Innovation will drive greater inclusion and with it opportunity

Swiss Re’s Head of Sustainable L&H Delivery, Melissa Leitner, says the market has an opportunity to reach those on lower and middle incomes across the world, to enhance the sectors inclusion, but it will require innovation and collaboration with regulators.

She was speaking after the Swiss Re Institute has published the results of a new study which explores the extent to which life and health insurance in 16 markets is available, affordable, and accessible. It concludes that none of the focus markets is fully inclusive.

Leitner, says the results, while surprising, were not unexpected and that there are areas where the advanced markets can learn from the emerging markets around the way life and health products can be distributed to lower income communities.

The study found that on average, consumers in advanced markets face fewer barriers to inclusion than in emerging economies, but the typically higher income levels in advanced economies do not necessarily translate to higher levels of affordability. With the exception of Japan, in advanced markets the smallest policy sizes on offer often are too expensive and not relevant for lower-income consumers with modest needs. The opposite is the case in emerging markets, where products with low minimum face values boost participation for low-income communities.

“We wanted to adopt a holistic view on the topics around inclusion,” Leitner explains. “The key findings of the report are in the strengths and weaknesses for each market.

“There is room for improvement in every market but the areas of improvement differ from market to market.”

For the UK for instance the sector is strong in terms of the availability of products and the development of skills for those working within the sector. However, affordability and accessibility are areas where there is a need for improvement.

“We find affordability is a challenge for the advanced markets,” Leitner explains. “The distribution of products to lower income customers and the regulatory frameworks are a challenge for the more advanced markets we have examined.”

The Swiss Re Institute compared the markets for the most affordable cover and to ensure a level playing field for the comparison calculated the average GDP per person in each market. Again the most basic value products were more expensive in the advanced markets.

“Emerging markets see more product development to shape products to better access low and middle class communities,” Leitner says. “The regulators are also likely to be more accommodating and there are lessons that advanced markets can learn from the examples we see in the emerging markets.”

She adds: “For the advanced markets, there needs to be a balance struck in terms of regulations, that allow consumer protection to be in place but will encourage innovation around product development and distribution to sectors of society which are finding accessibility and affordability a challenge in the current environment.”

Accessibility is the biggest factor behind a lack of inclusion in emerging markets, driven partly by lower financial literacy as well as lower usage and trust in the financial services sector.

Leitner says the study defines four areas that the life and health companies need to address.

“The first is simply to understand,” she explains. “Companies need to understand those communities which they are seeking to serve better, both in terms of the products they need and how best they can be delivered.

“Companies need to invest in innovation around the way in which they can distribute their products. We need to find novel ways to reach these groups and it may well involve partnerships with organisations outside of the industry which have better access to those communities.”

Leitner continues: “We need to look at greater innovation around the products we offer and how we can increase the effectiveness of how we supply those products. We also need to recognise how regulation impacts our business and we need to ensure we are engaging with regulators to ensure that we play a part in the way future regulation will look.”

However, while the study highlighted both strengths and weaknesses Leitner believes that the current market delivers opportunities for life and health insurers.

“There is a risk that insurers will be seen as losing their relevance,” she says. “That would be really unfortunate given the benefits of the products and services we offer to policyholders.

“National governments are facing the challenge of the level of support they can deliver to the population and as such there is the opportunity for insurers to offer solutions for the risks that people across all social and financial demographics face.”

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