Insurance Leaders Face Urgent Need to Close Global Protection Gap, Report Finds
A recent study, “Revealing the paths to 2040: A global industry survey report,” from SAS, in collaboration with Economist Impact, reveals that the insurance sector is facing a critical juncture.
The global protection gap – the difference between insured and uninsured losses – totaled £1.4 trillion.
This gap represents the disparity between insured and uninsured losses across life, health, natural catastrophe, and crop insurance. The report, which surveyed over 500 insurance executives from 17 countries, highlights the industry’s ethical obligation and the crucial role of technology in addressing this issue.
Technology as a Key Solution
The survey emphasized technology as the primary solution to the protection gap. A significant 79% of insurance leaders believe they have an “ethical obligation” to step up. Furthermore, with climate change-related losses mounting, 76% recognize the closure of the protection gap as a significant business opportunity.
The report examines the risks, opportunities, and trends insurance leaders anticipate will shape the industry in the coming years, including the climate emergency, data and AI innovation, and rising fraud and cybersecurity risks. Experts from The World Economic Forum, The Geneva Association, Economist Impact, and SAS will discuss the research further in an upcoming webinar.
Climate Change’s Impact Widens
In 2024, the global economic losses due to catastrophic events like fires, floods, storms, and earthquakes reached £289 billion; however, 60% of those losses went uninsured. This is particularly true in the property and casualty sector, where vulnerable communities – often in high-risk markets – find it difficult or impossible to afford insurance due to the effects of climate change.
The protection gap extends to life and health insurance, especially for underserved populations. Extreme climate conditions can harm and kill children, the elderly, and those socioeconomically disadvantaged, which means that health and life insurers must adapt to growing climate risk.
“As financial first responders, insurance leaders understand that shifting ways to incentivize this shift in behaviours and mindsets amongst our customers and communities and it is critical to addressing increasing climate risk and insurance affordability challenges at hand,” said Sean Kevelighan, CEO of the Insurance Information Institute.
Barriers to Progress
The survey identified significant barriers limiting insurers’ ability to address industry trends, including the protection gap:
- Understanding of consumer needs (76%)
- Understanding of the external environment (75%)
- Outdated tech systems (75%)
- Working in silos (74%)
- Slow rate of innovation (74%)
- Lack of resources (73%)
“Our study also shows that many insurance leaders we spoke to (77%) believe that a lack of trust in the industry is a barrier to closing the protection gap,” said Andrew Pollard, insurance specialist at SAS UK & Ireland.
Lack of trust stemming from companies retreating from disaster-prone areas and criticisms of data privacy violations are key concerns. To address these issues, insurance carriers ought act transparently about their data and invest in responsible tools.
Tech-Driven Solutions
Executives identified these tech-driven avenues to best target the global protection gap:
- Using technologies to make insurance products more affordable (48%)
- Developing innovative insurance products such as parametric or microinsurance (42%)
- Engaging with regulators through insurance organizations (39%)
- Leveraging data to better assess risks and design products (38%)
“The future belongs to those who harness innovation – AI, data and emerging frontier technologies – to make insurance not just more accessible but more equitable,” added Sabine VanderLinden, CEO and co-founder of Alchemy Crew. “The industry must certainly cover risks. It also must empower communities, create trust and bridge the divide for a more secure tomorrow.”
