70% of high net worth (HNW) respondents in Singapore have said that insurance comprises more than 10% of their wealth and legacy planning, compared with the 52% indicated by their peers across Asia, according to a report released by AIA and global professional services firm EY.
This finding reflects the understanding that high net worth individuals (HNWIs) in Singapore have on how insurance solutions play an important role in wealth management, says the report which provides new insights into HNWIs, in the context of their views and adoption of insurance solutions. The report also identifies specific challenges faced by HNWIs and explores how insurance solutions can help this segment with their overall wealth management.
Other notable findings from the report include:
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 outlines a number of key conclusions in relation to the role of life and health solutions in protection and legacy planning for HNWIs, including:
Protection of family wealth 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.
Beyond basic life insurance
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.”
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.”
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, Taiwan and Singapore.