Dubai: Life insurance is said to be the cornerstone of good money management because it helps people prepare for life’s uncertainties. If the sole breadwinner in the family dies or suddenly becomes incapacitated to work, for instance, the dependents can rest assured that their needs will be taken care of.
Apparently, the wisdom of insurance protection has fallen on deaf ears, with around one in three (32 per cent) UAE residents, the highest globally, admitting that they have not bought an insurance policy at all. The reason they have not done so is that they expect someone else to arrange it for them.
This is one of the findings of an HSBC survey conducted between October and November 2015 among 1,000 residents in the UAE. The research seeks to gain some insights into how consumers are financially protecting themselves and those closest to them.
The study suggests that the UAE has one of the highest uninsured population in the world, and that the actual number of people who don’t carry a life insurance at all represents more than just 32 per cent of the population.
According to Timetric research, life insurance penetration rates in the UAE were less than 1 per cent in 2014, which suggests that more than 90 per cent of the population are not insured. This is far behind other developed Asian economies such as Taiwan (15.3 per cent) and South Korea (9.2 per cent).
"The number of people without life insurance in the UAE could even be lower than 1 per cent," commented a source at one of the major insurance firms in Dubai.
What is alarming, according to HSBC, is that 65 per cent of people in the country think that it is someone else’s responsibility to provide financial stability to their families if something were to happen to them and they’re no longer able to work.
Among those who don’t bother buying a policy, about a third (30 per cent) said that life insurance should be taken care of by their family. About 19 per cent said their employer should arrange the insurance for them and 16 per cent believe the responsibility falls on the government.
The bank said the results of their study indicate that most UAE residents don’t have the awareness and understanding about the importance of investing in insurance.
"It is truly alarming to see that nearly two-thirds of people in the UAE think that it is someone else's responsibility to provide monetary stability to their families, because one can never truly foresee unexpected events and relying on other parties to look after your loved ones is leaving a lot to chance,” said Gifford Nakajima, head of wealth development at HSBC Middle East.
“While in some cases it is understandable that some people expect their families to take on this responsibility, it is worrying that 19 per cent rely on their employer and 16 per cent on the state, which may not be widely applicable to the majority of people in the UAE, in terms of life insurance,” Nakajima told Gulf News.
Another reason people are not attracted to insurance appears to be cost-related, with six in ten (60 per cent) saying they expect or know that life insurance is too expensive.
However, HSBC argues that on average, life insurance policies for individuals can start at $1,500 annually, or approximately $125 a month, and can vary based on factors such as age, cover and lifestyle.
“We see that there is also a significant misperception towards the cost of insurance as many people believe it to be too expensive, whereas, in reality, some annual premiums cost approximately as much as your annual car insurance,” said Nakajima.
Preeti Bhambri, founder of personal finance site MoneyCamel.com, said anyone who has dependents should secure a life insurance policy. She said it doesn't cost a lot of money to get one, with a basic product taking only a periodic premium for providing a lump sum in the event of death or permanent disability due to an accident.
"Life insurance plans linked to investments are basically investment plans that also provide cover for life. The primary objective of these plans is to build wealth vis a vis protection," she added.