Mortality Protection Gap – Swiss Re Report
Article Synopsis :
The mortality gap is essentially the difference between the amount of life insurance people carry and the amount they need (based on age and current income levels) to sustain surviving loved ones.
The report “Mortality Protection Gap – Asia Pacific 2015” by Swiss Re provides the latest available data on the scale of under-insurance across the Asia-Pacific region, including comparisons between markets. Robust economic growth region-wide has outpaced the growth of life insurance protection. In other words, while many across the region have enjoyed the benefit of increased economic output, not enough consideration has been given to how to protect that increased wealth. Key statistical findings of the report include:
- The mortality protection gap in the 13 markets measured widened to US$58 trillion in 2014 from US$42 trillion in 2010
- In absolute size, China has the broadest gap among the 13 Asia-Pacific markets. It also accounts for most (>80%) of the increase in the gap between 2010 and 2014
- The rate of widening of the gap is slowing. In the 2000–2010 decade, the gap rose 10% per annum on average. Over the past three years (2011–2014), the average rate of increase slowed to 6%
- Computed as the ratio between “protection gap” and “protection needs” (i.e., the unfunded part of financial needs), improvements were observed in most markets over the period between 2010 and 2014, with only South Korea and Thailand showing deterioration
The results of the study, according to Swiss Re, are a call to action to find new ways of educating consumers as well as innovating new products and distribution channels. Understanding the drivers behind consumer choice is key to all of these. The report offers the following list of actions for insurers to consider on the path to closing the gap:
- Promote financial literacy and risk awareness
- Promote micro insurance
- Build public-private partnerships (PPPs)
- Develop new products
- Enhance product clarity and transparency
- Help business assess and anticipate exposures
- Create a conducive regulatory, legal and tax environment
- Establish effective compulsory schemes
- Gather and share data collectively
It’s imperative that insurers develop products and solutions to provide consumers with multiple access points to life insurance. There is clearly an unmet need, given the size of the gap, which represents a massive growth opportunity for insurers across the region.
The link takes you to the full report. A downloadable fact sheet is also available.
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Digital Insurer's CommentsWhy do people who could and should buy life insurance opt not to? This, according to Swiss Re, is the US$170 billion (in potential new annual premiums) question.
Part of the answer is ignorance, meaning people just aren’t aware that products and options exist. Complexity is also a factor, as some whole life and blended products can be difficult to understand. And then there’s lack of trust, sparked by agents (or companies) who have mis-sold or over-sold insurance products, casting aspersions on insurance products as a class.
Digital tools, in our view, will help insurers solve these problems and seize share across all thirteen markets measured. Mobile and social platforms, enabled by the cloud, will help buyers not only learn about new products but understand and trust them as well. The mortality gap is a longstanding problem but real solutions seem close at hand.
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