China, the United States and India: the countries with the greatest insurance potential

MAPFRE Economics, which is MAPFRE’s economic research service, has updated its Global Insurance Potential Index (MAPFRE GIP) using the latest available data for the year 2021. The purpose of this indicator, which is calculated for 96 developed and emerging insurance markets, is to measure the worldwide insurance protection gap, by creating a metric that maps those markets in terms of their medium-term and long-term insurance potential. Currently, China, the United States and India are once again leading the ranking of the countries with the greatest insurance potential in both the life and non-life segments.

Calculation of the indicator is based on estimates of the size of the Insurance Protection Gap (IPG) in the markets studied, along with the capacity of the corresponding countries to close that gap. The IPG represents the difference between the insurance coverage that is economically necessary and beneficial to society, and the amount of coverage actually acquired. This concept is modified in line with the growth of a country’s economy and population, taking into account the emergence of new risks related to the country’s economic and social development.

For 2021, the global IPG for the market as a whole was $7,016 trillion U.S. dollars, or 730 basis points, of global GDP. This IPG can be broken down into 67.6% in the Life segment ($4,744 trillion) and the remaining 32.4% in the Non-Life segment ($2,272 trillion), which in terms of global GDP, represent 493 and 236 bps, respectively.

“You have to keep in mind two relevant aspects that were identified. The first is that most of the insurance gap comes from the emerging world with 77.6%, and the second, that the insurance gap of the life segment has grown faster than that of the non-life segment,” stated Manuel Aguilera, general manager at MAPFRE Economics.

To calculate the MAPFRE GIP, other aspects in addition to the IGP are taken into account, such as penetration (premiums/GDP), size of the economy, and population size, among other variables. Thus, it can be anticipated that the MAPFRE GIP ranking will be increasingly dominated by emerging insurance markets, especially the large ones, which have the capacity to converge in income and still maintain high levels of “underinsurance”, in both the life and the non-life segments.

Within this year’s index, the GIP index noted China’s extraordinary performance within the BRICS, where the contribution of the GDP parameter has grown by double digits (19.8%), although they have not reached the highest growth in premium volume. So, the Asian giant leaves this distinction to the other developed countries (19.0%) and the G7, comprising Germany, Canada, the United States, France, Italy, Japan and the United Kingdom (10.4%), which are the largest contributors to IPG growth with respect to GDP and to the decline in the relative penetration index in the Life market.

In general terms, the evolution of the MAPFRE GIP presents a growth trend during the 2017-2021 period; however, the values reached before the pandemic in 2019 have not been reached.