On Wednesday the 24th of August I woke up to the sad news of a 6.2 magnitude earthquake in the central area of Italy which has left more than 290 casualties and almost 400 injured people (you can see more details in Swiss Re's fact-sheet).
As I was looking at the media coverage, one particular picture showing half of the town of Amatrice – the older half- completely flattened out while the newer one seemed in much better shape; made me think that it looked as one of those pictures made with a before-and-after app. It makes me wish we could have an app that would rebuild these towns as easily as the pictures get restored.
Unfortunately such an app doesn't exist. What is actually needed is funding and while the prime minister has promised that no community will be left to die and the first € 50 mio in aid have been released, the fact is that more than 98% of the current estimate of up to €11 Bio economic loss is not insured and therefore will have to be borne by society.
In other countries with a high earthquake frequency, like Turkey for example, the government has recognised the value that lies in pre-financing disaster relief. They have set-up schemes that ensure their society's resilience by allowing (or rather enforcing) insurance to provide for the needed protection.
Oftentimes, the answer to the question of why people don't buy earthquake insurance is that it is too expensive, but in reality those same people who say it is not affordable don't know what the price is. It is a matter of perception, the perception that insurance is expensive because the balance of cost and benefit is off: consumers perceive little value and therefore any price is too high.
Insurers can continue trying to decrease the price of their products but that can only take us so far; what we must do is increase the real and perceived value that the products deliver. We should do this through simpler forms, shorter wordings which focus on meeting the client's needs to the largest extent possible; easier access, the one-click insurance policy store.
Risk awareness is also a lever in which technology can play a significant role: the availability of images and news from smaller events which wouldn't have made it to a global newspaper 20 years ago, allows us to grasp the level of devastation some small events can have but doesn't necessarily makes us relate to our own individual risk. For this we must ensure widespread risk awareness campaigns are undertaken alongside prevention measures. We must highlight the benefits insurance brings and make them tangible for the wider population and only then will we be able to get consumers to buy a product they believe in.
The Italian Insurance companies, alongside the global reinsurance industry, has enough capacity available to provide cover to the Italian society. Swiss Re alone paid almost USD 8 bio in P&C claims last year, including catastrophe claims. This money was used to rebuild houses, businesses and lives.
But underwriting capacity is not enough. Building codes must be enforced and risk reduction measures undertaken. Citizens must also do their part and participate in the risk transfer mechanism and the government must foster it. And again: insurance products must be simple and comprehensive as well as affordable and easily available.
Let's work together to ensure that the next earthquake's reconstruction – because there is no doubt whatsoever that there will be another earthquake like this one- is pre-financed. Together the Industry, the government and society, have everything we need to make it happen.
Are you making it happen?
Category: Climate/natural disasters: Disaster risk, Earthquakes, Resilience