What value does life insurance bring to society?
The straightforward answer is that the life insurance industry has a responsibility to promote social wellbeing in our communities by supporting people through times of financial adversity and illness, while also providing an efficient means of pooled saving for income in retirement.
But that is only part of the story. The investment of long-term insurance funds contributes directly to economic development and growth through expanding capital markets, financing infrastructure schemes and investing in commercial enterprises.
So, the life insurance industry plays an extremely important and highly responsible role in the social and economic development of the communities of Asia. In AIA, we are committed to this as our purpose and are proud to be a leading and integral part of that development.
Mortality protection gap
Asia has witnessed huge economic growth in the last 30 years, bringing a large proportion of the population into the market economy for the first time with rising incomes and wealth. At the same time rapid urbanization has reduced people’s ability to depend on traditional extended family support networks. Many governments across the region are aware of the risks of expanding the provision of state or taxation-funded social welfare services to keep pace with burgeoning demand.
The result, as we know, is that the region’s population is acutely unprepared and under-protected to cope with the financial consequences of mortality and disability risks. The size of the mortality protection gap alone is estimated to be more than US$41 trillion across Asia Pacific.
The emerging ‘protection gap’ needs to be addressed through private insurance taken out either by the individual or on a pooled group basis by employers. Despite the industry’s best efforts to close this gap, much more needs to be done to help secure families in the region against unexpected financial hardship, enabling them to meet these challenges head on and achieve their financial goals at each stage of their lives.
As an industry, we need to work together to address these issues by investing more in consumer education, providing products that best suit people’s evolving needs, enhancing the training of our own people, developing our distribution platforms and innovating through technology.
Promoting health and wellness in Asia
As the region continues to experience rapid economic growth and higher disposable incomes, more and more people are affected by lifestyle-related diseases and much wider use of medical insurance is needed to fund treatment.
Prevention is better than cure and, according to the World Health Organization, the risk of non-communicable diseases can be reduced by tackling four major behavioral and lifestyle risk factors: tobacco use, harmful use of alcohol, an unhealthy diet and physical inactivity.
AIA advocates long-term behavioral changes through providing the incentives, knowledge and tools to help our customers achieve their personal health goals. AIA Vitality, our science-backed wellness and shared value program is designed to encourage members to be responsible for their own health. It is the only extensive program of its kind in the region, created to influence long-term changes in behavior by going beyond simple loyalty or discount programs. Other benefits include in-depth health, nutrition and fitness assessments, educational content, trackers and social media tools.
The launch of AIA Vitality is one example of how the business of providing financial protection can be combined with the important social objective of advocating healthy living and the need to address the day-to-day challenges facing our customers when it comes to wellness.
This new emphasis on preventive care alongside the expansion of conventional protection insurance requires a change in mind-set across society but it is also an important tool in advocating and promoting a healthy Asia.
Safety net and economic development
The insurance industry has long been an important financial partner to governments. As with healthcare, retirement costs can be a huge contingent fiscal liability for the public sector balance sheet. The life insurance industry helps and encourages households to take ownership of their retirement plans in a timely manner through regular savings.
We also provide a source of long-term capital for funding infrastructure development. Life insurance liabilities are long-term and this corresponds well with the investment needs of large-scale infrastructure financing.
Furthermore, insurance companies support the development of bond markets in a number of countries across Asia. The deepening of these markets is critical to the growth and stability of financial systems.
The insurance sector is helping to expand levels of financial protection and to enhance social welfare provision, but the challenge remains considerable. The development of the insurance industry is accelerating financial and capital market reform and providing the long-term investment needed to finance the next stage of economic development across the region. There are significant opportunities for the industry to step up and make a real difference to the lives of people and their communities in many important ways in this part of the world.
It is a goal we must work together with commitment and energy to achieve.
(This article was first published by The Nation in Thailand in its May 2, 2015 issue. Mark E Tucker is the Group Chief Executive and President of AIA Group)