Sigma 1/2015: emerging markets ready to spend for healthcare

The latest sigma study, Keeping healthy in the emerging markets: insurance can help (see download box at right), assesses the development of healthcare services and insurance in emerging markets.

Among other issues, the study explores the utility of private insurance in helping consumers access services not covered by public-sector healthcare systems, and to pay for treatments supplementary and/or complementary to those available from state-sponsored schemes.

 

Demand for private health insurance growing
Traditionally, the money to pay for healthcare in emerging markets has come from the government via taxation revenues and out-of-pocket contributions from private household savings. However, reliance on these two channels of financing is becoming increasingly challenging, given mounting pressures on public finances and as advancements medicine and treatment options push up the cost of care services. And this raises questions as to the sustainability of existing channels of financing for healthcare services.

 

Key for sustainable healthcare systems
Private Health Insurance (PHI) offers consumers financial protection against future care-related expenses at affordable regular premiums, relieving the burden of large one-off hits to private savings. It also offers more choice with respect to place, type and level of treatment, and, with certain products, gives consumers freedom to choose how to use the benefits received. On the supply side, meanwhile, PHI can bring innovation across the value chain in healthcare, including in product development, distribution, underwriting, claims and customer services, leading to better services at lower cost. 

 

 

Only one in ten people feel financially confident
We asked people to consider their current financial position, and tell us how their household would be affected if they were to suffer a long-term illness, disability or if they were to die. The overall result highlights the burden of worry which most people carry: only 1 in 10 people can confidently answer that irrespective of an unexpected shock to their health or life, their family would remain well positioned financially.

 

I would recommend anyone who’s reading this now to do your own personal analysis. How would you answer the above question? Personally, it led me to buy more protection to cover future mortgage costs.

 

Disability Income Protection gap: We are broadly under insured
For the first time the report quantifies the”Disability Income protection gap” – a shortfall estimated at EUR 750billion. This is the gap between what’s required to replace 60% of income for anyone who becomes ill or injured, minus the amount currently available through private, employer and/or state funds.

 

The situation is further compromised by short-term benefit periods and reducing state benefits. All of it adds up to a danger for consumers and a growth opportunity for our industry.

 

What remains incredible for me in many European countries is that disability benefits are often based on a lump sum – usually presented as a multiple of annual salary (for example 5 or 10 times). This may be sufficient for a 50-year-old worker but what about the young person who falls ill or suffers an accident?

 

A lump sum payment wouldn’t cover the long term needs, and the shortfall would create lasting consequences. I see this as a huge opportunity for the industry to offer adequate disability insurance protection to our society!

 

Consumer behaviour isn’t always what you expect
We’ve all heard and talked about the life insurance protection gap, but the report reveals some new and interesting nuances around consumer perceptions and behaviours that may help the insurance industry attack the gap from different angles. How can we make more meaningful connections between our products and the peace of mind they provide? Are we using the right media to connect with them?