, Singapore
/National Cancer Institute from Unsplash

Singaporeans struggle with critical illness coverage despite reduction in protection gap

AIA SG’s chief marketing and proposition officer expects insurers to keep up with consumer demands better in 2024.

Rising insurance premiums have prompted one in four Singaporeans to voice concerns about the potential financial strain faced by patients and their families due to inadequate critical illness (CI) coverage.

Speaking on AIA Singapore’s CI study, Irma Hadikusuma, chief marketing and proposition officer, told Insurance Asia that Singaporeans are price-sensitive and value-conscious when considering insurance premiums.

Here lies the conflict, though, as stated by Hadikusuma: “Of those who indicated that their family member had faced a critical illness, 25% indicated that they lacked a CI plan to rely on.

The latest data from the Life Insurance Association of Singapore (LIA) claim that the CI protection gap narrowed to 74% in 2022 from 81% in 2017. Still, a chunk of Singaporeans lack protection when it comes to CI coverage needs.

“Second to affordability, desiring maximum coverage is a common theme among respondents — we found that they significantly underestimate the necessary amount of CI coverage required,” AIA Singapore’s Hadikusuma said.

Additionally, economically active (EA) Singaporeans and permanent residents — including platform workers (PWs) — reached a mortality protection gap of S$373b (US$277b), whilst critical illness (CI) stood at S$579b (US$430.1b), data from the LIA showed.

EA individuals have witnessed an improvement in their mortality protection needs, now covering approximately 79% of their requirements. This uptick can be linked to escalating living expenses and a burgeoning EA population. 

Notably, despite these changes, the mortality protection gap has maintained relative stability, registering only a slight 2% decrease from 23% to 21% since 2017. This consistency is primarily attributed to higher income levels, a notable 47% surge in Central Provident Fund (CPF) savings, and an 11% increase in life insurance coverage.

On average, each policyholder now benefits from mortality coverage of around S$331,200 (US$245,088) in 2022, roughly 3.6 times their average annual income. It is typical for Singaporean policyholders to have an average of three policies for mortality protection. The average CI coverage per policyholder has risen to approximately S$193,300 (US$143,572) in 2022, equivalent to about 2.1 times the average annual income.

This reduction in the CI protection gap since 2017 can be attributed to a substantial 63% increase in CI coverage during this period. Generally, CI policyholders in Singapore possess less than one standalone policy, with their CI coverage often originating from Whole-of-Life policies or riders complementing their primary life insurance policies.

The findings of the AIA CI study revealed one-third of respondents lack sufficient CI coverage, particularly among the younger demographic worried about rising costs of living and healthcare. 

An eye-opening revelation from the study was the significant underestimation of the necessary CI coverage amount. Whilst respondents desired maximum coverage, the median CI payout deemed sufficient was a mere S$100,000 (US$74,274), falling far below the recommended average minimum of S$300,000 (US$222,822) or 3.9 times one’s annual income, exposing a vital knowledge gap.


Striking a balance between affordable premiums and adequate coverage is a significant challenge for insurers, the Precedence Research report said. 

High premiums can deter potential policyholders, making coverage less accessible, especially for individuals on tight budgets. The increasing prevalence of pre-existing medical conditions among potential policyholders presents underwriting challenges for insurers, requiring effective risk assessment and management.

Dennis Tan, president of LIA Singapore, acknowledges that although progress has been made since 2017, there are still evident gaps in the insurance landscape. Despite the promising strides, Tan believes there are areas where life insurers can improve to better serve the community

Life insurers aim to simplify policies and innovate products to enhance accessibility and comprehension for consumers. This entails tailoring offerings and distribution strategies to different customer segments, particularly those with medium to high protection gaps.

Special focus is given to underserved groups, including those with lower education or income levels, to ensure inclusivity and address diverse needs. The LIA president emphasised the urgent need to improve access to insurance, especially for vulnerable populations like PWs, who face a significant 91% protection gap.

Public education initiatives are crucial for raising awareness about insurance benefits and financial risks, and empowering individuals to make informed decisions. 

Also, establishing accessible touchpoints and tailored solutions can enhance financial inclusivity, ensuring everyone has vital insurance protection.


Moving forward, AIA’s Hadikusuma said she expects insurers to comprehend these priorities for the CI market.

“Whilst we are unable to make conclusive judgments about the future, we are hopeful that the introduction of affordable, yet comprehensive and flexible plans like AIA Ultimate Critical Cover (AIA UCC), alongside continuous efforts to raise awareness and educate consumers, will encourage more Singaporeans to get themselves better protected with adequate CI coverage,” she told Insurance Asia.

“This is why, in developing the AIA UCC, we included the unlimited reset feature to benefit our customers, especially those with many more years ahead of them. In addition, AIA UCC offers level premium prices, that do not increase in accordance with age, for long-term protection,” she added. AIA UCC covers 150 medical conditions, offers unlimited claims with a maximum limit, and integrates with AIA Vitality for wellness incentives. 

Premiums start at S$630 (US$468.4) for a 25-year-old male non-smoker and coverage until 65-years old with a sum assured of S$100,000. The plan includes an optional UCC Enhancer rider and a premium waiver rider for income loss protection.

The CI insurance market in the region is experiencing rapid expansion, considering it is the third largest market share globally with 25%, according to Precedence Research’s report. Recent trends indicate a growing awareness of health-related risks, particularly among the rising middle class, leading to increased demand for critical illness insurance.

Insurers are also leveraging digitalisation to enhance distribution and customer engagement. Moreover, regulatory developments aimed at promoting insurance penetration and consumer protection are shaping the market landscape. If driven along the projected path, the global CI market’s compound annual growth rate (CAGR) from 2023 to 2032 could jump 7.5%.

In a separate forecast by the Business Research Company, 2024 is expected to have a CAGR of 15.2% to S$387b (US$287.4b). Meanwhile, it also sees 2028 registering a CAGR of 12% (to S$610b or US$453.1b), a faster rate than Precedence Research’s prediction.

(S$1.00 = US$0.74)


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