The changing and increasingly complex landscape of risks in advanced and emerging markets present a huge opportunity for insurers to offer innovative products in order to bridge the protection gap and insure the uninsured, said speakers at the Economist Insurance Summit in London.
A Lloyd’s study in 2011 found that an increase of 1% in penetration leads to a 13% drop in uninsured losses and a 22% reduction in what tax payers have to pay for their share of fixing damages, said Mr Tom Bolt, Director, Performance Management, Lloyd’s.
He added that penetration levels and awareness in emerging markets are usually associated with the growing middle class in these countries. However, many developed markets still lack adequate coverage, as seen in flood cases, which prompts providers to provide innovative solutions, use enhanced technology and consider public-private sector collaboration plans. He noted that the gap is huge, especially in emerging markets which provides only 17% of global premiums while contributing to 40% of the global GDP.
Over the past four decades, the insurance industry has failed to keep pace with the economic losses caused by natural disasters, said Mr Martyn Parker, Chairman Global Partnerships, Swiss Re. Aside from the massive protection gap in emerging markets, he noted that only 5% of wealth is covered in developed economies, which signals a vast opportunity for the insurance industry to innovate and broaden its outreach.
The protection gap in life markets is more of an awareness issue in emerging markets, noted Mr Michel Khalaf, President EMEA, MetLife. Mr Manuel Aguilera, Chief Economist, MAPFRE, pointed out that reducing gaps in emerging markets has to do with the individuals’ disposable income, but cultural factors, education and lack of understating remain the key hurdles.
The one-day event also discussed new business models based on technology and mobile networks to widen the insurance coverage and broaden protection to reach the uninsured, especially in emerging markets.