Asia's health protection gap widens to US$1.8 trillion: Swiss Re

Singapore

THE health protection gap in Asia is estimated to have reached US$1.8 trillion, representing 40 million households that forgo medical treatment to avoid financial stress, a study by Swiss Re has found.

In Singapore the absolute health protection gap is relatively modest at US$23 billion, a tie with Hong Kong and the second lowest in Asia after Thailand.

But the average gap per household at US$13,776 is the highest among 12 economies, which comprises about 10 per cent of Singapore's household income.

The average size of the gap for all households in mature Asia is more than three times that in emerging Asia. This reflects the higher cost of treatment in mature markets. But the estimated gap as a percentage of annual household income is lower in mature Asia than in emerging Asia.

Robert Burr, Swiss Re managing director and head of life and health client markets Asia, said: "Although Asia has been growing rapidly and people are becoming richer, access to quality and affordable healthcare continues to be a challenge in our society today. This is unacceptable in this day and age.

"It's time that all stakeholders - governments, healthcare providers, insurers/reinsurers and non-profit organisations - work together to find solutions.''

The study defines protection gap as the amount of insurance coverage needed to avoid the financial stress arising from unforeseen medical expenses. The gap could be medical expenses not covered by payers such as insurance, social security or government, which forces people to cut back on household spending.

It could also be non-treatment due to lack of financial resources, which exposes households to greater health risks and worsening health conditions.

The study said the inability to afford basic medical care indicates "severe vulnerability despite Asia's rapid economic growth''.

"Across all of Asia, affordability of treatment is cited as the top challenge, over the emotional burden or time required for treatment. The challenge of affordability will only grow, as medical costs are outpacing inflation in all the markets surveyed.''

The firm said the health protection gap should not be taken as full insurance opportunity. It said insurance is a key tool to help consumers close the gap, but there are cases where households cannot afford conventional cover. In these cases, the gap is an insurance opportunity that cannot be taken up.

Most of the protection gap in Asia - about US$1.4 trillion - arises from emerging Asia, due to large populations, low disposable incomes, high out-of-pocket expenses and low health insurance ownership levels in those markets. The out-of-pocket spending on healthcare in emerging Asia comprises some 18 per cent of net household income, based on Swiss Re's survey. More than half of the spending was a source of financial stress.

"Absent remedial action, we expect the health protection gap across all Asia to widen in the coming years given the ageing societies in many markets, and the high growth of medical inflation relative to average incomes.''

The largest gap is seen in China at US$805 billion, followed by India at US$369 billion. Thailand has the lowest gap at US$6 billion. Thailand's subsidised universal healthcare system has resulted in one of the lowest out-of-pocket medical expenses in the region.

Not surprisingly, lower-income households are the most vulnerable. Swiss Re said in some economies, the average size of the estimated gap is more than the annual income of lower income households.

In Singapore the health protection gap among lower-income households as a percentage of household income is estimated at 47 per cent, which puts it in the middle range among 12 economies. In India, the ratio is 249 per cent, and in China, it's 173 per cent.

Younger people in emerging markets face a higher amount of financial stress - more than half of the gap (53 per cent) is attributable to 18- to 40-year olds. Swiss Re said this is likely due to a lower understanding of the need for insurance, which results in lower rates of purchase. It is also due to lower income levels, and overconfidence about one's own health conditions.

About 60 per cent of respondents described themselves as healthy, but one in three said they did not exercise more than once a month. In addition, 61 per cent of those who smoked daily considered themselves healthy.

Self-reported healthy respondents are more likely to allow medical insurance products to lapse. This is seen in emerging markets where 53 per cent of self-reported healthy respondents allowed their insurance to lapse in the past, compared to 41 per cent of self-reported unhealthy respondents.

Wearables and health and fitness apps have reached a critical mass with 19 per cent owning a wearable device, a health and fitness app or both. The vast majority of consumers (83 per cent) are willing to share their fitness data with an insurance company. One-third are willing to do so unconditionally, and half of them for a premium discount.