Written by: Aayudh Sen
Despite significant strides in narrowing the protection gap for critical illness (CI) coverage in Singapore, a substantial portion of the population still faces challenges in securing adequate protection against health-related financial risks. Rising insurance premiums, coupled with misconceptions about necessary coverage amounts, continue to present hurdles for many Singaporeans.
A recent study conducted by AIA Singapore sheds light on the ongoing struggles faced by individuals and families when it comes to safeguarding themselves against critical illnesses. According to Irma Hadikusuma, AIA Singapore’s chief marketing and proposition officer, the study reveals a concerning trend: one in four Singaporeans lacks sufficient CI coverage, leaving them vulnerable to financial strain in the event of a health crisis.
While there has been a reduction in the CI protection gap, as reported by the Life Insurance Association of Singapore (LIA), from 81% in 2017 to 74% in 2022, the gap remains significant. This reduction is attributed to various factors, including increased awareness and uptake of CI coverage. However, the gap still represents a substantial portion of the population without adequate protection.
One of the primary challenges identified by Hadikusuma is the disconnect between affordability and desired coverage. Singaporeans are price-sensitive consumers who often underestimate the amount of CI coverage needed to adequately protect themselves and their families. Despite desiring maximum coverage, many respondents in the study indicated a median CI payout of only $100,000, falling far short of the recommended minimum of $300,000.
The economic implications of inadequate CI coverage are profound, particularly for economically active individuals and permanent residents, including platform workers. Data from the LIA highlights a mortality protection gap of $373 billion and a critical illness gap of $579 billion among this demographic. While there has been some improvement in mortality protection needs, the CI protection gap remains substantial, underscoring the need for targeted interventions.
In response to these challenges, insurers are striving to innovate and adapt their offerings to better meet the needs of consumers. Dennis Tan, president of LIA Singapore, acknowledges the progress made since 2017 but emphasizes the importance of addressing remaining gaps in the insurance landscape. Insurers are focusing on simplifying policies, enhancing accessibility, and tailoring solutions to different customer segments, particularly those with medium to high protection gaps.
Public education initiatives are also crucial for raising awareness about the importance of insurance and empowering individuals to make informed decisions. By establishing accessible touchpoints and providing tailored solutions, insurers aim to enhance financial inclusivity and ensure that everyone has access to vital insurance protection.
Looking ahead, Hadikusuma expects insurers to continue prioritizing the CI market and offering affordable yet comprehensive plans to encourage more Singaporeans to protect themselves adequately. With the CI insurance market poised for rapid expansion, driven by growing awareness of health-related risks and regulatory developments, there is optimism for increased insurance penetration and consumer protection in the years to come. However, addressing the remaining challenges will require concerted efforts from insurers, regulators, and other stakeholders to ensure that all Singaporeans have access to the critical illness coverage they need to safeguard their financial well-being.
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