Life and health sector failing on inclusivity reinsurer warns

Swiss Re has warned that the life and health sector has to focus on delivering greater inclusivity as the economic slowdown puts ever more pressure on families and those on low incomes.

The call came as the Swiss Re Institute (SRI) published a new study which explores the extent to which life and health insurance in 16 markets is available, affordable, and accessible.

It concluded that none of the focus markets is fully inclusive. The reinsurer said that by identifying inclusion deficits, SRI’s “Life & Health Insurance Inclusion Radar” can help guide and inspire life and health (re)insurers as they work to narrow protection gaps that leave underserved groups vulnerable.

Jérôme Jean Haegeli, (pic) Swiss Re’s group chief economist explained: “The research comes as the global economy is slowing and social inequalities have increased enormously on the back of the uneven recovery and highest inflation surge in 40 years. Life and health insurance is a powerful remedy, providing families with financial relief after tragedies and by covering healthcare costs. Insurance covers are key to fostering economic and social progress with more focus needed now on inclusion to narrowing protection gaps in life and health.”

The report found 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.

In advanced markets consumers face fewer barriers to obtaining insurance, but higher incomes in advanced economies do not necessarily translate into higher levels of insurance 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,” it added. “The opposite is the case in emerging markets, where products with low minimum face values boost participation for low-income communities.”

“While life insurance inclusion levels in the US are highest among the markets assessed, the availability of insurance helped offset relatively lower scores for accessibility and affordability,” it added. “In emerging markets, inclusion was highest in South Africa, where a robust showing in the availability and accessibility dimensions offset low marks for affordability.”

Julien Descombes, head Life & Health Products Reinsurance said: “By making life and health insurance more available, accessible, and affordable (the Inclusion Radar’s 3As), families and households will be better equipped to withstand financial challenges that occur when a breadwinner passes away or when they incur healthcare treatment costs. Making insurance more inclusive helps create a stronger, more resilient society.”

The study said improving insurance inclusion demands a “multi-faceted approach that starts with better understanding of consumer needs via market research prioritising underserved communities”.  It continued (re)insurers must explore novel strategic partnerships to foster distribution diversity and use digital technology to achieve scale.  “Continued innovation in product design must accompany more efficient, inclusive underwriting practices,” The report stated.

“Based on the study findings, we see four main areas where insurers can foster a path to more inclusive insurance,” Swiss Re explained. “These are to better understand consumer needs across all segments of society; to engage in strategic partnerships to boost diversity in distribution channels; to innovate in underwriting processes and product design; and to engage with regulators to maintain a balance of consumer protection and innovation.”