Swiss Re Survey of Risk Appetite and Insurance: Asia-Pacific 2011

Swiss Re Survey of Risk Appetite and Insurance: Asia-Pacific 2011 highlights: – India’s Generation X and Y of 20 to 40 years old are most willing to take risks as compared to their counterparts in emerging Asia – 78% are planning to buy life/health insurance products in the next 12 months. This ratio is the highest in Asia-Pacific – Perceived cost is a barrier to buying insurance; whereas life insurance is in general very affordable and within the price they are willing to pay – For the insurance industry, the 20 to 40 year olds are not only the future buyers of insurance, but also represent tremendous business opportunities now

The insurance business is at a critical stage in India. Over the next two decades we are likely to witness high growth in the life insurance sector for four reasons. Financial deregulation always speeds up the development of the insurance sector. India’s favourable demographics characterized by growing young population and increased longevity will drive demand for protection, health and annuity products.

Growth in disposable income influenced by strong economic growth prospects along with high savings rate and huge demand for tax planning products will continue to boost the life insurance growth in the future. Huge untapped potential in the mid-sized cities and rural India presents long-term business growth opportunity for the life insurance sector.

The insurable population in India has been assessed at 250 million by 2020 and this number will increase in the coming decades. This should be supplemented by innovative insurance products and programmes with reinsurance support by companies and government to extend coverage to much larger sections of the population.
Swiss Re commissioned a large scale survey covering 13,800 consumers aged 20 to 40 across major cities of 11 Asia-Pacific markets between April and May 2011. The survey aims to identify any changes in consumer risk attitudes as compared to the results of the inaugural study conducted during the Global Financial Crisis in 2009, by using the Swiss Re Consumer Appetite for Risk Index (CAFRI).

The survey scope has been extended in 2011 to look into the insurance needs and buying behaviours of respondents.

India leads emerging Asia in consumer risk appetite:

India has become the most risk taking emerging market in Asia. India ranks the 7th in the CAFRI table, behind all the developed markets.

Amit Kalra, Swiss Re’s Head of Economic and Consulting India, says: “Across Asia Pacific, the 20 to 40 year olds in India are the most willing to take risks in their lifestyle, such as pursuing dangerous sports, working for long hours, and living in the present without caring about the future.”

“But they continue to be among the least willing to take risks on their career (9th) and finance (10th). For instance, 83% of respondents still consider capital preservation as their top priority in making an investment. This proportion is the highest in the region,” adds Kalra

Worry about medical bills fuels insurance needs:

The study shows that a high majority (71%) of respondents in India are concerned about the amount they have to pay out of their pockets for medical expenses relating to major illness. And 70% are concerned that their medical/health insurance premium will increase beyond their affordability in the future. Both figures are higher than the Asia-Pacific averages of 67% and 58% respectively.

“Given the significant protection need, 78% of respondents in India are planning to buy life/health insurance products in the next 12 months. This ratio is the highest in the Asia-Pacific alongside Indonesia,” says Kalra. “The key drivers for insurance purchases are: the inability to pay for long-term medical expenses, getting a serious illness and early death.”

Life insurance is very affordable:

This study also shows that life insurance is not as expensive as people may perceive, and is indeed very affordable in India. Asked what would stop them buying insurance, 42% of respondents say price is an issue. But 80% are willing to pay at or above the market price range for a specified term life insurance cover. This proportion is the highest in the region.

“More education is needed to ensure consumers understand the value of protection insurance against the price they pay,” says Kalra.

Value, reputation and security most considered:

The survey also shows that TV is most preferred (71% – the highest in the region) by respondents in India for sourcing financial information, followed by insurance agents (63%) and newspapers (53%). An overwhelming majority of respondents (89% – the highest in the region) prefer buying life and health insurance through insurance agents, followed by banks (36%) and independent financial advisers (30%). The most important criterion for choosing an insurance company is value for money (55%), followed by good reputation (52%) and financial soundness (42%).

“Insurers must demonstrate the benefits of insurance and their strong value propositions in order to meet the specific needs of consumers, who put strong emphasis on value, reputation and financial soundness,” says Kalra.