By Charissa Yong

THE average Singaporean now needs about $495,000 of life insurance, but is covered for only one-third of that amount - a drastic shortfall that needs urgent attention, an expert has warned.

According to a new report by Nanyang Technological University (NTU) Associate Professor David Yee, workers here aged from 20 to 64 are under-insured by as much as $525 billion nationwide.

An average Singaporean needs life insurance protection of $494,851. However, his existing life cover is only $165,628 on average, even after including mortgage insurance and CPF savings. This leaves a stunning shortfall of $329,223.

Prof Yee presented the report at a seminar on insurance held at the Intercontinental Hotel yesterday.

A working adult's protection needs should provide enough cash to maintain dependants' current living standards.

It should also cover any outstanding debts and funeral expenses. This excludes the contribution of a surviving spouse. In addition, it needs to cover housing costs, allowances given to parents and children's expenses, including education fees.

Working men aged 30 to 49 have the highest protection needs as they have the highest income and are likely to have higher personal loans.

Also, more dependants typically rely on them financially.

The male-female income gap is the main driver behind differences in the insurance needs of each gender, he said.

As couples get older, the husband tends to be the more dominant breadwinner, and so the financial burden of protection shifts away from the wife.

Those aged 30 to 39 were found to have the highest level of insurance ownership, but also the most protection needs.

This general under-insurance problem comes on the heels of another recent study, which found that Singaporeans consider themselves financially risk- averse.

It was conducted early this year by Swiss Re, a member of the Life Insurance Association.

Nearly three-quarters, or 73 per cent, of Singaporeans were aware of the need to insure themselves, but only 48 per cent were aware of how to go about it.

This highlighted a need for consumer education, said Mr Low Kwok Mun, executive director of the insurance supervision department at the Monetary Authority of Singapore.

He said that the incentive structures for insurance advisers currently tend to encourage advisers to push products that generate the most commissions, rather than the products that meet the needs of the consumers.

This does not align well with the nature of life insurance, which is to provide long-term protection to policyholders.

Mr Low urged the industry to ensure that incentive structures do not influence insurance agents to give advice based on any reason other than to meet the needs of individual consumers.

First Principal Financial's chief executive Mohamed Salim said one factor which contributed to the problem was the high turnover rate of financial advisers.

'Why would companies want to properly train their financial advisers if the turnover rate is so high? They end up performing the role of sales instead of financial advisory work,' he said.

'Industry regulators should consider looking at encouraging the need to develop good agency management practice as a requisite,' he added.

The NTU report estimated the protection needs of a working adult in various typical households in each broad age group. It covers only the scenario in which both husband and wife work.

The report is an updated version of a 2006 study, using research carried out in 2007. It surveys the most common household size for an age group.

This article was first published in The Straits Times.