Swiss Re published a study,Mortality Protection Gap: Asia-Pacific 2011, which finds that the aggregate mortality protection gap across 12 Asian markets expanded significantly from USD 16 trillion in 2000 to USD 41 trillion in 2010, representing an average growth of 10% per year.

The mortality protection gap in India also expanded from USD 2 trillion to USD 6.7 trillion during the same period. This is the first study of its kind featuring multiple Asia- Pacific markets.

“There is a sizeable mortality protection gap in all the markets covered by our study, particularly in China, Japan, India and South Korea,” says David Alexander, Head of Business Development Asia, Swiss Re.

“Swiss Re believes that the family breadwinner should typically have 10 times their annual salary in life insurance protection. The amount of such protection in place currently is simply not enough to protect their families should the breadwinner pass away unexpectedly. The Protection Gap we have identified equates to a massive opportunity for the insurance industry now – the mortality protection gap is worth approximately USD 124 billion in potential premiums to the Asia- Pacific industry,” adds Alexander.

Sizable mortality protection gap in both developed and emerging markets.
The mortality protection gap exists when the proportion of protection needed is not yet covered by either insurance or savings In India, for example, in 2010 every USD 100 needed for protection, there is only USD 7.4 of savings and insurance in place, leaving a massive protection gap of USD 92.6.

The study also computed the gap per working person with dependents. In more developed economies which are perceived to have more mature insurance markets, the gap per working person with dependents is substantial, which is partly explained by high income and cost of living.

Address life insurance needs
The continuing growth of Asia-Pacific economies will drive the need for even more life insurance protection. This study calls on the life insurance sector to understand such needs and reconsider how to best educate and guide the general public on life insurance matters.

Paul Turner, Head of Client Management, Division Globals says: “Large protection gaps in populous markets such as China and India imply tremendous growth opportunities, but developing attractive products and efficient and effective sales channels are essential to succeed and yet very challenging.”

“In more mature markets such as South Korea and Hong Kong, growth potential might be more limited, but the large gap per working person is already driving the development of protection products targeted at the high net worth customer segment,” says Turner.

Change consumer perception: Life insurance is affordable
The extent of the mortality protection gap across Asia-Pacific is also consistent with the findings of Swiss Re’s “Survey of Risk Appetite and Insurance: Asia-Pacific 2011” conducted between April and May 2011.

According to this survey, 40% of the respondents said their families would or might struggle financially in case of an adverse event such as early death. While insurance is widely considered an important protection tool, ownership of pure life insurance products is still low in many Asian markets.

The survey also identified the major barriers to purchasing insurance:
1) cost and 2) lack of available funds.

Despite the perception that life insurance is expensive, over half of the survey respondents were willing to pay at or even above the market price for a pure life insurance product.Turner adds: “This perception gap in customers’ minds is an
opportunity for the life insurance sector to reach out and provide greater clarity to consumers on the relative cost and value of pure life insurance, for example, by comparing the cost of insurance with that of a cup of coffee a day.”

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