According to a survey by Transamerica Life (Bermuda) Ltd conducted in partnership with Asian Private Banker, 75% of clients who favour insurance-related solutions tend to be moderate or moderately conservative in their risk tolerance. Thus, demand for life insurance as a low-risk wealth management tool has risen, with the majority of survey participants agreeing that life insurance policy purchases increase with market uncertainty.
“Asia experienced an economic boom from the 1970s to 1990s and as a result, the region is in a period of transitioning wealth from the first generation to the second generation,” noted Marc Russell Lieberman, President and Chief Executive Officer of Transamerica Life Bermuda. “In unpredictable market conditions, Asia’s ultra High Net Worth individuals (HNWIs) are increasingly looking to establish wealth legacy plans to ensure business continuity and peace of mind as they expect to pass on upwards of USD1 trillion to the younger generation.”
Notably, almost two of three wealth managers surveyed say that childbirth or succession planning is the key trigger event most likely to lead to a conversation about life insurance. This is followed closely by family death or serious medical issues, and significant changes in business ownership.
Among the three most important criteria that clients look out for when selecting a life insurance provider, product pricing emerged top (73%), followed closely by financial strength (67%) and brand reputation or heritage (56%). Two out of these three factors are trust-based, suggesting that trust is a critical factor in the consumer’s decision journey in wealth and legacy planning.
The survey also revealed that the most significant factors stimulating growth of life insurance across private banks include the need for client estate, legacy planning and health coverage (36%) and increased relationship manager education (30%). On the other hand, the most significant factors that inhibit growth of life insurance across private banks include unsuitable product terms and pricing (37%), and lack of client or relationship manager understanding (28%).
A continued need for personalised service in an era of digital
Understandably, the need for trust and intimate connection is critical for subject matter such as wealth preservation and legacy planning. This is further reflected in HWNIs’ preference for personal service in spite of the trend of digitalisation. Out of the 455 number of respondents surveyed, a large majority (73%) indicated that their clients prefer to communicate with a relationship manager or private bank regarding their life insurance needs.
Wealth managers also stated that their clients mostly prefer to communicate via phone. This suggests that there remains a need for authentic, personal conversations and services despite the rise in technological advancements today.
“As the finance industry explores new technology including fintech and robo-advisers, we are cognisant that a significant number of our clients appreciate face-to-face communication and personalised service. We believe that this preference will remain even as transitioning wealth gives rise to a new generation of young HNWIs,” said Lieberman.
Shifting attitudes of a new generation of young HNWIs
As HNW wealth continues to grow in Asia, financial tools such as universal life policies remain relevant across all age profiles of HNWIs as part of wealth and legacy planning. The survey indicated that younger HNWIs (40%) between 31 and 50 years old are more inclined to purchase a universal life policy, as compared to HNWIs aged 51 and above (33%).
However, the approach to financial tools such as universal life policies is changing, with younger HNWIs shifting perceptions from insurance as a mere protection mechanism to a potential wealth creation and financial planning tool.
Differences in perspective and attitude, between Traditional HNW (55+ years of age) and New Generation HNW (31–50 years of age) clients
Traditional HNW
- Focused on retirement and legacy planning
- Views insurance as a protection mechanism
- May use insurance for estate and legacy planning for retirement
- More likely to highlight the importance of life insurance and wealth planning to the younger generation
New Generation HNW
- Focused on liquidity and returns
- Views insurance as a potential wealth creation tool
- May use value of insurance policy as leverage for loan collateral
- More likely to be receptive to insurance than the older generation, and conducts own research and due diligence prior to purchase
- Concerned about premiums and pricing
Asia as a growing market for HNW life insurance
Despite the muted market outlook, the universal life industry remains a bright spark with considerable room for growth as Asia’s HNWIs become increasingly aware of the need for wealth preservation and legacy planning. Of wealth managers polled, the majority (32%) indicated that universal life is the best option as compared to other insurance products including retirement, annuity, hospitalisation and medical, index-linked, etc.
In contrast, the majority of respondents indicate that only 5 – 10% of private banking clients have purchased a universal life policy. This suggests that there is considerable room for the HNW life insurance market to grow in the region. Over the next 24 months, 56% of private bankers foresee that universal life policies will show the fastest increase in popularity among their clients as compared with other life insurance products.
“As of 2016, Asia has overtaken North America as the wealthiest region for the first time. Coupled with increased education around insurance, this demonstrates the region’s rising demand for wealth and legacy planning. At Transamerica Life Bermuda, we are constantly listening to what our clients want, and updating our business strategy, products and operations to align with customer needs,” adds Lieberman.
About the survey
The survey was conducted by Asian Private Banker in partnership with Transamerica Life Bermuda. A total of 455 private banking and wealth management practitioners representing 29 private banks, institutions with private banking facilities and wealth management firms in Hong Kong and Singapore were surveyed between June and September 2016. Respondents have an average of 13.9 years of wealth management experience in Asia.
Transamerica Life Bermuda is one of the leading High Net Worth insurance providers, dedicated to offering life protection to High Net Worth individuals, families and businesses across Asia and beyond. It is part of the Aegon Group, an international insurance, pensions and asset management company with headquarters in the Netherlands.