The global insurance protection gap (IPG) for the total market (life and non-life) has risen to $5.78tn- 70.8% in the life segment and 29.2% for the non-life segment - according to the updated edition of MAPFRE Global Insurance Potential Index (MAPFRE GIP) 2020.
The index, released on 1 December 2020 with the latest available data from 2019, is calculated for 96 insurance markets (both developed and emerging) and it measures the IPG across the globe by creating a metric that summarises the markets offering the highest insurance potential in the medium- and long-term.
Currently China, US and India rank top of the table of countries with the highest insurance potential, both in the life and non-life lines of business.
MAPFRE economics general manager Manuel Aguilera said, “More than 70% of the current gap is explained by the underinsurance in emerging countries. In this sense, the aging populations, their income growth and size are factors that determine the widening insurance gap for the life business in these countries. The IPG in the non-life business has also grown over the last three decades, although significantly less.”
The MAPFRE GIP also takes other variables into account including penetration (premiums/gross domestic premiums (GDP), economy size and population size. In short, it produces a score according to which the markets are ranked based on their contribution to closing the global insurance gap. So, in order to be ranked highly, markets need to be large in size (measured in terms of their GDP) and also need to have adequate capacity to close their own IPG.
The report also recognises the value of those countries that have ample capacity to close their own gap but also have relatively little economic weight and are therefore placed in a low position in the ranking. These markets represent a future source of insurance potential given their alignment, which makes them a focus of considerable attention in the report. A