UAE residents amongst least likely globally to take responsibility for arranging financial protection for their families

People in the UAE are among the least likely globally from a total of 12 countries to take a proactive approach towards ensuring they and their families are financially protected in the event of disability, critical illness or death, according to HSBC’s Power of Protection 2016 report. An alarming 65% of people in the country believe it is someone else’s responsibility to provide financial stability to their families if something were to happen to them and they were no longer able to earn. Similarly, around one in three (32%), the highest globally, have not taken out life insurance because they expect someone else to arrange it.

In its first year, the new global research from HSBC looks to provide insights into people’s concerns about the future and how they are financially protecting themselves and those closest to them. The report, Confidence in the future, assesses the views of over 11,000 people in 12 countries, and over 1,000 respondents in the UAE. [1] It revealed that tied in with the need for people to take more responsibility towards protecting their families’ futures, residents in the UAE lacked the awareness and understanding about the importance of investing in insurance.

Highlighting the need to take responsibility

People in the USA are most likely to take responsibility for themselves (54%) while those in China (77%), the UAE (71%) and Argentina (70%) are the most likely to say someone else (State, employer or family) should be responsible.

Of the 65% of people in the UAE who believe that someone else should take responsibility for ensuring their family’s financial stability in the event of an incident, under a third (30%) say that it should be their family, almost a fifth (19%) say that it should be their employer and 16% think that it should be the Government.

People aged 55 and over are more likely to think that their family should take responsibility (35%) compared to people aged 25-34 (29%). Nearly one in three (32%) expect someone else to arrange their life insurance and 29% expect someone else to arrange their health insurance.

Commenting on these sentiments, Gifford Nakajima, Head of Wealth Development, UAE and MENA, Retail Banking and Wealth Management, HSBC Bank Middle East Limited said:

“While most people in the UAE (67%) have an optimistic outlook and high expectations for their future quality of life, more than half (56%) say that their biggest worry is that poor health could one day stop them being able to look after themselves or their families. Despite recognising this challenge, we see that 30% rely on family, 19% on their employer and 16% on the government for financial support, the latter of which is not possible for expats in the UAE, highlighting the need for people to take ownership of securing protection for their families.”

Misperceptions about cost

Beyond the lack of awareness, another major barrier to taking out insurance appears to be cost-related as six in ten (60%) expect or know that it is too expensive. However, on average, life insurance policies for individuals can start at $1,500 annually - 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. However, people also need to factor the cost of delay - when you are young, fit and healthier, the premiums are usually lower, but as you get older and your medical history changes, costs are likely to be higher. At the same time, it is also important to invest in insurance during a downturn because it helps mitigate the cost of uncertainty. This is particularly significant with more than two in five (43%) people saying that they are financially unprepared should something unforeseen happen in their life. People need to view insurance as an investment in tomorrow, rather than a cost today.”

HSBC’s research also shows that one third (33%) of people in the UAE say that they could not manage well or at all, if something unexpected were to happen to them. Nearly half (46%) say that they do not know how to go about life insurance or are concerned about what policies would pay out.

Given these attitudes, it is not surprising to see that life insurance penetration rates in the UAE were less than 1% in 2014, according to Timetric research, far behind other developed Asian economies such as Taiwan (15.3%) and South Korea (9.2%).[2]