The aggregate mortality protection gap in Asia Pacific (APAC) is projected to reach $119 trillion by 2030, according to a new report by Swiss Re.
The gap reached $83 trillion in 2019 and is expected to rise by an average of 4% each year over the next decade.
Based on a survey of 10 markets in the region, Swiss Re estimates that from now until 2030, closing this gap would result in up to $292 billion in additional annual premiums for re/insurers.
The mortality protection gap is defined as the difference between the protection needs of a household and the financial resources available to sustain its living standards in the event of the unexpected death of the main breadwinner.
With an average of almost 8 times annual household income being unprotected, around 75% of households will not be able to manage if their main breadwinner dies, Swiss Re found.
About a quarter (24%) of households face a very high protection gap, defined as having over 90% of their protection needs unmet.
As a total, the gap is largest in mainland China at $41 trillion, while 83% of families in India have their protection needs unmet, making it the most vulnerable as a percentage.
Swiss Re attributed the growing mortality protection gap in large part to a lack of concern over mortality risk and attitudes towards life insurance.
Analysts reported that close to 30% of respondents underestimated the importance of financial preparedness to deal with the loss of income due to the death of their breadwinner.
For example, 94% of respondents said they are not fully confident to manage their financial vulnerability in the event of a mortality shock, but one 39% considered buying life insurance to reduce such risk.
“Underestimation of protection need, lack of consumer risk awareness and low uptake of life insurance continue to underpin the mortality protection gap in Asia,” said Kelvin Ho, VP, Health & Medical Solutions Asia, Swiss Re.
“Insurers need to be creative in overcoming ingrained consumer mindsets, to design optimal distribution and customer experience in meeting consumer concerns for protection in Asia-Pacific,” Ho added.
Research shows that 35% of respondents would prefer to have their life insurance policies bundled with health protection options like medical reimbursement and critical illness cover.
In addition, Swiss Re found a high potential for increased use of digital channels in life insurance distribution, as more than 70% of consumers indicated openness to researching products, applying for insurance, and transacting online.
On a similar note, a recent COVID-19 consumer survey by Swiss Re found that about one in three Asian consumers are feeling overwhelmed and anxious about their financial future.
“The increased awareness of life insurance during this pandemic period contrasts sharply with the added uncertainty over life and livelihoods brought by the COVID-19 outbreak,” Ho stated. “At no other time has understanding and closing the mortality protection gap been more urgent.”
