The insurance gap in Poland needs to be closed

Luc Williams

What is an insurance gap?

It means any financial losses incurred in connection with the occurrence of specific events that have not been insured, either in the private or public system. In other words, it is information about how we deal with the possible financial consequences of losing health or the death of a loved one. How will we cope in old age? Do we have enough money to contribute to our retirement to ensure a decent life? Finally, it provides information on whether we can cope with property losses, including: our houses and apartments, cars. Insurance is one of the methods of financing the possible consequences of such events. We can also build a financial cushion in other ways, e.g. by saving or investing.

We devote a lot of attention to the insurance gap. At PIU, we decided to prepare the report “Poles and risk – how do we insure ourselves? The insurance gap in Poland” on a topic that is primarily a valuable analysis for insurers, but also more broadly – ​​for the financial sector.

Is there an insurance gap in Poland?

In many areas. This means that we could, in many areas, pass on possible costs related to unfortunate events to insurers and, to a greater extent, build financial security with their help. This applies especially to life and health, but also to property, where we are significantly underinsured, both in the individual and corporate sectors. There are many reasons for this phenomenon. In Poland, we have been building insurance awareness for only 30 years, since we opened our market to foreign companies in the 1990s and competition appeared here. Previously, we treated insurance as a tax. This is still the case today, for example in compulsory motor insurance. We are also still a society on the rise, which means that insurance is not a permanent element of household budgets. And the less money there is, the easier it is for us to give up protection.

Where is the insurance gap and how much is it estimated?

The lack of adequate financial security in the event of various accidental events applies especially to the protection of life and health. The biggest gap is in health and life insurance. Poles are more willing to insure their property, although for everyone life and health are the most valuable values. There is also a systemic lack of money in health. The insurance gap is huge, especially if we wanted our health care to be the same as in countries where it is rated as the best and most effective. We calculated the gap here in two ways. First, we estimated “standardly”, assessing the so-called “out-of-pocket” expenses, i.e. private health care expenses, excluding health insurance and prepaid benefits, i.e. medical subscriptions. To estimate the systemic gap in health care in Poland, we must exclude from the total “out-of-pocket” expenses those for drugs that patients have no problem paying for (that’s PLN 16 billion), and adjust the result for unrealized health expenses (PLN 1 billion). ). With these assumptions, the estimated systemic gap in health care in Poland is PLN 22 billion. However, in our report, we created a model based on which we were able to determine which parameters in the system would need to be changed and how much money should be added to it in order for us to have the level of health care enjoyed by, among others, citizens of Switzerland, Scandinavian countries or Germany.

And what are the conclusions of the analysis?

According to this analysis, the gap in the area of ​​health is even 5-6 times larger and reaches PLN 100-125 billion. However, what is important, the mere introduction of funds into the system does not guarantee their proper targeting and can only bring us slightly closer to the expected level of health services. We have to spend money on prevention, outpatient care, quick detection, among others. cancer and chronic diseases – these are priorities whose implementation would significantly improve the health of Poles.

Insurers have been organizing health care in this direction within health insurance for a long time. Our experiences can therefore be used.

And in life insurance?

We must think of life insurance as a financial cushion in the event of our death or serious illness. Will the family survive on one salary? Poles have no savings and are in debt. At the end of 2023, the average borrower’s debt is over PLN 132,000. PLN for a housing loan. In addition, on average, borrowers have PLN 33,000. cash loan. Almost half of Poles have loans. With small savings and average earnings, in the event of a serious illness or death of the main breadwinner, the situation of many families may deteriorate significantly.

We have calculated how much financial cushion should be provided to the family in the event of the death of its main breadwinner. Assuming average values ​​of salary, debt and savings of Poles, the average sum insured in the event of death should be approximately PLN 330,000. zloty. The insurance sum should not be lower than the amount of the liabilities left, and should also ensure the possibility of supporting the family for several months to even several years, depending on the earning capacity of the main person maintaining the household. In the event of a serious illness, the amount of the benefit should cover additional costs of treatment, rehabilitation or changing work to a less strenuous one.

The pension gap is also important. Many of us do not take into account the fact that in retirement we will only receive a portion of what we earn today. The replacement rate in 2022 was 56.6%. – let’s translate this into average earnings, in retirement we will receive half of our salary. Will we be able to support ourselves with this, considering that we will only live half of our retirement in good health?

