No life & health (L&H) insurance market – advanced or emerging – is fully inclusive. It is with this fundamental understanding that insurers need to focus their future efforts for maximum impact in closing the protection gap.
In Asia Pacific, accessibility appears to be one of the most significant factors for the lack of L&H insurance inclusion, based on the Swiss Re Institute’s recent study, the Life & Health Insurance Inclusion Radar.
We consider “inclusive insurance” to be the provision of relevant risk covers to all people in society. We hope this novel and calibrated resource will help steer our industry towards new sources of growth by better serving the needs of people who are particularly vulnerable to financial hardship.
In the context of L&H insurance and this research, three drivers of inclusion across 16 markets are explored: the availability of and accessibility to relevant insurance services, and the affordability of insurance. For the emerging markets of Indonesia, India and Vietnam, the lack of accessibility is driven partly by lower financial literacy, lower usage, and trust in the financial services sector.
Unlike the other advanced markets studied, insurance inclusion in Australia is hurt by low scores for life insurance reach, distribution diversity and a poor showing for underwriting spectrum. Meanwhile, Japan’s L&H market excelled in accessibility, but fared relatively poorly among advanced economies in terms of availability with comparatively weaker underwriting innovation, as well as skills and market development.
At the end of the day, it is imperative to note that all markets have room for improvement when it comes to insurance inclusion. This requires a multi-faceted approach that begins with better understanding of consumer needs via market research prioritising underserved communities. We identified four key areas of opportunity:
The industry should conduct market research to better understand consumer needs across all segments of society, particularly in community groups that may be overlooked. Two types of data can help to inform business and policy decisions: “demand side” data, which comes from customers and “supply-side” data reported by financial institutions to government agencies and regulators. However, in many instances there is little to no data on underserved consumers. New research to uncover insights into target customers’ needs, preferences and behaviours is essential.
Re/insurers must explore novel strategic partnerships to foster distribution diversity and use digital technology to achieve scale. We need to think of diversity in terms of people and representation, as well as in terms of technology-enabled distribution. To access new customer segments, the industry can partner with non-insurance companies that already transact with target underserved customers.
Public-private partnerships with governments, non-profit organisations and microfinance institutions also pave the way for new opportunities, while skills development and training programmes with industry bodies can contribute to new and diverse talent and ideas for inclusive innovation.
Continuous innovation in product design must accompany more efficient and inclusive underwriting practices. For example, group life insurance provided by employers has traditionally been the most inclusive form of L&H insurance available to employees. Given the changing nature of work, efforts to extend group L&H cover to gig workers and buyer groups such as telecom service users are channels by which to extend insurance reach beyond the traditional employer/employee space.
Finally, insurers must continue to engage in dialogue with regulators to maintain a balance between consumer protection and innovation. Advanced insurance sectors tend to be highly regulated with rules designed for more complex and higher-end products, whereas several emerging markets have more flexible standards for microinsurance to meet the needs of lower-income customers. For progress to be made, the regulatory approval process for new product concepts that benefit lower-income communities, in both advanced and emerging markets, should not be a disincentive.
Regulatory sandboxes allowing insurers to pilot new concepts outside of existing regulation to a limited scale, can and do make a positive difference. Working with regulators to overcome the challenges involved in making insurance more inclusive, with innovations that recognise synergies between social welfare benefits and private risk covers, is important.
This article was written by Melissa Leitner, head of sustainable L&H delivery, Swiss Re. Leitner is based in Zurich.
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