Emerging Asia Middle Class survey – What does it tell us about narrowing protection gaps?
Our large-scale consumer survey of the Emerging Asia Middle Class, published in October 2022, revealed several insights into the consumption and savings behaviours of the middle class in Asia.[1] In this article, we parse these consumer trends for their implications on insurance demand and protection gaps.
A key takeaway from the survey was that middle-class consumers in emerging Asia are optimistic about their socio-economic mobility and their children’s futures, despite the recent economic challenges that many might have faced. This population segment is also acutely aware of its financial vulnerability to medical and other unexpected events. As a result, it is twice as likely to save for unforeseen events than its mature market counterparts.
Yet, despite a high level of risk awareness, significant protection gaps still exist. For example, about a quarter of the survey respondents said they would expect a substantial financial impact from an adverse health incidence such as cancer or stroke. This is in line with other research showing widening protection gaps in the region despite economic growth and rising insurance penetration.[2]
Drawing from the observations of the middle-class survey, we explore the consumer-side factors that tell us more about these protection gaps and how insurers may approach narrowing them. It is no secret that emerging Asia is among the fastest-growing insurance markets globally. A better understanding of this important consumer segment will benefit both the end consumers and insurance companies.
Figure 1: Expectation of socio-economic mobility in the next five years (%)
In the next five years, do you see yourself remaining in that same group or moving upwards/downwards within the socio-economic hierarchy? Base: Malaysia n=600, Indonesia n=600, Thailand n=600, Vietnam n=600, Philippines n=600, China n=1000, India n=1000, Emerging Asia n=5000, Mature Asia n=1500
Source: Peak Re Emerging Asia Middle Class Survey 2022
Emerging Asia middle-class invests heavily in the next generation, viewing it as a means to secure the family’s financial future
Emerging Asia middle-class consumers’ optimism about their future socio-economic status (Figure 1) and their children’s future are tied to the tendency to invest heavily in the next generation. They are more likely to have children (Figure 2) and view having children as important to care for themselves in their old age. Our survey showed that “support for old age” was the second most often mentioned reason to have children (Figure 3). This shows family support is still considered a key feature in old-age planning, which could have been utilised in place of insurance.
Figure 2: 51% of Emerging Asia respondents planned to have children vs 22% in Mature Asia |
Figure 3: Reason for having children |
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Survey sample: those who have no child and are aged 25-50, Emerging Asia n=907, mature Asia n = 596 |
Survey sample: Those who have at least one child OR currently have no child but plan to have one in future: Emerging Asia n=4430 |
Source: Peak Re Emerging Asia Middle Class Survey 2022 |
Source: Peak Re Emerging Asia Middle Class Survey 2022 |
The rising middle class also views education as the primary means to success for their children. Our survey showed that the emerging Asian middle class are three times more likely to invest in the best quality education possible for their children (giving less consideration to price) than their mature market counterparts (Figure 4). This segment is also more likely to invest extra for tuition and other extra-curriculum activities for their children.
Figure 4: Emerging Asia more likely to choose quality over price, when it comes to children’s education
Source: Peak Re Emerging Asia Middle Class Survey 2022
While this tendency reduces the discretionary income left for other investment options, a conservative savings culture is also deeply entrenched in the Asian middle class. For example, our survey showed that 63% of respondents bought private health insurance, and 41% were covered by company health insurance (i.e., a higher proportion than in mature markets). Yet, 41% said that they had also set aside savings for unexpected events, indicating that the private and company health insurance policies might not be sufficient or comprehensive (Figure 5).
Often investments in hard assets, such as gold or real estate, are preferred for locking in savings for the long term – especially in emerging markets that have been affected by high inflation rates in the past.
While cultural tendencies are hard to change, we believe that further increases in disposable incomes, financial education, and accessibility to better savings instruments may reduce the dependencies of the middle class on their children for future financial safety. Whether insurance policies adequately match this market segment’s requirements should also be explored.
Figure 5: Emerging Asia is twice as likely to set aside savings as a way of dealing with unexpected medical events versus mature Asia counterparts
How do you usually plan for your personal medical expenses? Survey sample: Emerging Asia consumers n=5,000, Mature Asia consumers n=1,500. Emerging Asia: MY, ID, TH, VN, PH, CH, IN, Mature Asia: HK, JP, KR
Source: Peak Re Emerging Asia Middle Class Survey 2022
Financial literacy is strongly linked to higher protection levels in Emerging Asia
Our study also shows that the Emerging Asia middle-class is more aware of healthy financial habits and of the financial investment and insurance options available to them than their mature market counterparts.
In our survey, 27% of the emerging markets respondents rated themselves “very knowledgeable” on financial literacy, compared to just 8% of the respondents from Mature Asia (Hong Kong, Japan and Korea, Figure 6). Moreover, the younger population within Emerging Asia (the 25-39 age group) showed higher self-perception on financial literacy than the 40-50 age group (Figure 7), which included knowledge of financial topics such as budget management, saving discipline and investments.
