Economic progress is fundamentally impacted by insurance. By shielding people and property against risks that may be insured against, it promotes and facilitates economic activity. Insurance firms serve as both the unseen social glue and a cushion against unfavourable situations.

Emerging risks like COVID-19 and climate change have the potential to exacerbate global vulnerability and have a greater effect on developing nations. These risks could arise in the context of economic and social progress. In many markets that may most benefit from the peace of mind that insurance provides, we continue to see that its penetration is still quite low given the current circumstances.

Why is it important to have insurance?

We encounter countless unanticipated events in our lives that have the potential to negatively impact our family’s and our own well-being. This is where insurance starts to become crucial because it enables us to lessen or completely eradicate the effects of these unanticipated disasters.

For this reason, it’s critical to obtain insurance in order to safeguard your assets, your well-being, and your life—that is, to ensure that the things that are important to you will always be taken care of. Nevertheless, as we previously mentioned, not every nation has the same insurance penetration rate. For instance, living insurance-free is not as prevalent in Latin America.

How can insurance help you?

It gives you certainty:

Insurance provides protection and support in any unexpected circumstance. It is better to have it and not need it than to need it and not have.

It lowers your risks and losses: Having insurance increases your chances of surviving uncontrollable, unanticipated occurrences like natural disasters, both personally and professionally.

You can feel more at ease knowing that insurance helps lessen anxiety and annoyance while dealing with unclear future circumstances. Our health is impacted by financial instability since it leads to stress and anxiety. Financial literacy is crucial because of this.

Henry Ford once said, “The entire world depends on insurance.” Without it, people would hoard their money and not invest it elsewhere for fear of losing it, which would have brought civilization to a standstill well past the Stone Age.

As we’ve seen, there are several crucial actions that must be taken in order to gradually close the protection gaps that exist in developing markets, as the long-term and severe repercussions of uninsured risks can be considerably worse than in other economies. Assuming risks that promote development is made possible by insurance, which offers the security of protection.

Here at MAPFRE, we take the lead in initiatives that contribute to closing these gaps, whether it is through our good governance policy’s explicit promises or the promotion of a financial culture for all. These commitments, which are based on accountability, integrity, and openness, are concentrated on continuously innovating goods and services that support and encourage insurance accessibility for a growing number of groups, including those in developing nations, and guarantee full advice and information before obtaining a policy as a foundation for openness and the development of trusting relationships.

Basic elements for effective insurance development in emerging markets:

A paper recently released by the Geneva Association and the Insurance Development Forum (IDF) examines the ways in which government policies and regulations can either promote or inhibit the growth of resilient insurance markets that fill gaps in developing economies. The following conclusions stand out as important considerations among others.

Political priority:

The first step in regulating the insurance industry is for policymakers to prioritise it politically and establish the legal and financial conditions necessary for its growth. A distinct approach to insurance regulation and oversight is necessary for emerging markets.

As stated in the paper, “regulatory techniques and practises should not go beyond what is necessary in order to achieve their purpose and opt to balance prudential and market development objectives.” This regulation should take into account the maturity of each specific market. In other words, they ought to choose simplicity.

Financial education and risk awareness:

One of the primary obstacles to the expansion of insurance beyond state-level policies is the general lack of understanding of finance among a large portion of the populace. This includes a lack of knowledge about the components and tools necessary to manage a personal and family economy or to recognise risk and vulnerability in the current environment.

Programmes for financial education would be required to start as early as primary school in order to establish this beneficial foundation of fundamental financial understanding for daily living. Furthermore, increased cooperation between governments, regulators, and the insurance sector is necessary to raise public awareness of the value of sound insurance regulation and the role that insurance plays in society.

Understanding insurance, an intangible product, as an investment rather than an expense would be aided by increased financial literacy and a greater comprehension of loss vulnerability and its repercussions.

Simplicity and affordability:

As we’ve seen, simplicity is crucial on the regulatory and financial education fronts. They must be things that are easy for customers to remove from their purchases, free of complicated restrictions and exclusions. They must meet specific, observable needs and make their advantages evident. It is important to remember that the price needs to be appropriate and consistent with the market’s economic realities.

Trust:

Encouraging insurance regulations, accessible and easy-to-purchase products, and basic financial education will all contribute to building trust in this essential component of economic growth.

Helps with long term goals:

The ability to save and increase your money is one of the life insurance’s most significant advantages. This sum can be used to achieve a variety of long-term objectives, such as beginning a business, saving for your child’s college education or wedding, and more.

Useful for retirement planning:

You can maintain your financial independence in retirement with life insurance. Annuity plans and life insurance plans both give you a set income for the rest of your life. These are low-risk programmes that support you in achieving your post-retirement objectives, covering medical costs, and maintaining your current way of life.