According to the Polish Chamber of Insurance, the insurance gap in the area of health is as high as PLN 125 billion per year. This is the amount that we would have to allocate to our healthcare system for specific measures (such as outpatient assistance, prevention) in order to come closer to the health systems considered to be the best in Europe. Combined with the pension gap of PLN 75 billion, underinsurance represents more than 1/4 of the state budget. How does insurance in other areas of life look like? How do Poles ensure their financial security? What are the implications for the insurance industry and the state? The answers can be found in the latest report entitled ‘Poles and Risk – How do we insure ourselves? The insurance gap in Poland’.
The report entitled ‘Poles and Risk – How do we insure ourselves? The insurance gap in Poland’, developed by PIU in cooperation with Milliman Polska, was created in order to better understand the phenomenon of the insurance gap.
– This is one of the most difficult issues in insurance and the providing the relevant data and methodology for assessing the gap is of significant value to the insurance market. In our report, we define the gap as any financial loss incurred as a result of certain events which have not been secured by insurance in both the private and public systems. These include loss of health, income, retirement or property losses – explains Jan Grzegorz Prądzyński, President of the PIU Management Board.
Pensions and health
Data from the report indicate that underinsurance for retiring people in 2023 amounted to PLN 75 billion, and the gap will increase for the next generations. Moreover, taking into account the life expectancy forecast, the Polish Chamber of Insurance estimates on the basis of data from the Central Statistical Office (GUS) that we will be healthy only half of the time after retiring.
In the healthcare sector there is a lack of funds between PLN 100 and 125 billion a year to bring us closer to the healthcare systems considered to be the best and most efficient, such as those in Switzerland, the Netherlands, France, Germany or the Nordic countries.
– In order to estimate the health insurance gap and the pension gap, we have developed advanced mathematical models for a thorough analysis of the problem. We have used over 20 variables characterising the healthcare systems of 26 countries in Europe over three years to analyse healthcare systems. We used the mathematical method of Principal Component Analysis (PCA), which allowed us to examine the interrelationships between healthcare systems in Europe and assess the financial implications of the expected changes – says Marcin Krzykowski, partner of the actuarial consultancy company Milliman, which prepared the report at the request of PIU.
Private health insurance can help to increase funding for prevention, diagnosis and effective patient care. The industry has long called for it to be included in the public healthcare system.
– The pension gap will increase each year. In the next 40 years, it will total PLN 15 trillion, representing 441% of Poland’s GDP in 2023. It is difficult to imagine these figures. Obviously, insurance will not cover this gap, but it can help to cover at least part of the needs of future pensioners. Insurance can also improve the efficiency of the healthcare system in Poland; insurers know how to spend money to make the system work well. They prioritise prevention, quick access to specialists, diagnostic tests and examinations that allow early detection of many diseases and the introduction of appropriate therapies at an early stage. We have the relevant know-how and we have been trying to support the public healthcare system as its important pillar for years – says Jan Grzegorz Prądzyński, President of PIU Management Board.
Life insurance
The report of PIU focuses on the issue of determining the relevant sum insured for life insurance. It varies on a case-by-case basis, however with certain assumptions it is possible to calculate what financial cushion should be provided to the family in the event of the death of its main breadwinner. Assuming the average remuneration, debt and savings of Poles, the average sum insured in case of death should be approx. PLN 330,000. These funds should correspond to at least three years’ remuneration of the deceased person plus the total value of the credit commitments. The sum insured should not be lower than the amount of the commitments outstanding and it should ensure that the family can survive for several months to even a few years, depending on the earning capacity of the main household member. In the event of a critical illness, the amount of the benefit should cover the additional costs of medical treatment, rehabilitation or changing to a less demanding job.
– At the end of 2023, the borrower’s average debt was over PLN 132,000 for a housing loan. On average, borrowers have also PLN 33,000 of cash loans. Almost half of Poles have borrowings. With little savings and average earnings, in the event of a serious illness or death of the main breadwinner, the situation of many families may significantly deteriorate. Insurance, in which the sum includes credit commitments, savings and earnings, may be of real assistance when something bad happens – comments Jan Grzegorz Prądzyński.
Property insurance
According to PIU data, an average of 49% of properties in the household sector are insured. The financial security for single-family buildings is more common than for multi-family buildings – 72% vs. 40%, respectively.
Disaster damage is an important component of the gap in property insurance; it concerns both real property and property of households and businesses. Swiss Re calculated the insurance gap for Poland in securing against natural disasters in 2022 at the level of USD 300 million, i.e. approximately PLN 1.3 billion.
– The report entitled ‘Poles and Risk – How do we insure ourselves? The insurance gap in Poland’ shows how much the sum insured needs to be increased for it to be adequate to the level of today’s real property prices and costs of construction materials. 45% of the agents we asked in the survey believe that the sums insured for houses and flats are too low in relation to their value. We also checked whether Poles are able to estimate the value of their assets. In our survey of 2022, almost 1/5 of them declared that they did not know how to do it – says Jan Grzegorz Prądzyński.
The report also contains calculations of the gap in the casco insurance of land vehicles in Poland – only 26.3% of cars have this additional insurance. The discrepancy in payments in the case of insuring all vehicles aged up to 15 years was estimated by PIU at PLN 4.6 billion per year, based on a simplified assumption that the frequency of events covered by casco would be the same for all cars (insured and uninsured). At this point, these are the losses that we will cover from current savings.
A problem that needs to be solved
According to estimates by the Swiss Re Institute, in 2022 our lives, health and property on a global scale were insured to a total of less than 60 percent. Insurance plays an important role in tackling the consequences of unforeseen events. Therefore, the lack of financial security or insufficient financial security may have a serious impact on people, their well-being and their sense of security.
The discussion on the insurance gap is still present in the industry. The data, estimates and summaries collected in the report confirm that the problem still needs to be discussed and possible solutions have to be identified. At the same time, they can facilitate the effective development of methods to reduce the scale of this phenomenon. The report entitled ‘Poles and Risk – How do we insure ourselves? The insurance gap in Poland’ can also help to adapt the insurance offer to the constantly changing customer needs.
Download report: Poles and Risk – How do we insure ourselves? The insurance gap in Poland
