On our radar: Improving Life & Health insurance inclusion

The persistent mortality protection gap is a constant reminder of the challenge re/insurers face in reaching underserved customers. The Swiss Re Institute's L&H Insurance Inclusion Radar offers a new tool to understand key factors that have hindered progress on this front. By making insurance coverage  more Available, Accessible and Affordable, our industry can boost societal resilience.

If there's one thing the COVID-19 pandemic taught us, it is just how fragile our lives and our health really are. Though we live in an era of profound technological advancements that insulate us from many threats – or at least allow us to push them from our daily thoughts – the pandemic demonstrated vividly that we still share vulnerabilities of our ancestors who lived centuries ago.

Despite our modernity, we remain mortals. Dating back to ancient Rome, life insurance has helped make sure that people's loved ones were protected against tragic instances when our mortality came to pass unexpectedly. Today, the innovation of insurance continues to fulfill this role.

However, the peace of mind afforded by insurance remains unfulfilled for many. One measure of life insurance's utility, the Swiss Re Institute's Mortality Resilience Index, indicates that more than 50% of global financial needs remain unprotected in the event of a breadwinner's death. Simply put, survivors are often left with insufficient resources, exposing them to financial hardship, potential poverty, or reliance on extended family or community support to pick up the pieces.

Unfortunately, despite the re/insurance industry's efforts to address protection gaps, data shows that global mortality resilience has been stagnant for at least the last two decades, which covers the span of my career. Financial inclusion is of utmost important to Swiss Re. As we work with our clients and partners to reach more people in historically underserved communities, our team realised that we needed fresh new tools to look at this challenge differently.

This was the motivation that spurred a group of three dozen Swiss Re Life & Health specialists to create the Swiss Re L&H Insurance Inclusion Radar. It measures the degree of inclusivity in a selection of 16 life insurance markets, based on what we identify as three dimensions of inclusion: Availability, Accessibility and Affordability, or what we've come to call the 3As.

It might seem obvious that in markets where insurance is available, accessible and affordable, people are better protected. But our L&H Insurance Inclusion Radar offers deeper insights by adding a holistic and consistent framework with which to explore further questions, all the while acknowledging that the answers may differ from market to market. Why do protection gaps persist? And what barriers to inclusion emerge as those that our industry should prioritise?

Taking this systematic approach, our radar pinpoints subtle, sometimes hidden deficits in each market that may detract from levels of insurance inclusion – and which have held us back from closing protection gaps. The research team scrutinised five advanced insurance markets and 11 emerging insurance markets, arriving at some compelling conclusions.

For starters, the L&H Insurance Inclusion Radar illustrates that no insurance market is fully inclusive or scores consistently high across all of the 3As. Whether emerging or advanced, all 16 markets have structural weaknesses that hamper efforts to close the protection gap.

While inclusion is generally higher in advanced markets where life insurance has historically played a more significant role, the L&H Insurance Inclusion Radar demonstrates that typically higher income levels in advanced economies do not inherently translate to higher levels of Affordability.

Among our focus markets, the United States has the highest combined L&H inclusion score. Viewed through our Radar, however, the picture is more nuanced.

Accessibility in the US market is hurt by, among other things, a lack of diversity in the insurance workforce. Reaching diverse communities requires a new approach. Fortunately, change is underway: Our report documents how more than 80% of US insurers have made commitments to advance racial equality, like recruiting more talent from historically Black colleges and universities.

Similarly, in South Africa, the L&H Insurance Inclusion Radar teases out the forces shaping inclusion in that country's insurance market. South Africa, with a long insurance tradition, is the highest ranking of our emerging markets – it outperforms some advanced markets – with inclusion driven by strong innovation and financial literacy.

Still, South Africa is the second-worst performing of all 16 of our focus markets on Affordability behind Colombia, a shortcoming driven by high unemployment and deep social inequalities.

Our Inclusion Radar is more than a ranking system. Its purpose is to inform and strengthen re/insurers' efforts to improve Availability, Accessibility and Affordability. It illuminates areas where inclusion deficits are barriers for would-be insurance buyers. The result is a visual representation of inclusion levels, allowing comparison of strengths and weaknesses. It shows where efforts to remedy deficits should be focused.

As an industry, we must strive to better understand consumer needs in communities that are underserved and more vulnerable, while forging strategic partnerships to boost diversity in workforces and distribution channels. The Inclusion Radar reminds us that innovation in underwriting and product design remains a critical component of positive change. And it calls for collaboration with regulators, to ensure innovation proceeds while ensuring that consumer protections remain robust.

Our lives and wellbeing are fragile. The pandemic brought this fact into stark relief, and it remains true even as the health crisis slowly subsides. This is why it's so important to materially shrink L&H insurance protection gaps, both between countries and within countries. The L&H Insurance Inclusion Radar offers valuable new insights to call re/insurers to more transformational action for inclusive growth.