Prioritising family protection in the UAE
February 21, 2021
Source: Middle East Insurance Review
Financial attitudes and preparedness among families in the UAE reveal shifts in the customer mindset and protection gaps they are facing, says MetLife Gulf.
In 2021, the resilience and success of families residing in the UAE exemplify the peace and prosperity of the region, a beacon for both financial and human progress. But while these residents have an awareness of their family’s priorities and their need for financial protection, security, and stability, they don’t always have access to, or fully understand, insurance and financial products best suited to their needs.
MetLife research titled ‘Life Comes First: Prioritising Family Protection in the UAE’ – conducted in October 2020 and February this year – looks at the financial attitudes and preparedness of families in the UAE at a time when job security and long-term financial wellness are primary concerns. The findings are based on a 2,000-respondent survey of residents in the UAE, which includes UAE citizens. The demographics, nationalities, and social classes of respondents are representative of the overall census of adults in the UAE.
The survey reveals that although most residents are aware of the need for insurance and they now have an appetite for protection, they are unsure if they are adequately insured or if their insurance would cover an eventuality such as a job loss or serious illness.
MetLife believes that insurers have the responsibility to educate customers who have knowledge gaps in these areas. “There is great potential for the insurance industry to grow and for underinsured customers to become optimally insured. Insurance companies that invest in education can help customers bridge their coverage gaps and ensure they are prepared for life’s eventualities,” said the report.
The findings from the study include:
- 52% of the residents in the UAE are financially optimistic
- 78% of respondents claim ‘protecting family from unforeseen circumstances’ and ‘family not worrying about income if something happened to me’ are top financial priorities
- 47% of respondents are not financially prepared to face an unfortunate incident of any kind, including loss of life, sudden disability or critical illness
- 41% acknowledged they have access to savings or other assets to sustain themselves
- 60% of respondents believe they are either not adequately insured or are unsure whether their insurance would cover an eventuality
- 45% of respondents feel confident about their emotional recovery while 45% feel confident about their mental recovery from unexpected life events
Benchmarking financial optimism
The majority of surveyed people in the UAE expressed financial optimism yet are concerned about actual preparedness.
The results show low financial readiness towards unforeseen events among surveyed adults. Despite a lack of preparedness, adults in the UAE are motivated by drivers for life insurance policies and other long-term financial investments. Their cash savings for a major eventuality are indicative of this, as well as their desire to protect their families, pay off liabilities such as debt, and improve how they manage their personal finances.
These same drivers are behind their optimism about their financial futures. A multiple regression analysis of the data shows that, among adults in the UAE, 52% qualify as being financially optimistic – good money management, sufficient savings to face an incident and being financially confident that they can make the right decisions aligned with a sense of control and optimism about their financial futures.
Coverage sufficiency for health eventualities
The report shows that 77% of respondents claim to be in good or very good health. However, underinsurance is a risk among these families.
The findings show that most adults in the UAE are either unprepared for eventualities, unsure how to prepare for eventualities or unfamiliar with the insurance coverage they have.
There is a false perception among respondents that a corporate medical card protects them from every eventuality. Among those with medical coverage, 55% believe they are accurately covered, but only 30% are actually covered based on eventuality.
The lack of financial literacy and insufficient investment is 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, said MetLife, adding that insurers must help improve customers’ financial literacy and simplify complex insurance terms.
Aligning family needs with the right financial products
COVID-19 caused lower spends on investments and future financial growth as residents in the UAE prioritised an increase in cash savings to survive the crisis instead. When asked how their spending, saving, or investing behaviour had changed with regard to financial behaviours during this time, most had been building up savings in lieu of taking risks such as investing in business, property, or loans for large purchases.
Meanwhile, 36% were building up savings, triggered by their awareness that nothing is certain. Although many would use personal savings as a way to protect themselves, for the vast majority, it is not enough; there is still an impetus to explore real insurance solutions.
But these trends are more indicative of already existing habits among adults in the UAE. In terms of how they distribute their income in a normal month, adults in the UAE direct roughly half towards necessities like rent, groceries, financial payments and utility bills on average.
Only 4% of income is dedicated to insurance products, even as roughly one-quarter is attributed to other savings investments – including bank savings accounts, investment savings, and remittances abroad. Respondents acknowledge this lack of sufficient coverage. A majority are worried about protecting their families and also describe it as their top financial priority.
But protecting family and dependents appears to be a key need gap in the market currently, with most policy owners claiming that their current policies do not meet their needs in this aspect.
Building trust through financial literacy
Adults in the UAE are taking active steps to deepen their understanding of insurance options available to them for the sake of protecting their families from income loss and eventualities. Respondents value protection, but they are also seeking peace of mind from understanding and buying insurance policies that will deliver the best results.
The protection gap between perception and reality must be closed. Residents have the right to access and understand every insurance policy or financial product which stands to benefit them the most, said MetLife. Fortunately, many are actively seeking insurance products that meet their needs.
Towards a more secure financial future
Adults 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. This is due in part to a lack of financial literacy, which impacts their ability to choose insurance products right for them and to understand the insurance policies they already have. Too often, people miss out on the policies they actually need, leading to disappointment in actual coverage when tragedy strikes and exacerbating existing disillusionment with insurance.
However, growing interest among adults 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.
To view MetLife’s research findings, please visit https://www.metlife.ae/LifeComesFirst/
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