loans.
- Tax benefits: Savings in tax for estate and legacy planning can be achieved through employing the appropriate life insurance propositions.
The report was developed based on proprietary research, interviews with relevant stakeholders including HNWIs and an analysis of qualitative and quantitative data. Customer research was conducted in Mainland China, Hong Kong SAR, Taiwan (China) and Singapore.
Mr Paul Ho, chief mortgage officer at iCompareLoan, commenting on the survey on Singapore based HNWI said: “as policymakers are doing all they can to minimise collateral damage from the Covid-19 pandemic, insurance will play a significant role in preserving wealth and legacy planning.”
“HNWI will not leave things to chance is today’s uncertain markets. They will to go back to basics and look for products which will protect and preserve their wealth. I believe that they will also harness technology to transform the ‘usual way’ of doing things,” added Mr Ho.
Several financial institutions have stepped-up their efforts to help their high net worth clients protect investments amid COVID-19 uncertainty. UOB recently announced that it has intensified support to their clients as part of a Bank-wide #UnitedforYou effort to help people grappling with the impact of COVID-19. As markets continue to fluctuate and economies stall due to COVID-19, UOB’s more than 500 Wealth Advisers have been proactively calling Wealth Banking and Privilege Banking clients to review their investment portfolios.
During these discussions, UOB continues to advocate its risk-first approach to ensure investors understand the risks of an investment ahead of any potential returns. Since mid-March, the Bank has seen a 70 per cent increase in portfolio reviews , compared with those completed between January and mid-March.
As part of keeping clients informed on risks and opportunities given fluid market conditions, UOB has also increased the investment insight reports it provides to clients. The reports contain information such as the Bank’s views on future market moves and recommended investment strategies.