Emerging Asia is facing new and widening protection gaps, Peak Re warns

New protection gaps are rising across Emerging Asia—China, India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam—in the wake of the COVID-19 pandemic, presenting both a significant challenge and a unique opportunity for the re/insurance industry to build trust and drive growth in this dynamic region. Clarence Wong, chief economist at Peak Re, highlighted some pressing issues and surprising developments in an exclusive interview with EAIC Today.

While Emerging Asia is seeing steady growth, with its diversified economies becoming more resilient to global shocks, protection gaps have remained huge. Wong pointed out that even the financially literate middle classes in Emerging Asia remain underinsured. He highlighted concerns around mental wellness gaps, cybersecurity, and more traditional areas such as health and home insurance. 

“Large protection gaps still exist, even for Emerging Asia’s middle class that are financially literate and can afford insurance,” he said.

Peak Re’s 2024 Emerging Asia Middle Class report, which surveyed more than 7,000 respondents from six emerging markets: China, India, Indonesia, Malaysia, the Philippines and Vietnam, found that residential home insurance penetration was just 38 percent. “This shows that many middle-income consumers remain vulnerable to risks including property damage or health crises,” Wong noted.

Beyond traditional risks, new concerns have surfaced since the pandemic. Mental wellness has come to the forefront as a major issue, with 28 percent of Indonesian respondents and 62 percent in India in a 2022 survey claiming to have experienced mental health issues. “We might also have a huge mental wellness protection gap in Emerging Asia,” Wong remarked, stressing the need for insurers to address this growing concern.

Natural catastrophes represent another significant protection gap. Wong pointed out that the region has the largest catastrophe protection gap globally, and it is even more pronounced in Asia’s emerging and less-developed markets. 

“The challenge posed by the increasing frequency and severity of extreme weather events limits insurance and reinsurance appetite for secondary perils,” he explained. As extreme weather events become more frequent, the industry will need to find innovative ways to manage these risks.

A complex picture

The region’s shifting economic landscape, influenced by global inflation, China’s economic slowdown, and rising geopolitical tensions, further complicates matters. “While global inflation has moderated, it remains high in certain areas, driving up claims costs,” Wong said. He is concerned that China’s economic slowdown, as the world’s second-largest insurance market, could impact reinsurance demand and services across the region.

“The global supply chain is undergoing significant changes because of heightened geopolitical tensions,” Wong added. These shifts will affect how the insurance industry approaches risk and transparency in global supply chains.

“Everyone always says that the middle class is the future of insurance in Emerging Asia.” 

One of the most pressing areas of concern is cybersecurity. Peak Re’s survey revealed that 65 percent of consumers had experienced some form of cyber attack, yet personal cyber insurance remains “very limited” across Emerging Asia. As digitisation expands, this gap will grow if not addressed, Wong warned, adding that failing to close such gaps could erode consumer trust and hinder the industry’s development. 

“We need transparency, information sharing, and open dialogue with various stakeholders, and this is what we aim to do with our survey,” Wong said.

He emphasised that “challenges mean opportunities” for the insurance industry to innovate and adapt. Emerging Asia’s middle class, he believes, will be key to driving future growth in the insurance sector. “Everyone always says that the middle class is the future of insurance in Emerging Asia,” Wong said, adding that understanding their risk preferences and financial behaviours will be crucial.

“The understanding of how the middle class see the risk landscape and what are their risk preferences is the kind of information that is very limited in the Emerging Asia region. This is a great opportunity for insurance in the region.

“We need a holistic approach, with the participation of the public sector, academics and business partners, non-governmental organisations and the local community,” he said.

Watch full video below.

Peak Re’s 2024 survey revealed unique insights into evolving roles for women in the insurance market. Women in the region are becoming more financially independent, accounting for one-third of household income in many cases. Working mothers, women entrepreneurs, and women breadwinners tend to see themselves as having better financial literacy than the average man. 

However, protection gaps remain—many women entrepreneurs have low awareness of commercial insurance products such as business interruption and cyber insurance. 

“There are still tangible gaps between insurance awareness and ownership,” Wong concluded.

Clarence Wong is the chief economist at Peak Re. He can be contacted at: clarence@peak-re.com 

For more news from the East Asian Insurance Congress conference (EAIC) click here.

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