(First of two parts)
While the coronavirus disease 2019 (COVID-19) pandemic has financially impacted some parts of business and society in the Philippines more than others, consumers were also affected on psychological, emotional and economic levels. As a result, consumer insurance behaviors and preferences are evolving. This presents insurers with a unique opportunity to adapt their products and distribution models, provide value and support consumers against uncertainty and risks during this unprecedented time.
The EY 2021 Global Insurance Consumer Survey reveals relevant insights about the impact and anticipated changes to consumer insurance preferences and buying behavior brought about by COVID-19, as well as how insurers could adapt. EY surveyed consumers in various countries in Africa (South Africa), Asia-Pacific (Philippines, Japan), and North America (Canada, US) between May and August 2021. The objective was to gather insights about how the COVID-19 pandemic impacted the lives of consumers and their evolving insurance needs.
In connection to an increased desire for greater financial security, the survey shows that the pandemic brought about a significant interest in obtaining life insurance. The insurance industry can seize this chance to help consumers manage this challenging environment and support their financial well-being. The insurer’s role entails aligning solutions to cater to changing needs, helping consumers by providing a “safety net” protecting against future financial risk and uncertainty, and enabling digital channels to meet consumer demands. Insurers must devise ways to help customers understand better their products and the value they provide to remain relevant moving forward.
CONSUMER BEHAVIOR, PREFERENCES BY FINANCIAL IMPACT
Consumers across all countries express notably high concern about the effects of the pandemic. However, a sizable difference in scale of the financial impact from the pandemic is reported between the most impacted segment and the least impacted segment. Each segment reveals unique needs that necessitate insurers to adjust their products, solutions, and distribution channels to be flexible and easy to understand.
Comparing the results of the financial impact survey conducted in emerging countries like the Philippines and South Africa against the developed countries like Japan, the US, and Canada, we can infer that consumers in emerging markets experienced more severe financial consequences. These include job loss, reduction in work schedules and the need to dip into savings. Nearly half of the emerging markets respondents — 46% at most — experienced these consequences to a great degree compared to 26% or less who felt the same in the developed markets.
In the Philippines, the most financially impacted segment is typically younger (under 44 years old), with annual household incomes lower than P249,000 and with less than P1,200,000 in investible assets. They are more likely to serve in occupations where it is less feasible to work remotely.
PHILIPPINE CONSUMER CONCERNS
In determining what both segments considered important to them during the pandemic, a key insight from the survey revealed that 88% of the most impacted segment in the Philippines were mostly concerned about losing income from their jobs, while 87% were most concerned about losing a loved one earlier than expected.
These concerns, together with the need to dip into savings to support themselves and reduced employment hours, grew significantly over the course of the pandemic. This paved the way for consumers to become increasingly aware of their financial well-being, especially regarding the importance of insurance products. This is especially true among the most impacted segment, shown by a rise of 67% and 66% for health and life products, respectively.
Given the financial difficulties they have experienced, those in the most impacted segment are focused on reducing their exposure to similar financial risks in the future. As much as 77% of the most impacted claimed their intent to save more is a result of the pandemic. Emergency plans are also considered top of mind, with over 54% planning to develop their own.
PHILIPPINE CONSUMER PRODUCT PREFERENCES
Those in the most impacted segment are also more interested in insuring themselves against evolving future risk and express greater interest in purchasing insurance online. Products that appeal the most to this group focus on pandemic-specific solutions that covers hospitalization expense protection or an add-on feature for life insurance that allows access to funds in case of an emergency. Income disruption protection is also mentioned, such as a three-month salary cover, a product that can pay credit card bills and the continuity to fund a college education savings plan in case of job loss caused by the pandemic.
These are unmet needs brought about by the pandemic situation that provides insurers room for innovation. They include products that can adjust their prices in exchange for sharing personal data, and a request for usage-based motor policies based on a subscription fee with a premium based on the number of miles driven. The appetite to purchase this kind of protection is especially relevant to the current situation, making it urgent for insurers to launch targeted and value adding customer-centric solutions.
In the second part of this article, we discuss the increased shift to digital channels, and the increased prioritization of insurers with corporate social responsibility commitments.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms.
Faith Mariel N. Reoyan is a Senior Manager from the Consulting Service line of SGV & Co.
