ong chong tee : confidence in and resilience of the life insurance industry speech by mr ong chong tee, deputy managing director ( financial supervision ) of the monetary authority of singapore, at the life insurance association ( lia ) annual luncheon 2015, singapore, 4 march 2015. * * * dr khoo kah siang, president of the life insurance association, distinguished guests, ladies and gentlemen. 1. thank you for inviting my colleagues and i to the association ’ s 13th annual luncheon. 2. modern life insurance is said to have its beginnings in london more than 300 years ago by a company called amicable society for a perpetual assurance, with the aim of allowing an amicable distribution of contributions to be made by deceased members to their surviving wives and children. but even during the times of ancient rome, it is believed that some forms of life insurance existed to help mitigate the costs of burials of deceased members and to provide for their surviving families. while clearly much has changed in the industry, the central tenet of the industry has remained – to provide financial protection to dependants and in current times, also as a means of savings and wealth management. 3. a life insurance purchase is in essence a legal promise. in exchange for payment of premiums, an insurer will honour claims and make payment as agreed under the insurance policy. hence given the typically long term nature of the commitments, confidence in and resilience of the life insurance industry must underscore its growth and development. if one were to type “ life insurance ” and do an image search over the internet, a very common picture is that of the umbrella ; and it is easy to understand why – insurance as protection, a cover, or a shield. but the umbrella has to be a dependable one, when one needs it most. 4. two critical factors underlie consumers ’ confidence in the life insurance industry : i. first, insurers, together with financial advisers, must be regarded as trustworthy and reliable. consumers must be able to depend on them to provide appropriate financial advice and life insurance products to meet their needs ; and issues of fairness and transparency must underscore the relationship. ii. second, given the long - term commitments, insurers must be financially resilient to be able to weather different economic, financial and industry cycles and have adequate financial resources to be able to honour claims. 5. today, let me therefore take stock of two key policy thrusts that

have been smaller than we had expected in may. this seems to have been partly because the restrictions in australia didn't amount to a complete lockdown, and partly because they were lifted a bit earlier than expected. another reason for the smaller contraction was, as noted earlier, that fiscal transfers did a lot to replace lost income. this has helped sustain employment through periods of lockdown. it has also supported household consumption, which has recovered sooner than expected. a similar pattern has been evident in other advanced economies. second, while the part of the contraction directly attributable to initial health measures turned out to be smaller, general uncertainty and responses to weak demand seem to have accounted for more of the downturn in output and the labour market than earlier envisaged. this has been evident in the industry pattern of employment effects, as well as the weakness in investment intentions both in australia and abroad. after an initial rebound in payroll jobs in the most affected industries, the recovery in the labour market has been quite patchy. consequently we now think that, even though the initial contraction was smaller, the subsequent recovery is likely to be more protracted and progress on reducing unemployment will be slower. third, and related to the previous point, while the decline in total hours worked was smaller than we thought, it was tilted more to job losses rather than declines in average hours than expected ( graph 9 ; graph 6. 3 in the smp ). and more of the people who exited employment left the labour force entirely. this implies that there is more spare capacity in the labour market than a straight read of unemployment would suggest. graph 9 fourth, over the first half of the year, fiscal policy measures managed to keep aggregate household income broadly steady at the same time that household consumption contracted substantially. some households have therefore built up buffers of savings – intentionally or otherwise – that they would not normally have accumulated. similarly, recent withdrawals from superannuation could be used to tide some households over in a period of income loss. household incomes are forecast to decline later in the year when jobkeeper starts to taper off and the mutual obligation conditions for jobseeker are reimposed. but partly because of these accumulated savings, we do not expect this temporary setback to incomes to derail growth in household consumption. fifth, the large persistent rise in case numbers in victoria and the ensuing introduction of stage 4 restrictions there were not anticipated. this is not exactly a lesson for our earlier forecasts, but it