Therefore, long-term saving is of great importance.

How do we secure our assets?

Even though in Poland approximately 49 percent are secured. real estate, which is not a bad result compared to Europe, we observe significant underinsurance here. In our report, we show how much it is worth increasing the insurance sum to make it adequate to the level of today’s real estate prices and the costs of construction materials. 45 percent agents we asked in the survey believe that the insurance amounts for houses and apartments are too low in relation to their value. We also checked whether Poles are good at estimating the value of their property. In our 2022 survey, almost one in five said they didn’t know how. This is valuable information also for insurers, because we definitely need to strengthen communication and educational activities.

At PIU, we also address them to entrepreneurs, showing what they should pay attention to when insuring property. How to insure the main assets without which they would not be able to continue their business. We show, among others: differences between insurance at replacement value and that at gross book amount. For example, an entrepreneur who bought a machine a few years ago, if he insures it for the gross book amount, will receive exactly the amount for which he bought it. However, today’s prices are much higher.

Is the insurance gap in all these areas getting wider every year? Why?

Inflation and price increases affect every area of ​​life, so replacing assets today will be much more expensive than a few years ago. All the more so because as a society we are constantly getting richer, building and developing infrastructure. Healthcare has become very expensive. Modern medical procedures are becoming more and more effective, but also expensive. In pensions – the replacement rate will decrease because we are aging as a society. This means that subsequent generations will receive less money when they retire.

What consequences does this have for policyholders?

The lack of adequate financial security when something bad happens condemns us to great uncertainty and often pushes us into poverty. Serious illness, death of a loved one, destruction of a house or apartment – these events generate costs that the average Pole is unable to cope with on his own, especially considering the low level of savings in our society.

How can the insurance gap be addressed? What are the solutions? What can be recommended and to whom?

We would like, among other things, in health, insurance has become an element of the system – we have been pushing for it for years.

In Poland, we have to pay health insurance contributions to the National Health Fund and at the same time buy insurance or a medical subscription because we want to see a doctor faster. However, the queues are getting longer and the financial needs are increasing. We could switch to a complementary model, where some services are provided by the public system and some by the private system, then we would be able to deal with these problems more easily. The money would be spent more efficiently. We could also introduce a system of tax relief for employers and employees, which would encourage comprehensive health care.

In the case of life insurance, we would like to see tax incentives for this type of products, as in Western European countries. These incentives may vary. Thanks to this, the market is developing. In group insurance, the relief may be double. The employer could include the insurance paid for the employee in tax deductible costs and thus reduce tax. An employee could be exempted from income tax due to the financial benefit he or she has thanks to group insurance. In the West, life insurance policies with an investment element are more popular thanks to tax breaks, and this is one of the few methods of long-term saving for people with low and medium incomes.

Let us remember that life insurance is a source of long-term capital. Capital invested in insurance is more resistant to all types of crises and economic cycles than capital invested in banks or securities. That is why good conditions have been created in Western Europe for the development of this insurance market, so that the capital invested in these products will be an anchor for the economy. Therefore, reducing the gap in this area will also bring real benefits to the economy.

Does the problem of the insurance gap also exist in other countries? How do they deal with it, what solutions do they introduce in this area?

Unfortunately, the insurance gap is a global phenomenon. That is why cooperation and incorporating insurance into the system are so important. There are many solutions to this problem in Europe.

For example, in the health field there are several models, in each of them insurance plays an important role. In the Netherlands and Switzerland, the state plays the role of the regulator. It defines the basic, mandatory scope of benefits, and insurers play the role of payers. Citizens decide which payer they will use and to whom they pay contributions. In Poland, this would, of course, mean a systemic revolution. But the French model could be a good model for us.

In France, the basket of benefits financed from public money was limited, thus creating room for private entities, including insurers. The co-payment system for health care services has also been expanded, and this co-payment can be insured. Thanks to this, public and private systems complement each other.

We hope that, given the growing insurance gap and the need to provide Poles with the opportunity to build a financial cushion in many areas of life, we will cooperate with the government to introduce such systemic solutions.


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Luc's expertise lies in assisting students from a myriad of disciplines to refine and enhance their thesis work with clarity and impact. His methodical approach and the knack for simplifying complex information make him an invaluable ally for any thesis writer.