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INSURANCE| 18.10.2021

Which European countries have residents who spend the most on insurance each year?

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Although is not unusual for the residents of European countries to purchase automobile insurance, homeowners insurance, and health insurance, not everyone is spending the same amount. In fact, these amounts can vary considerably, depending on the country. These differences are not only due to the local economic circumstances, but also to the type of insurance culture that exists.

Curiously, while the United Kingdom has a highly developed insurance industry and is often considered to be Europe’s insurance capital, it is not the country where the residents spend the most on insurance. That distinction goes to the Netherlands, where the average resident spends $5,022 per year, according to a report from MAPFRE Economics entitled “The Spanish Insurance Market in 2020”. The United Kingdom does take second place, however, with the average UK resident spending about $4,500 per year on insurance. This is also the European country where the insurance industry plays the most significant role in the economy, with insurance premiums representing 11.1% of the Gross Domestic Product (GDP). In the Netherlands this percentage is lower at 9.6%, despite the higher level of per capita spending.

Which European country has the third highest level of insurance spending? That would be France. However, this is more of a distant third, compared to difference that separates the top two countries. Each resident of France spends about $3,300 per year, followed closely by the Germans, who on average spend $3,108. The rest of the European countries have per capita spending figures below $3,000. Italy takes the fifth position, with the average Italian spending almost $2,700 each year on insurance, followed by Spain with approximately $1,400 spent on average. Even though these are the top two Mediterranean countries in terms of spending, the residents of Italy and Spain spend significantly less than their neighbors to the north.

If we expand our focus worldwide, we see that the residents of Hong Kong spend the most on insurance, with the average resident spending $9,746 per year. Not surprisingly, Hong Kong is also the place where insurance premiums represent the highest percentage of the GDP, at 20.8%. The United States occupies the second position worldwide, with spending at a level of $7,643 per person, and with the insurance industry representing 12% of the country’s GDP. Taiwan also has a high per capita spending figure at $4,800 per year, with its insurance industry also representing a significant portion of the economy at 17.4%.

What these figures demonstrate is that there are still markets with a high capacity for growth. Spain can be seen as one clear example of this potential, since its insurance industry represents only 5.2% of the country’s GDP.

Last year the total figure for insurance premiums in the Spanish market was almost €59 billion, which is 8.2% less than during the previous year. Can this be considered as the optimal level for this market? Clearly, the answer is no. This can be explained by what is known as the “Insurance Protection Gap”, which is a concept that measures the difference between the existing level of insurance and the level that would be most desirable from a social and economic perspective. Based on that indicator, Spain has a growth potential of more than €31 billion, since according to MAPFRE Economics, the optimal figure for insurance premiums in the Spanish market would be about €90 billion.

Although this gap did narrow last year, it only decreased by about €2 billion. That is still a significant amount, of course, especially since 2020 was a year when the situation generated by the pandemic caused a worldwide economic crisis, which has obviously had repercussions on the insurance market as well.

Economic growth and the emergence of new risks—some known and others still developing—could help drive the eventual closing of this gap, which will occur if the industry can maintain an average annual growth rate of 4.3% during the next decade. This represents both a challenge and an opportunity, not only for Spain’s insurance industry, but also for the country’s economy as a whole and for its society in general, which would become better protected.