In recent years, Singapore has witnessed remarkable economic growth and development, transforming into a global financial hub. However, amid this prosperity, there exists a critical concern that often goes unnoticed—the protection gaps in critical illness and mortality coverage.
As Singaporeans lead increasingly busy lives, the importance of comprehensive insurance coverage for unforeseen health crises and mortality risks cannot be overstated. Understanding and addressing these gaps is essential for the well-being of individuals and the broader society.
One of the glaring issues in Singapore’s insurance landscape is the underestimation of the financial repercussions associated with critical illnesses. While medical insurance can cover hospitalization and treatment costs, it often falls short in addressing the additional financial burdens that accompany serious illnesses. Many individuals are unprepared for the potential loss of income, increased medical expenses, or lifestyle adjustments that may be necessary. This protection gap leaves families vulnerable to financial strain during times of health crises, hindering their ability to cope with the emotional and financial challenges that often arise.
Mortality protection gaps pose another significant concern. While life insurance is widely acknowledged for its importance, a substantial portion of the population remains underinsured or lacks life coverage altogether. Families without adequate life insurance face the risk of financial instability in the event of the primary breadwinner’s demise. This protection gap can lead to dire consequences, impacting the education, well-being, and future prospects of dependents.
To address these critical issues, a multifaceted approach is necessary. Firstly, there is a need for increased awareness and education about the importance of comprehensive insurance coverage. Individuals must be informed about the potential financial risks associated with critical illnesses and mortality and encouraged to assess their insurance needs accordingly.
Insurers and financial institutions play a pivotal role in narrowing these protection gaps. Developing innovative insurance products that specifically address the financial challenges of critical illnesses and mortality can provide individuals with tailored coverage options. Moreover, simplified and transparent policy structures, coupled with accessible information, can empower individuals to make informed decisions about their insurance needs.
Government initiatives and collaborations with the private sector are instrumental in creating an environment conducive to comprehensive insurance coverage. Implementing policies that encourage financial planning and insurance adoption, along with tax incentives for individuals who prioritize critical illness and mortality protection, can contribute significantly to closing these gaps.
Critical Illness and Mortality Protection Gap Study in Singapore
Recent findings from a comprehensive Protection Gap Study (PGS) conducted by the Life Insurance Association (LIA) of Singapore reveal a concerning reality in the country’s insurance landscape. The study unveils a mortality protection gap of SG$373 billion and a more substantial critical illness protection gap of SG$579 billion for 2022. This translates to a 21% gap in mortality protection and a significant 74% gap in critical illness protection among Singapore’s economically active population, including the growing sector of platform workers.
The LIA Singapore emphasizes the pivotal role of the PGS 2022 in devising strategies to address the diverse protection and financial planning needs of Singaporeans. This is particularly crucial in light of increased life expectancy and a dynamic socio-economic environment impacting the community’s insurance requirements.
The study recognizes the unique challenges faced by platform workers, who often experience larger protection gaps. In response, the LIA, in collaboration with the broader life insurance sector, is focusing on initiatives to enhance policy comprehension and accessibility. This includes tailoring insurance propositions for specific segments, raising consumer awareness through educational initiatives, and establishing accessible touchpoints for underserved groups, notably platform workers.
While there has been progress in narrowing the protection gaps, significant work remains. Singapore’s economically active individuals have about 79% of their mortality protection needs met as of 2022, a slight improvement from previous years. The average mortality coverage per policyholder has increased to approximately SG$331,200 in 2022, equivalent to about 3.6 times the average annual income.
The critical illness protection gap, while still substantial, has seen a reduction, decreasing to 74% in 2022 from 81% in 2017. The average critical illness coverage per policyholder rose to around SG$193,300, about 2.1 times the average annual income, driven by a 63% increase in coverage since 2017.
As Singapore continues to evolve, the findings underscore the need for ongoing innovation and outreach in the insurance sector. Ensuring that all Singaporeans, including the vital demographic of platform workers, have access to sufficient protection against mortality and critical illness risks is imperative. Strategic efforts focused on education, policy accessibility, and tailored insurance solutions can effectively bridge these critical protection gaps, securing a more financially resilient future for the citizens.
Addressing the critical illness and mortality protection gaps in Singapore requires a collective effort from individuals, insurers, financial institutions, and the government. By fostering awareness, developing innovative products, and implementing supportive policies, Singapore can build a robust insurance framework that safeguards the well-being and financial security of its residents, ensuring a resilient and protected society for years to come.
