People are saving more but could be saving better - AIA poll

More than seven in 10 (71%) of consumers plan to save more, driven by fear and insecurity arising from the COVID-19 pandemic, according to the findings of a survey by AIA Group on the impact of COVID-19 on household savings.

The survey also showed that 73% of consumers agree that insurance has become more important than ever to secure better financial protection in case of emergencies. The AIA Save Smarter Study 2021 polled 7,400 insurance consumers aged 25+ across eight Asian markets, including mainland China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Mr Stuart A Spencer, group chief marketing officer of AIA Group, said, “AIA’s purpose is to help people live 'Healthier, Longer, Better Lives'. One of the key findings from this survey is that under duress, consumers are willing to forgo saving for planned life events and instead shift their focus toward protecting themselves against the unexpected. This approach is completely understandable, but it has led people to retain cash in the bank. A better solution lies in insurance products and savings plans that deliver greater peace of mind through higher returns and access to liquidity.”

Intention to save more

Uncertainties caused by COVID-19 are driving a major shift in consumer household savings. While 41% of the respondents said they reduced their savings in 2020, 55% said they plan to increase their savings in 2021 and 10% of those plan to increase their savings by more than 50%.

Change in savings goal

The study also showed that household savings trends and objectives are changing. Managing uncertainty has become the emerging saving goal with a greater focus on having access to emergency funds.

Preparation for emergency spending (64%), guaranteeing financial security (60%) and coverage for medical expenses (54%) top the list of savings objectives. A lower but nonetheless important priority remains saving for typical life goals such as education, getting married, buying a house (42%) or retirement (52%).

Savings strategy

How to meet such diverse goals through increased household savings is a major challenge. Almost a third of the respondents (31%) simply save what money they have after expenses without a proactive saving plan. 21% set aside a fixed amount for various goals. By far the most popular place to save is the bank, with more than nine out of 10 preferring the liquidity of bank savings, and a quarter of the savers with no other form of savings at all.

Insurance becomes more important

One effect of the pandemic is a stronger interest in insurance with 73% agreeing that insurance has become more important than ever to provide better protection in case of unexpected incidents and 18% of respondents say they plan to increase their allocation of funds to insurance. Of those planning to raise their spending on insurance, 57% say they plan to spend more on medical and health insurance, which is already the most popular category with 56% currently owning a medical/health policy.

Emotional and financial impact of COVID-19

The fear and uncertainty that is driving increased interest in protection also appears to be impacting wellbeing, with 70% of those surveyed saying COVID-19 has negatively impacted their social life, 38% believing it has adversely affected their health, and 39% feeling that their mental health has suffered.

The financial impact has also been significant with an average income reduction of 27% across the eight markets surveyed in Asia, with a reduction of as much as 33% in Thailand. And these impacts may not end any time soon, with 88% believing COVID-19 will persist beyond June 2021 and 57% believing it will last until 2022 or beyond.

In Asia, AIA Group has a presence in 18 markets – wholly-owned branches and subsidiaries in mainland China, Hong Kong, Thailand, Singapore, Malaysia, Australia, Cambodia, Indonesia, Myanmar, the Philippines, South Korea, Sri Lanka, Taiwan (China), Vietnam, Brunei, Macau and New Zealand, and a 49% joint venture in India.

Source: Asia Insurance Review