Asian weddings: An insurance dilemma

Indian wedding (Photo - Thinkstock)

Wedding insurance is growing in India as families spend a collective $16bn on marriage celebrations. However, as Nicky Burridge reports, the chances of its spreading further into Asia look unlikely.

Indian wedding

Wedding insurance is growing in popularity in India, as couples look to take out financial protection in case their big day goes wrong.

Two major insurers, Bajaj Allianz and more recently ICICI Lombard General Insurance, now offer the cover as a standalone product owing to increased demand. But the take-up of wedding insurance is proving slow to spread to other countries in the region.

Steady demand
ICICI Lombard launched its wedding insurance policy in India in 2011, and has reported steady demand for the cover.

Sanjay Datta, head of underwriting and claims at ICICI Lombard, said: "Demand for wedding insurance is slowly gaining attention among Indian buyers."

He added that the product now has "established demand" among the affluent sector of society, but has yet to reach the wider population as a whole.

"The awareness for wedding insurance is still in the nascent stage. However, there is immense scope for the product, which will gain momentum with increasing awareness," he said.


"Demand for wedding insurance is slowly gaining attention among Indian buyers." Datta


Potential market
The potential for wedding insurance in India is huge, given that families in the country spend an estimated $15.8bn on marriage celebrations each year, according to the Economic Times.

Datta believes that couples like the security the product offers. "We have noticed people do not want any stone unturned on the big day and are prepared to insure their event against any possible risk associated with it," he said.

Low awareness
But despite the positive reception of its product in the Indian market, ICICI Lombard is sceptical that the cover will take off in other Asian countries, claiming low awareness of the product means demand is limited outside India.

In theory, there should be a market for the cover in China and Hong Kong, where couples are also famously big spenders on weddings, which are traditionally seen as a good opportunity for a family to gain ‘face'.

But in reality, there is only one policy available in the region, which is offered by MSIG Insurance, and sold directly and through Aon.


"Consumers in this market have traditionally focused more on premium costs, instead of risk protection." Wong


Niche product
Angela Chan, senior vice president for marketing and product development of MSIG, said that the group launched its MSIG Merry-Get-Married Protection Plan in 2005 after seeing an increasing number of weddings being held in Hong Kong.

It offers tailor-made and comprehensive cover, but it is available only in Hong Kong and the group said it remained a ‘niche' product. Aon, which markets the policy as the Wedding Protection Plan, has also seen only limited take-up.

Christa Wong, director of retail broking at Aon Hong Kong, said: "Consumers in this market have traditionally focused more on premium costs, instead of risk protection when it comes to insurance buying."

But she added that the group hopes to see increasing demand for the product as the market develops.


"If your core business is still making good profits, there is less incentive to expand into something that is unknown to you." Lui


On demand
Aon also offers wedding insurance in a number of other Asian countries, although it does not actively market it outside Hong Kong.

For example, wedding insurance is available if a consumer asks for it in South Korea, while in other countries, such as Vietnam, it can be taken out under special events coverage.

But Aon stressed that awareness of, and demand for, the product remained very low in the region.

Despite this, the group is considering launching wedding cover in a number of new countries in the near future, although it declined to say which ones.

As well as a lack of awareness among consumers, another issue limiting the availability of wedding insurance in Asia is a lack of underwriting experience of the product among insurers.

Anti-selection
Insurers in the region tend to shy away from what they consider unusual risks. Neil Raymond, managing director of insurance broker Kwiksure, says it can be difficult to underwrite wedding insurance, as it is "prone to anti-selection", i.e. people who suspect they may have to cancel the wedding are more likely to take out a policy.

He added that the product is unlikely to take off in the Far East and South East Asia.

Wedding insurance also tends to be more popular in mature markets, such as in the UK and US. Hong Kong is somewhere between an emerging market and a mature market, while other countries, such as China, Malaysia and Indonesia, are still very much emerging ones.


"In Hong Kong, most parents will think that taking out wedding insurance is bad luck and not a good sign for their children." Tang


Sticking to the core
As a result, insurers in these regions are still focusing on core products, such as life, travel, home and motor insurance, and margins on these products are still good.

Bonnie Lui, chief life product officer at Axa Hong Kong, said: "If the core business starts to earn less money, insurers will need to offer new products that will generate more profits.

"When you have a new product in the market there is less competition, so you often benefit from better profits for a while.

"But if your core business is still making good profits, there is less incentive to expand into something that is unknown to you."

Sticky situation
Lui added that when a new type of risk, like wedding insurance, is being covered, there may not be sufficient claims incidents to help set adequate premiums to ensure a decent profit.

As a result, the market becomes stuck in a situation where a lack of awareness among consumers leads to limited demand for wedding insurance, while the lack of demand means many insurers are reluctant to enter the market.


"Claiming on the policy would be embarrassing for local people." Raymond


Inauspicious problem
And there is another problem that is likely to limit the scope of wedding insurance take-up among Chinese couples, namely that having a policy in place could be seen as inauspicious.

"In Hong Kong, most parents will think that taking out wedding insurance is bad luck and not a good sign for their children. It is meant to be a happy day. You don't want to think about the negatives," explained May Tang, assistant marketing manager in Hong Kong at Friends Provident International.

Raymond agrees. "Claiming on the policy would be embarrassing for local people," he said.

Even once the underwriting experience is in place and there is a higher level of awareness of the product among consumers, this issue may prove the hardest to overcome in the long run.

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