Planning for the unplanned: Securing your family's future

What characterises emerging Asia? News bulletins will almost always exclusively feature scenes depicting its economic growth, market potential, its young, vibrant multi-lingual and highly educated workforce. Asia's spending power and high-tech urban playgrounds are two other well-worn scenes from this playbook.

But what's not shown is its vulnerability.  As dynamic as this region is, it is also human, and it is frail and vulnerable. Mortality, and its effects, are inevitable.

Awareness of protection need is key to closing the mortality protection gap

According to our latest 2020 Asia's Mortality Protection Gap study on consumer attitudes and preferences towards life insurance and mortality protection, one in four consumers have more than 90% of their life protection needs unmet.  Among emerging Asia, mainland China has the largest mortality protection gap per household at over USD 202 000. Meanwhile, Indians are the most severely under-protected - especially with the 25–34-year-old age group. If left unchecked, the aggregate mortality protection gap in emerging Asia would almost double by the end of the decade. Having worked in the insurance industry throughout my career, this is alarming to me.

A key reason is our longer life expectancy has made many people, especially among those that are younger, believe death is a long way off. Death is therefore deprioritised. But when our loved ones die, without the right plans in place, it's likely that the family will face a period of extreme financial stress.

In our report, we have observed a consistent underestimation of mortality risks and protection needs among Asian households. Close to 30% of the survey respondents (which covers over 14 000 consumers across 10 markets), don't feel the need to prepare financially to deal with the loss of a breadwinner. However, the risk may be much greater than most people think. More than ever, the current COVID-19 pandemic exposes this vulnerability and highlights the crucial role that insurance plays in ensuring resilience.

Have we prepared our families to handle mortality shocks?

First, there's a lack of concern about mortality risks. The Mortality Protection Gap research shows that households express greater concern over health, accident risk and retirement than planning for eventual death and its effects.

There are also households that realise the risks of mortality threat but downplay the on-going financial and emotional impact arising from the loss of income from their deceased breadwinners.

Without proper financial planning and protection in place, they'll need to look for new sources of income or funds to get on with their lives.  In certain dire situations, it’s not uncommon to see families selling valuables like jewellery or collectibles to raise funds, selling property to reduce mortgage burdens, re-entering the full-time job market, or sacrificing non-critical expenditure like vacations, tuition and long-term elderly care.

The burden is especially heavy if the ill-prepared households are also supporting young children and the elderly at the same time. Longer lives and rising costs of living are already adding to the pressure on this "sandwich generation". The unexpected financial and emotional shocks are just going to add more on surviving family members. As has been well documented, the "sandwich generation" isn't shrinking…but more and more working adults are looking after dependents – younger and older. They are also working longer, face additional pressure at work, and dealing with the intensity of an ongoing pandemic.

Are millennials underprotected?

Our study validates the importance of life insurance in mitigating household financial risks. The survey results show that in advanced Asia, for those households without a protection gap, life insurance is one of the main contributors that help close the mortality protection gap.

Even though life insurance is an effective way to secure a family's future, families do not necessarily default to buying life insurance. Based on the study, we found that they preferred to find ways to earn more money, followed by purchasing health insurance. In mainland China, up to 65% of households intend to earn more to bolster protection, reflecting the traditional culture of hard work. This preference is also particularly obvious among the younger generation who often tend to be overconfident and underestimate their financial needs, and don't realise the level of risk they face or don't believe that life insurance is a better way.

Households in Asia (31%) also lack understanding of available products and perceive that life insurance is too expensive (51%). Consumers in mainland China and India are particularly vocal about confusing products, which then means that it is our opportunity to improve insurance accessibility and help consumers understand what we offer. We must admit that insurance is not a simple and straight-forward financial product, but with exponential volume of data generated by consumers every day, we have now found new ways to systemically assess, accept and manage risks for consumers based on their habits and lifestyles. Swiss Re's new "Big Six" lifestyle risk factors enable insurers to incorporate lifestyle factors into the underwriting process.

What would you want to leave behind for your loved ones when you are no longer around?

If I relate this to my own experience, I remember how my late father made plans when he fell ill.  He was never a very organised person, but in that one year he had made many plans, mostly for my mother – from what would she live on without his pension, to whether she's still eligible for his retired civil servant medical services.  For us who work in the insurance industry, that's what we want to remind people – to plan for the future, for good times and bad.

What kind of life do we wish for ourselves and our loved ones, when life deals us a bad hand? The truth is when we are young and healthy, we don’t tend to think ahead, or take enough action. Despite the increased awareness of insurance there's still more for us to do in continuing to make insurance more affordable and accessible.

Compared to investing in properties and other financial assets, life insurance serves as a simple, stable, longer-term financial protection tool, especially in times of market volatility. By addressing consumer mindsets and raising this mortality protection gap discussion front and centre, I am hopeful that insurers can help consumers find the appropriate measures to protect their families' future and make emerging Asia an even better place to live, grow and thrive.

For more insights, please visit our Asia's Mortality Protection Gap interactive website.