PEOPLE IN HONG KONG do not have enough life insurance protection, according to research conducted by Swiss Re. The Swiss firm had assessed life protection coverage in several markets, including Hong Kong, over the past few years and found all of them wanting to varying degrees, said David Alexander, life manager, Hong Kong and Macau. According to Swiss Re research, there is a 'life protection gap' (the difference between the amount of life insurance cover a person has and what he or she requires) of US$320 billion in Hong Kong. Among other countries surveyed, there was a gap of US$474 billion in Australia, US$640 billion in Italy and more than the US$234 billion in Taiwan. However, these totals may be less relevant than the per capita figures. And here, Hong Kong falls well behind the other places surveyed. On a per capita basis, Hong Kong is estimated to be US$457 short of life cover, a far bigger gap to plug than the US$250 in Australia, US$141 in Italy and mere US$98 in Taiwan. But exactly how much cover is enough? This would depend on a person's individual circumstances, said Mr Alexander, who recommended that people seek the advice of a qualified financial adviser. 'For example, if you have a person who is unemployed with no dependents, there is no need for any cover, and they probably could not afford it anyway. At the other end of the scale, you might have a senior executive with a family, including school-going children and a big mortgage.' For its Hong Kong study, Swiss Re took what it judged to be the average case of a working person with dependents on a salary of $15,000 a month, or $180,000 per year, as the basis for calculating the protection needs. 'In broad terms, we assume that a working person with a family including children, would need on average 10 times their annual salary in life insurance protection. This would allow the family to continue to live the same lifestyle should that person die unexpectedly. In fact, one could justify more than 10 times the annual salary if the person had large commitments, such as children at school and a large mortgage,' Mr Alexander said. Swiss Re argued that inadequate life insurance caused 'genuine, widespread hardship'. In its survey, the firm cited a United States study which showed that the poverty rate of women in the US who were widowed rose from 9 per cent to 42 per cent in the two years after their husbands died. Mr Alexander believed the main reason behind the shortfall in life insurance protection in Hong Kong and other places was that people did not wish to acknowledge their mortality. Also, in the past, many people could not afford the 'relative luxury of life insurance protection'. There were also cultural factors at work. 'In Asia, we hear that people like to get something back when they buy life insurance. Term insurance pays out only if you are to die within a specified term, for example 10 years. If you survive, you get nothing. It is strange that people seem happy with the concept of no return of premium on fire insurance, car insurance and travel insurance but not for term life insurance.' To shrink the life protection gap, education had a role to play by encouraging people to speak to their financial adviser, Mr Alexander said. He believed life insurance firms could raise their customers' awareness of their real protection and savings needs in order to grow their business. 'Swiss Re estimates there is a market of $6.3 billion in annual premiums for insurers to work on if they are to satisfy the $2.5 trillion of consumer needs for life insurance protection.'
