Mr Mark O'Dell, president of the Life Insurance Association (LIA), told reporters yesterday 'significant effects' are likely on sales of single-premium products in the second quarter of next year.

Under the new rules, a CPF member will not be allowed to invest the first $20,000 of his CPF Ordinary and Special Accounts savings under the CPF Investment Scheme (CPFIS).

To mitigate this feared drying up of investment in insurance products, industry players are now informally lobbying the Government to allow money parked in the Special Account to be invested in products under the CPFIS.

This may mean reversing the rule barring investment of the first $20,000 in a CPF member's Special Account.

Mr O'Dell was speaking at a press conference to announce a 31 per cent year-on-year surge in new business premiums to $1.18 million for the nine months ended Sept 30.

He warned that while strong growth may continue for the next six months, the industry may take a hit in April.

'It is estimated that half of the CPF funds will not be eligible for CPFIS products. Some $4 billion, or 63 per cent, of the single-premium business in Singapore are bought with CPF funds,' noted Mr O'Dell.

'It is not easy to analyse the exact impact on sales of single-premiums, as we do not know how much of the CPF funds available may potentially be invested in the CPFIS. However, we anticipate a significant impact,' he said.

To mitigate this blow, industry players will have to seek more non-CPF sources, such as cash, to drive sales in the same way that banks, which already attract more cash investments in bancassurance products, do.

The industry has also been making efforts to 'demonstrate that investment-linked products provide opportunities for superior returns, compared to the rates offered under the CPFIS', Mr O'Dell said.

As a further step, the LIA has been 'engaging the Government in a dialogue' to allow money in Special Accounts to be invested in CPFIS products. The Straits Times understands that this dialogue is currently in its preliminary stages.

Mr O'Dell argued that 'it is counter-intuitive to keep retirement savings at a risk-free rate, especially if you are relatively young', since those funds can be held in equities in the long-term to earn higher returns.

In the third-quarter, regular premium sales grew 27 per cent to $226 million, while single-premium sales rose 28 per cent to $1.99 billion compared with the previous year.

Sales were affected by the 'volatility in the equity and capital markets', which may have prompted some Singaporeans to postpone investment decisions, said Mr O'Dell.

The robust economy and greater awareness among Singaporeans about the need for life insurance and investment, however, are likely to support growth in the industry, whose assets crossed the $100 billion mark in the third quarter. Annuities sales for the first nine months of the year reached $316 million from $172 million a year earlier.

'While there is a heightened awareness of the need for annuities, there are not many products on the market, with only eight companies offering eight rather standard products,' said Mr O'Dell.

graceng@sph.com.sg