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Answering life's tough questions in the middle of a pandemic

I tell people I grew up in insurance - literally! My father was the General Manager of Sales and Marketing for a Scottish life insurance company so from an early age, I remember spending school holidays travelling from branch office to branch office as my dad visited agents and customers. Most of my vacation jobs during university were with that same company, doing everything from filing life insurance policies in the safe to reviewing application forms and supporting claims assessments. I got to see early, and at first hand, the crucial role that insurance plays in providing the solid foundation that societies, families and individuals need in order to thrive.

Insurance is especially important to face any pandemic, as we have learnt – and are still learning – with COVID-19. A good example is how attitudes toward healthcare have undergone a dramatic and fundamental shift. Before the pandemic, few people could foresee that the healthcare systems could be stretched to such a critical level.

Moreover, for many in Asia, death is a taboo and difficult subject to address. But the reality is we face the threats and realities of illness and mortality every single day. We're all facing financial stress caused by lockdowns and business disruptions and no one really knows what the financial future holds. And when you realise the sheer size of the health and mortality gaps to fill, this is when the real-world impact of financial exposure really hits home.

Since 2010, Swiss Re has periodically gauged an estimate of the mortality protection gap in Asia, a measure of the lack of financial resources households have in order to maintain living standards should the main breadwinner(s) of the family die. Back then, it was USD 42 trillion.

In our latest report, we estimate the mortality protection gap to have reached USD 83 trillion in 2019 across 10 markets in the Asia-Pacific region. The aggregate mortality protection gap is expected to increase to USD 119 trillion by 2030.

The survey covered 14 000 consumers across 10 markets in Asia-Pacific: Australia, Mainland China, Hong Kong SAR, India, Indonesia, Japan, Malaysia, Singapore, South Korea and Thailand. It told us that Asian households are very vulnerable to financial hardship in the event of the unexpected death of a primary breadwinner(s). Over 75% of households in Asia face a mortality protection gap almost eight times their average annual household income. This sort of amount can break families, even the most strong-willed. COVID-19 exposes this harsh reality, and it is only right that we begin discussing this openly and look at how this gap can be narrowed one family at a time.

Taking a step back in time to 2005 when I was developing marketing materials for life and health insurance products in Hong Kong and Singapore in the aftermath of SARS, I have been reflecting on what has changed. The awareness of the value of insurance back then also took a sudden tick up and I was keen to include tough messages about the impact on families if the household breadwinner died. But I was advised that if we mention 'die' in a brochure, it would be cast aside as this is unpalatable and harsh in a number of Asian cultures.

A similar issue arose when we were preparing a questionnaire for our research into attitudes to pre-retirement healthcare planning in 2015. Again, we were advised that we couldn't ask people when they thought they would die… so instead, we asked how long they thought their retirements would be!

Today, these attitudes have changed. The harsh reality of infection and mortality rates are inescapable and right in our faces (and on our phones). The issue hasn't been desensitised, but it is top of mind. For reinsurers like us, this means we should be more direct in showing the critical role that insurance has to play in providing that solid financially secure foundation that people need.

The crux of the problem of the widening protection gap lies in consumers’ perception of mortality risks and attitudes towards life insurance. Life insurance plays a key role in closing the mortality protection gap. Without this form of insurance, many households will face massive disruption, and the quality of life they hold so dear is likely to be affected. Without life insurance, their financial security is potentially vulnerable to financial market and real estate volatility.

In talking to both clients and consumers, this is a different landscape to SARS. Technological advances and access to information mean that consumers are better able to search for information about how to proactively protect themselves and their families without leaving their living rooms. From the virtual sales discussions to the end-to-end sales process online, consumers can quickly and securely get the peace of mind that insurance offers them.

Consumers have also demonstrated that they are very open to their insurance company contacting them in times of crisis. They are more receptive to advice, to reminders about the benefits they are entitled to under their existing policies, and to suggestions on what other products might help them ensure that their families are covered for unexpected events. It may well be the case that insurance is still more ‘sold’ than proactively ‘bought’, but it is bought willingly. Our role as re/insurers is to get consumers to choose the right kind of protection for their needs. Is there a right time to do this? Yes, and it's right now.

Our study found that closing the mortality protection gap in Asia-Pacific could generate an average of USD 292 billion of additional aggregate life insurance industry premiums every year between 2020 and 2030. More than half would come from Mainland China and around a quarter from India. With proper understanding, innovative insurance products and an informed engagement approach, we believe insurers will be better equipped to close the mortality protection gap and strengthen resilience in the region.

For more information visit our Asia Mortality Protection Gap research webpage.