Covid-19 has not only upended people’s lives but also laid bare the cracks in their financial preparedness to tackle unexpected events. Although most people consider financial security and family welfare top priorities, the pandemic has revealed that they haven’t backed that with appropriate action to ensure protection from unforeseen circumstances. Research from MetLife showed that 84 per cent of the 2,000 UAE residents surveyed believed they would not be able to maintain their standard of living for more than two months in the event of an income loss. Only less than half (41 per cent) had savings or assets to sustain themselves.
Despite that, a majority still felt optimistic about their financial future – that too in an environment where job security remained a major concern. They were buoyed by the fact that the desire to protect their family was driving their preparedness and were quite happy with their money management, putting away cash for a rainy day and diligently paying off debt. But, that simply isn’t enough when a crisis strikes.
“This confidence doesn’t necessarily coincide with financial preparedness,” says Apostolos Ailamakis, Head of Bancassurance and Direct to Consumer, MetLife Gulf. He points to the disconnect between perception and reality among the surveyed, between optimism and actual preparedness. Even though 52 per cent were optimistic about their future, the survey found that only 39 per cent were actually financially stable. In the case of income loss whether it’s due to an accident, illness or redundancy, they would have to dip into their savings or go back to their home country.
An insurance policy that was geared to tide over such crises presented as a solution for only a minority, about 23 per cent, according to MetLife Gulf’s market study, Life Comes First: Prioritising Family Protection in the UAE, based on the survey.
However, Covid-19 and its aftermath are bringing about a shift in people's mindsets.
With 52 per cent claiming long-term financial security is very important to them and 41 per cent believing they need to do more to fulfil their future needs, there is an appetite for improved financial preparedness, says Ailamakis. “Financial services companies can focus on those positive attitudes as they partner with customers to help them bridge preparedness gaps.
“If more of the UAE population had appropriate insurance policies in place—especially among those most concerned about job security and those who would suffer the full impact of income loss—financial optimism and peace of mind would be much more achievable, as well as real financial security in the face of unavoidable life incidents.”
Knowledge gaps
Having said that, it’s not just preparedness gaps that are in the way of family protection. Underinsurance and lack of awareness about what exactly insurance products cover are also major stumbling blocks.
For instance, people have the wrong impression that a corporate medical card protects them from every eventuality, says Ailamakis. “Among those with medical coverage, 55 per cent believe they are accurately covered, but only 30 per cent are actually covered based on an eventuality. Knowledge gaps of this kind prevent residents from seeking out financial products they need, despite the prevailing desire among them to improve their long-term financial security.
"Lack of financial literacy and insufficient investment are indicative of a knowledge gap between insurance companies and the individuals who stand to benefit—one that is as much the responsibility of insurance companies as the individuals they serve."
This offers plenty of scope for insurance companies to educate customers on bridging their coverage gaps and converting them into business opportunities. With only 4 per cent of income dedicated to insurance products while one-quarter is directed to other investments such as savings accounts, investment savings and remittances abroad, there is potential for real insurance solutions that ensure family protection.
“People in the UAE continue to prioritise alternative financial investments in lieu of insurance policies that might provide financial protection when they need it most—not to mention peace of mind throughout their lives,” says Dimitris Mazarakis, Senior Vice-President and General Manager, MetLife Gulf. “However, growing interest among people in the UAE aged 38 years and younger alongside widespread acknowledgement of the necessity of coverage bodes well for the future of insurance and the families it protects.”
As people realise the benefits of insurance products, the focus is on their and their families’ overall well-being, not only financial well-being.
“People are prioritising insurance products that support preventive health services to avoid long-term medical issues,” explains Mazarakis. “They want policies that do more to protect their families—not just from financial losses in the event of a medical emergency, but by preventing medical emergencies themselves.”
Mazarakis adds that developing a deeper understanding of customers’ motivations helps MetLife create better policies to fit their needs. “With more than 150 years of expertise in protection, we enable our customers to live with a secure financial future. Therefore, our collective efforts here in the UAE involve the transformation of financial practices and insurance solutions to better contribute to the lives of generations to come.”
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