Under-insurance is one of the biggest challenges facing the global insurance industry. In developed regions, there is significantly higher insurance coverage available for the people. However, a large number of individuals in developing countries are either not aware of the benefits of insurance or do not get adequate coverage. This makes them and their family members vulnerable to financial insecurities in case of death of an earning member.
In the last few years, both the government authorities as well as insurance companies have tried hard to create awareness regarding the benefits of life insurance. As a result of these efforts, the global life insurance market is expected to grow at a steady rate of approximately 6.4 percent until the year 2020. In terms of premium income, the average annual growth rate is expected to be around 4 percent during the same period. As compared to developed regions of the U.S. and Europe, the growth of the life insurance market is going to be significantly higher in developing regions like Asia Pacific, Africa, Latin America, and the Middle East.
Life Insurance Market
Life insurance is one of the most popular forms of insurance policies in the world. It is a contractual agreement between the insurer (insurance company) and the insured (individual subscribing to the policy). In case of the death of the insured person, the insurance company reimburses a pre-agreed amount to the nominated beneficiary. The insured person has to pay a premium to the insurance company to continue enjoying the coverage. In most cases, the insured person needs to undergo a medical examination to determine the eligibility for a policy.
In case the insured person fails to pay the premium on time, the policy lapses and the coverage is discontinued. Life Insurance essentially acts as a safety net that offers financial security to the family of the deceased. To safeguard the interests of the insured persons and also regulate the working of the insurance company, a statutory authority is established by the government. For instance, in India, all insurance companies and policies come under the purview of the Insurance Regulatory and Development Authority of India (IRDAI).
Transformation in the Life Insurance Market
With the rapid integration of technology in the insurance industry, the life insurance market is undergoing a host of changes. These developments are contributing to the expansion of the life insurance market and making it accessible to a large number of people.
- Insurance companies are incorporating mobile technologies, cloud platforms and blockchain technologies in their operations. The insurance industry is one of the earliest adopters of blockchain. All these technologies are helping the insurance companies reduce the time and costs involved in their processes. It is also helping to identify fraud and is bringing down the error rates.
- Merger and acquisition activities going on in the life insurance market have helped in streamlining the functioning. Instead of many smaller players, there are now selected big players who are in a better position to use the latest technology to deliver their services. This trend has also led to an increase in life insurance premiums as fewer companies result in fewer options for consumers.
- Online platforms are becoming the preferable mode of subscribing to life insurance by the customers in developing regions. The platforms offer the customers with several insurance policies that meet their requirements, from which the customers can choose the life insurance policy they prefer. This concept has expedited the process of policy issuance and has brought down the costs involved.
- With the rising standards of living, the demand for life insurance is significantly increasing from developing regions of Asia Pacific, Latin America, Africa, and the Middle East. Out of these regions, Asia Pacific has the highest awareness regarding life insurance while Africa has the lowest. These developing regions are the major driving force behind the steady growth being witnessed in the life insurance market.
Future Opportunities in Life Insurance
There are plenty of opportunities available in the life insurance sector.
- One of the major future opportunities in the life insurance sector is the disruption caused by technology. Latest technologies like blockchain and cloud computing offer an incredible opportunity to the insurance companies. Those insurance companies that are not able to leverage these technologies for their benefit will be at the risk of being left behind.
- As the level of income in developing countries is increasing, they present excellent growth opportunities for the life insurance market. Low life insurance coverage combined with increasing awareness about insurance, presents an incredible chance for the insurance companies to establish a stronghold in the market.
- Government agencies in developing regions are creating awareness regarding the benefits of life insurance. The younger population in these countries considers life insurance as an important part of their financial planning. This makes the work easier for the private insurance companies as there is already a demand for these services.
- In the developed regions like the UK, the demand for private insurers in the life insurance segment is increasing. Earlier people used to prefer government funded schemes, but this trend is changing, presenting another growth opportunity for insurance companies.
With such incredible opportunities on offer, the future of the global life insurance market seems to be poised for tremendous growth, fuelled especially by the developing regions.