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Mortality protection gap widens even more in Asia

Source: Asia Insurance Review | Sep 2015

The mortality protection gap in Asia is continuing to widen at an alarming pace, with emerging markets further fuelling the divide, said Mr David Alexander, Director, Head of Business Development, Asia at Swiss Re.
   Preliminary findings of a study on the mortality protection gap in Asia by the Swiss reinsurer indicates that the mortality protection gap has increased by 38% across 13 Asia-Pacific markets over the last four years. The protection gap was estimated to have reached US$58 trillion in 2014, against US$42 trillion four years ago, when the survey was last conducted.
   “There has been a lot more sales and a lot more focus on this life insurance aspect [the mortality protection gap] by insurance companies, but nowhere near enough to keep up with the economic growth around Asia,” said Mr Alexander.
   The mortality protection gap refers to the difference between the resources available to individuals and those needed to maintain their living standards following the death of a working family member.
   The Swiss reinsurer calculated the protection gap by determining the level of protection necessary to maintain living standards - which it estimated to be ten times the amount of the breadwinner’s monthly income - and by subtracting from it the amount of life insurance and half the amount of savings already in place.
Large increase largely attributable to China
The large increase in the mortality protection gap was largely attributable to China, Mr Alexander said. China’s large population, while enjoying a rise in disposable income, had failed to put the adequate protection coverage in place.
   Of the 13 insurance markets surveyed, all lacked adequate protection coverage, but emerging markets clearly emerged as laggards. While Taiwan had the highest level of protection, followed by Australia, the protection margin - that is the ratio of protection lacking as a percentage of the amount of protection determined to be needed - of the other 11 markets polled ranged from 55% to 90% and above.
   “The really emerging markets have yet to address this issue,” Mr Alexander said. “In the economies where the insurance markets have really developed over the last few years, the amount of protection is also relatively low.”
   That is because insurers typically focus on selling saving products, before moving on to protection products, he said.
   The 13 insurance markets covered in the survey are Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam.
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