The research explores the growing protection gap between consumers in emerging markets and those in developed markets, and offers insights into how the COVID-19 pandemic has impacted consumers’ financial risks, vulnerabilities and needs when it comes to insurance product preferences. The survey data builds on the initial EY Global Insurance Consumer Survey released in February, which uncovered the financial goals and insurance needs of the consumers most financially impacted by the COVID-19 pandemic.
Demographics play role in pandemic-related financial distress
As per the survey, emerging markets consumers experienced more financial impact from the COVID-19 pandemic compared to those in developed markets. Seventy-eight percent of consumers in emerging markets had to dip into their savings, 61% lost income and 54% had to skip certain bills or payments, compared to 33%, 30% and 22% of consumers in developed markets, respectively. Additionally, in emerging markets, where vaccination rates are considerably lower than developed markets, concerns about losing a loved one and financial well-being were notably higher.
The demographic breakdown of the consumers in each market plays a role in the way COVID-19 is impacting financial stability. Consumers in emerging markets are younger (75% are under the age of 44 and only 3% are retired) and lack both a comfortable financial cushion and certain insurance coverages. For example, only 10% have $100k or more in investible assets (versus 37% for developed markets), and 56% of homeowners have coverage for their home (versus 88% in developed markets).
Fayaz Jaffer, EY Americas Insurance Product Innovation Leader, says: “Insurers have an important role to play in protecting those that need it most. They must start by building trust through personal connection and empathy to deeply understand their client’s personal and financial goals. Connecting with customers on a human-level – especially across digital channels, which younger consumers prefer – is imperative to meet the evolving needs of their clients, improve financial well-being and build sustainable relationships long term.”
Emerging markets consumers have strong appetite for purchasing insurance products
Overall, consumers in emerging and developed markets expressed interest in short-term protection products, like insurance that funds college education plans or pays for credit card bills in the event of a job loss. However, among all eight product offerings proposed in the latest survey, the appetite for purchasing a product is nearly twice as high among emerging markets consumers compared to those in developed markets.
Examples include:
• 61% of respondents in emerging markets are interested in purchasing life insurance, versus 22% of respondents in developed markets.
• Consumers in emerging markets are 30% more likely to be interested in an insurance product that pays for hospitalization expenses compared to those in developed markets.
• 88% of emerging markets consumers are interested in an insurance product that pays them three months of income if they lose their job, compared to 47% in developed markets.
• As an alternative to purchasing insurance from traditional carriers, emerging markets consumers expressed interest in purchasing embedded insurance policies. Forty-seven percent of consumers were most interested in purchasing insurance from a health care organization/hospital chain, followed by a hospitality company (25%), large tech company (23%) and the federal government (21%).
Additionally, over half (53%) of emerging markets consumers were willing to share personalized communication data with an insurance or financial company in exchange for help meeting their individual savings goals, compared to 25% in developed markets.
Corporate social responsibility plays significant role in purchasing decisions in emerging markets
The survey also highlights the COVID-19 pandemic, along with other events of the last year, has advanced consumer interest in corporate social responsibility (CSR) and raised expectations about how companies contribute to society. Fifty-nine percent of consumers worldwide know their insurers’ CSR stance at least somewhat well, with consumers in emerging markets more aware of social commitments. An average of 56% worldwide took at least some CSR-related action involving insurance or other financial products. Reputation is the most critical factor, with a quarter of respondents saying that they have chosen one insurance brand over another due to its CSR reputation.
Bernhard Klein Wassink, EY Global Insurance Customer and Growth Offering Leader, says: “Social responsibility and purpose continue to remain top of mind for consumers, so it’s important for insurers to demonstrate their commitment to these issues. Now more than ever, insurers should focus on bringing these issues to the forefront of their products and services to help with financial and social recovery efforts, especially for those who are most vulnerable in the uncertain environment.”
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