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01 Sep 15 02:05

According to Swiss Re Mortality Protection Gap Report, the mortality protection gap for Asia has widened further between 2010 and 2014. The size of the gap increased to USD 58 trillion in 2014 from USD 42 trillion in 2010 for the 13 Asia-Pacific markets examined. This is definitely a wake up call…both for citizens of Asia and also for Asian life insurance companies.

Although we have seen increased efforts over the past few years by various stakeholders to find solutions to close the protection gap, the extent of under-insurance remains striking in many Asian markets, particularly within the emerging markets. For instance, households in India and Vietnam have less than 10% of the financial resources required to sustain their daily life in case of the unexpected loss of the family breadwinner.

The prognosis for the coming years is not optimistic. With government finances increasingly under pressure, it is doubtful that regional governments will be able to increase spending on social security. Indeed, there are growing signs of governments passing the responsibility to individuals, corporations and insurance companies. The expectation of a prolonged period of low interest rates also challenges the ability of households to accumulate savings to meet contingency needs.

Therefore, business as usual is no longer an option for the Asian insurers. Now is the time for insurers to take action to ensure their long-term societal relevance and reinforce their value to customers. Admirable progress has been made over the past few years, as evidenced by the stabilisation of the pace at which the protection gap is widening in many regional markets, but this is not enough. Building on its successes, the insurance industry will need to sharpen its focus on meeting consumers’ protection needs, and at the same time showing that term life insurance is a very cost effective alternative to precautionary savings as a means of

For the people of Asia, now is the time to act. Swiss Re believes that a typical family with dependents (eg children or elderly parents) would need to have life insurance with a sum insured of 10 times the annual salary of the main wage earner, if not more! Consumers should consider when they are going to take action to protect their financial position with term life insurance coverage.

Consumers might also be surprised how reasonable the cost can be; for the price of a cup of coffee per day, most families would be able to put in place a material amount of cover to protect their families.

It is indeed a difficult challenge to close the protection gap. It will require the strong cooperation and partnership of all stakeholders – customers, insurers, reinsurers, intermediaries, regulators and governments alike. We need to address this challenge through careful analyses of demand and supply side factors, examining needs such as further educating and guiding consumers to improve awareness, and developing more attractive products and effective distribution channels.

Consumer behaviour and perception are as important as product and distribution strategies. Various studies have shown that consumers overestimate the cost of buying adequate life protection for themselves and their families. Even under conditions of sufficient awareness and attractive prices, consumers may decline the opportunity to buy.

So, what should consumers and insurers do? Please share your views by leaving your comments below.

Category: Funding longer lives: Health/medicine, Long-term care, Longevity risk, Pension/retirement

Location: Hong Kong


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