Although insurance can be considered the safety net of society, protection gaps exist across developed and developing nations. Soaring inflation and the cost-of-living crisis has made this all the more relevant. Better understanding risk and building relationships is key in working towards closing protection gaps and serving customers more effectively.
In partnership with the Association of British Insurers (ABI), FinTech Global held a “Tech for Good” event to hear from experts on the latest developments in making insurance more inclusive.
FinTech Global sat down with Mervyn Skeet, director of general insurance policy at ABI, to explore some of the key takeaways of the discussion.
Insurance gaps exist where there is a discrepancy between the amount of insurance that is economically beneficial and the amount of coverage that is actually purchased. In instances where there are large catastrophic events such as hurricanes or earthquakes, Skeet said the coverage is sometimes only around 50 to 60% and this causes huge losses.
“It is important that the industry thinks about how to tackle this. That can be in developed nations such as the US or the UK, or it can be in a less developed scenario where insurance just isn’t a priority for people to buy.”
This is becoming a more pressing issue as of late in the UK market and other more developed nations. “The cost-of-living crisis has meant that for some people insurance is not as important as it used to be. They are focussed on paying the bills, keeping the power on and buying food. So, insurance has become more difficult to manage. As an industry we must think about how we can help our customers in such cases.”
Some of the key instances where insurance protection gaps exist, according to Skeet, are in the health insurance sector. Additionally, when it comes to developing nations, crop insurance coverage is proving vital. Certain innovations such as parametric insurance are going some way to improving this and the industry must continue to develop such innovations further, Skeet said.
One theme that stood out to Skeet during the panel discussion, was the approach of dealing with the customer before they need the insurance, and thereby having insurance as the fallback position.
“Another thing I took away is that we need to get better at helping customers to understand what they are buying and how they are buying it,” Skeet said. “If we can work with individual customers or SMEs to explain the risk in a way that can be understood, and how insurance can cover that risk, this would allow a better match.”
Moving forward, Skeet said that he would like to see the industry continue to work to understand the risks that customers face. “If we can get a good understanding of those risks we can develop more products that work for those risks.”
The flipside of that, he continued, is that customers need to feel comfortable coming forward to the industry and providing that information and wanting to use the industry as a safety net. “So, there needs to be movement on both sides. We need to work with customers, as many of our members already are, and we need to encourage customers to understand the industry better… in essence, building relationships is crucial.”
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