Risk awareness and affordability are key causes of the protection gap
A lack of risk awareness and affordability are two major causes of the protection gap in Asia, Arina Tek, vice president, market research and analysis for Peak Re, said in a presentation given at the EAIC.
Summarising the findings of her recent Peak Insights paper, Narrowing insurance protection gaps through building trust and customer-centricity, she said that for re/insurance companies to capture the full potential of the Asian market, they need to consider the fundamental reasons for insufficient financial protection.
Addressing the lack of risk awareness by educating existing and potential customers on risk exposures and the consequences of being underinsured is part of the solution.
“For middle class buyers, the choice of insurance depends on the relationship the insurer has with the family, but with poorer families you have a high chance that family has had no interaction with insurance, so you need to convince them of the importance of insurance,” she said.
It was noted during questions from the floor that this may require effecting a shift in a common attitude in Asia that misfortunes happen, or don’t happen, “God willing”.
Insurance companies also need to scrutinise their own shortcomings as reasons for underinsurance, she said. Transparency, accessible information and interacting regularly with policyholders can all create improvements.
So too can the creation of simpler products, more customer-friendly solutions and better service.
“The role of the insurers is not only paying the claims: additional service information related mostly to risk management should now play a greater role,” she said.
Tek added that traditional channels such as staffed agencies remain the preferred way of purchasing insurance in developed Asia, whereas in emerging Asia, customers are more likely to do business through traditional channels (agency, bank and broker) and digital platforms.
The choice between traditional and digital channels also has significance depending on the age of the target customers. In order to nurture future growth, insurers need to interact not only with the working generation but also with generation Y—and they are more likely to purchase insurance online.
“With the increasing use of new technology we should also expect that older Asians will probably be willing to interact with their insurers in the same way,” she said, recommending that insurers maintain their traditional channels while also building their digital capabilities.
“Through customer-centricity we can create trust and loyalty,” she said.
