Swiss Re headquarters in Zurich MV.
The international life insurance and private health insurance markets are not fully inclusive. This is not only a problem for people and their security and health problems, but also for insurers, as a study by Swiss Re shows. The solution becomes a Herculean task.
None of the 16 focus markets examined in the life and health insurance sector are free of restrictions, according to the Swiss Re Institute’s (SRI) study “Life & Health Insurance Inclusion Radar”. This ensures that insurers cannot place enough offers and underserved groups become vulnerable. The extent to which the markets can be penetrated varies – Germany was not part of the markets examined.
Inequality in market openness is a problem as the global economy has slowed and social inequalities have widened sharply due to the uneven recovery and the highest rise in inflation in 40 years. According to the SRI, an antidote can be life insurance and private health insurance. “Insurance protection is key to driving economic and social progress, but there needs to be a greater focus on inclusion now to reduce life and health insurance gaps,” says Jerome Jean Haegelichief economist of the group.
The conditions for hedging
Consumers in advanced markets have fewer barriers to purchasing insurance. However, higher income in advanced economies does not necessarily mean that insurance is more affordable. The criteria availability, accessibility, affordability, summarized as 3a dimensions, are essential for comprehensive market penetration.
The example of the USA makes it clear how different the 3a dimensions can be in a country. While US life insurance coverage is highest among the markets surveyed, the availability of insurance helped offset relatively low accessibility and affordability scores.
There are different indicators and sub-indicators for the 3a dimensions. The more factors are met, the easier it will be for the customer and the insurer to cover themselves. “By making life and health insurance more available, accessible and affordable (the 3A of the Inclusion Radar), families and households will be better able to meet financial challenges,” says Julien DescombesHead of Reinsurance Life and Health Insurance Products.
The situation in the emerging countries is different from that in the USA. Accessibility is the biggest contributor to the lack of integration at this point. This is partly due to lower levels of financial literacy, as well as lower usage and trust in the financial services sector, SRI analyses. In emerging markets, inclusion was highest in South Africa, where strong performance on availability and accessibility offset low scores on affordability.
What insurers need to do
Improving insurance inclusion across markets requires a multi-pronged approach that begins with a better understanding of consumer needs through market research focused on underserved communities, according to SRI.
Reinsurers in particular need to explore new strategic partnerships to drive distribution diversity and leverage digital technologies to achieve greater reach. But continued innovation in product design must be matched by more efficient, inclusive underwriting practices. In summary, this means searching for new corporate relationships while developing a new generation of products under new underwriting rules. This won’t be easy.
Author: Maximilian Volz
