By Lorna Tan, Senior Correspondent

THE life insurance sector continued its recovery in the third quarter with new business premiums surging 87 per cent from the previous quarter to $2.12 billion.

The impressive performance was due to single-premium sales, which hit $1.85 billion, according to the Life Insurance Association (LIA) yesterday.

LIA president Darren Thomson said the upswing in sales across two consecutive quarters is encouraging.

'The financial meltdown of September 2008 affected the life insurance sector. The latest results reflect a more upbeat consumer sentiment against an improved outlook for the Singapore economy as a whole,' he said.

Almost 90 per cent of the single-premium policies were bought using cash.

Annual premium sales also fared well, rising 15 per cent from $238 million in the second quarter to $274 million in the three months to Sept 30.

LIA believes this indicates that consumers appreciate the value of long-term life insurance.

Strong quarter-to-quarter recovery has effectively placed the industry back to the levels before the global recession.

Total business premiums were down marginally this year compared with the $2.13 billion recorded in the third quarter last year.

In the first nine months of this year, health insurance rose by 26 per cent to reach $106 million.

'The continuing growth demonstrates the awareness among consumers of the essential role and benefits of having health insurance to pay for their health- care expenses,' said the LIA.

The industry had paid out a total of $3.72 billion to policyholders or beneficiaries by the end of September - $296 million in respect of death, critical illness or disability claims and $3.42 billion on maturing policies.

The LIA says there is still a need to encourage Singaporeans to raise their protection cover. In the third quarter of this year, the average sum insured worked out to around $42,130 for single- premium and $44,790 for regular-premium policies. These are considered too low.

The average death benefit worked out to a better $47,027 per policy, the highest in recent memory. While this is by no means adequate for the average family, it shows the protection gap is narrowing.

Mr Thomson believes the annual premium business will show a slight uplift in this quarter.

He said some insurers noted a trend where customers moved money from cash into single-premium insurance products to position themselves for the economic upswing.

This article was first published in The Straits Times.