Commentary: Most young adults in Singapore are under-insured — and it’s a bigger problem than we may think

The Life Insurance Association in Singapore in 2022 reported a critical illness protection gap of 74 per cent or S$579 billion for economically active Singaporeans aged between 20 and 69 in Singapore. 
The protection gap refers to the difference between the level of financial protection one has and what one actually needs to safeguard against potential risks. 
Being underinsured means one is not sufficiently covered for unexpected events, leading to unwanted financial challenges. 
Closing this gap to ensure sufficient protection for medical emergencies, accidents, and unforeseen expenses is crucial for bolstering one’s financial security. 
More urgently, this gap is increasingly widening across generational lines. 
In a 2023 survey on Gen Z insurance trends by FWD Singapore, more than 68 per cent of Gen Z respondents indicated that they do not have coverage for critical illness events such as cancer, stroke, and heart attacks.
Every generation is shaped by different backgrounds, circumstances, values and perspectives — differences which are reflected in their insurance needs and attitudes as well. 
The post-war generation (or baby boomers), generally aged above 60, largely tended to focus on retirement planning and healthcare, necessitating life insurance for estate planning and long-term care coverage. 
Generation X, in their 40s and 50s, strive to balance multiple financial responsibilities, requiring coverage for mortgages, dependents, and potential long-term care. 
In contrast, when it comes to millennials and Gen Z, there is a clear shift in insurance needs and priorities. 
Millennials, in their late 20s to early 40s, seek financial security for growing families, emphasising affordable health insurance and financial protection for debt obligations. 
Gen Z is the largest global generation, with its members reporting growing spending power and changing spending habits, according to Nielsen’s data. 
However, being teens and young adults in their early 20s, they are still only at the outset of their financial journeys. As such, they gravitate towards digital platforms and accessible insurance that lay the groundwork for their financial protection journey.
As these emerging generations become significant consumer markets, insurers face a critical question: How can they better understand and cater to the changing needs of modern young adults? 
More and more data show that young adults prioritise meaningful work, flexibility, and autonomy over stable, linear career paths. 
In Singapore, a growing number of Gen Zs (46 per cent) and millennials (37 per cent) have taken on either a part- or full-time paying second job, showed research by Deloitte in 2023. 
This signifies a broader, more adaptable approach to work, that may encompass remote work, side hustles, and entrepreneurial pursuits. 
There are also diverse needs and different segments among young adults — from fresh graduates navigating their first steps into the job market, to gap-year takers in search of meaningful experiences, to those seeking conventional and unconventional routes to wealth accumulation. 
This shift not only transforms individual professional journeys but also impacts considerations in insurance coverage. 
Notably, research indicates that early retirement is becoming an increasingly popular concept among millennials and Gen Zs. Financial planning and investment patterns for this group of consumers will likely need to be altered accordingly. 
Many young adults might not see the urgency of this need now. Having had less time to gain and accumulate wealth at their age, insurance is not often top of mind for Gen Zers and millennials. 
The everyday young adult often navigates life with a sense of invincibility, believing that insurance coverage is a concern for older generations or unforeseeable emergencies. 
However, this perception overlooks the potential risks and financial burdens that can arise from unexpected events. 
While youth may bring a sense of vitality and freedom, it also comes with its own set of responsibilities, including the need to protect oneself against unforeseen circumstances.
Initial responses from Gen Z respondents and feedback from younger clients and customers outside of the survey suggest that they largely perceive insurance as complex and costly. 
As such, efforts to inform and educate younger generations more widely and effectively are vital, to bridge the growing gap between their evolving life goals and insurance needs. 
Some financial services providers have begun launching programmes to introduce basic financial literacy concepts to students. Educating younger children and teens on simple approaches to money management and building a strong financial foundation is an important first step.
Young adults need to understand that proper coverage extends beyond just health insurance to manage medical expenses. Other types of coverage, such as home insurance, motor insurance, and even life insurance, play significant roles in safeguarding one’s financial well-being.
Investing in insurance at a younger age often translates to lower premiums, as insurers typically consider younger individuals to be lower-risk. This means that securing insurance coverage early provides assurance, but it can also be a financially savvy decision in the long run. 
A few insurance providers are already offering simpler, more straightforward and affordable plans that can form the foundational blocks of critical illness plans, some starting from just S$20,000 sum insured. Opting for a smaller coverage is always recommended to having no coverage at all.
As millennials and Gen Zers navigate flexible career paths, re-evaluate professional and financial goals and contemplate early retirement, it may be tempting to overlook the overarching importance of insurance coverage in their everyday lives — but the reality is that insurance serves as a crucial safety net for unforeseen events and financial hardships. 
By prioritising adequate coverage, they protect themselves and their assets, but also pave their own way for a more secure and resilient future. 
Tackling the responsibility of insurance today ensures that they can confidently navigate whatever challenges tomorrow may bring, allowing them to focus on pursuing their goals with peace of mind.
On insurers’ part, more effort and resources need to be channelled towards tailoring approaches to meet the needs of young adults. The shifting values and aspirations of this demographic signal a need for providers to innovate and align with these evolving demands.
Making moves to stay adaptable now will not only serve the current populace but also help to safeguard the coverage needs of future generations. 
ABOUT THE AUTHOR:
Adrian Vincent is the chief executive officer of FWD Singapore.
Disclaimer: 
This article is for general information only and shall not be considered as financial advice. It does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person or group of persons.