Encouragingly, our survey showed a strong linkage between financial literacy and insurance penetration. Some 80% of those who ranked themselves as financially knowledgeable had bought private health insurance, and 74% had bought term life insurance products. Of these, only 5% did not currently own a health, critical illness or life insurance plan. As a result, this consumer segment saw themselves as less financially exposed to medical incidents.
While there are still large protection gaps within Emerging Asia, signs of rising financial know-how and the high linkage between financial literacy and protection penetration within the emerging middle class – especially the educated and the employed – indicate that furthering financial education as a goal is imperative in narrowing these protection gaps.
Figure 6: Self-ratings on financial literacy: Emerging Asia rates itself better than Mature Asia
How would you rate yourself in terms of financial literacy? Survey sample: Emerging Asia consumers n=5,000, Mature Asia consumers n=1,500. Emerging Asia: MY, ID, TH, VN, PH, CH, IN, Mature Asia: HK, JP, KR
Source: Peak Re Emerging Asia Middle Class Survey 2022
Figure 7: Higher share of emerging Asia youth rate themselves as financially knowledgeable, compared to the 40-50 year-olds
How would you rate yourself in terms of financial literacy? % Respondents who rated themselves as “Expert” or “Very knowledgeable” within Emerging Asia
Source: Peak Re Emerging Asia Middle Class Survey 2022
Smartphones are revolutionising insurance awareness and research, but most consumers prefer a hybrid approach for their insurance needs
Among the Emerging Asian middle class, smartphones/mobiles are now the primary media for information consumption – for work, education, entertainment and connectivity (Figure 8). When it comes to purchasing decisions, consumers value the accessibility, convenience, and increased choice and comparability provided by mobile apps.
Figure 8: For Emerging Asia middle-class, the mobile/smartphone is their primary medium for all types of information consumption
Which of the following tech devices or apps are most important for you in each of the below types of activities? Please select up to 3 devices or apps for each type of activity. Survey sample: Emerging Asia n=5000
Source: Peak Re Emerging Asia Middle Class Survey 2022
Several mobile apps and platforms are playing a role in increasing consumer awareness of insurance products. These apps explain insurance terms, present policies in an easily comparable format to consumers, and provide customer reviews for various insurance products. Consumers see such customer reviews as more reliable and objective information that helps them make purchasing decisions.
Incidentally, the two countries within Emerging Asia that are experiencing a boom of fintech and insurtech products and apps – India and Indonesia – are also seeing a higher self-perception of financial literacy among the middle-class population (Figure 9).
Figure 9: India & Indonesia rank themselves highly on financial literacy, a potential relationship with the higher penetration of fintech and insurtech in these countries
How would you rate yourself in terms of financial literacy? Emerging Asia consumers n=5000, by country
Source: Peak Re Emerging Asia Middle Class Survey 2022
While digital platforms are increasingly preferred for researching and maintaining insurance policies, consumers are looking for a mix of different channels in insurance purchases.
Despite the pandemic and social distancing requirements, a large percentage of consumers prefer to speak to an insurance agent or banks as part of the decision-making process. A hybrid model involving both online and offline channels was especially preferred in China, India and Indonesia (Figure 10).
This suggests that insurance companies should continue to invest in digitisation and hybrid channels to improve their reach within emerging markets. Partnering with fintech and insurtech companies/apps is also likely to benefit middle-class consumers with improved accessibility and information, which should help in narrowing protection gaps.
Figure 10: Insurance purchase channel preferences (digital versus non-digital)
Insurance purchase channel preferences. Emerging Markets. MY=600, ID=600, TH=600, VN=600, PH=600, CN=1000, IN=1000
Source: Peak Re Emerging Asia Middle Class Survey 2022
Takeaways for Emerging Asia Insurance Trends
Developing Asia’s demographics, culture, and consumer behaviours play a critical role in how middle-class consumers invest and plan for their financial risks. Among this segment, there is a strong preference for precautionary savings to handle unexpected health expenditures, and to invest in their children to secure their retirement. While this may be due to cultural factors or a lack of alternative options, this is contributing to the widening protection gaps in many emerging Asian markets. It also begs the question of whether the insurance and savings products available to this segment are adequately addressing their risk mitigation needs. These supply-side factors were not in the scope of our survey but are questions for further exploration.
Good financial literacy and digital accessibility are two encouraging and potentially interlinked trends in emerging Asia that stood out in our consumer survey. Notably, financial literacy was found to be strongly linked to insurance penetration within the educated and employed middle-class segment. This should be a key area of focus for insurance companies looking to close the protection gaps in these markets.
Our study also suggests that a hybrid (online + offline) insurance offering is the most effective when reaching the middle-class consumer. Smartphones and social media are now the primary means of information consumption for this market, and digital communication will be key to further insurance penetration. Partnering with owners of digital ecosystems and engaging in financial education via social media could prove valuable in narrowing the significant protection gaps for this fast-rising population segment.
See Peak Re’s Emerging Asia Middle Class Survey, for more statistics and insights on middle-class consumer trends.
[1] The full report is available here.
[2] See “Bridging the protection gap in emerging markets”, Peak Re, 25 March 2021.
