Swiss Re approximates that 75% of the world's insurable values do not have any protection. This is a bafflingly (and dangerously) high figure. We often refer to the opportunity it represents to the insurance industry, and it certainly does imply new business possibilities. However, we need to consider "the why" in order to get to "the how"—that is, why the protection gap, as we call this phenomenon, is so wide before we can lower this figure.
While some lack awareness of risk, many potential clients are aware of vulnerabilities, but do not have access to appropriate or easy-to-buy insurance for the risks they face. In particular, parametric insurance coverage when combined with digital technology opens up a new world of insurance possibilities for both those living in developed and developing regions. A key advantage to parametric insurance is that it can be purchased at the touch of a finger through digital means. This may be the only action a buyer needs to perform, as subsequently the product allows us to respond and pay out on the policy quickly—even instantly—in often dire circumstances. All without having to claim.
For example, for agricultural populations that depend on specific, but often fluctuating climate and weather conditions for their livelihoods, we've developed a variety of parametric solutions that immediately activate based on pre-determined conditions or "trigger events." These products can create a greater sense of stability for these populations. In addition, we also increasingly use parametrics to address less dire risks. Current travel insurance policies tend to be cumbersome in terms of the claims process. In mid-August, we launched Stork, a lean flight delay insurance project that relies on smart analytics to instantly pay policyholders experiencing pre-determined and often shorter time delays on flights (with predetermined time triggers as low as 30 minutes). We'll be demonstrating this technology with participants at the upcoming Monte Carlo's Rendezvous de Septembre – they'll be asked to input details of their flights from Nice to experience how this product actually works first-hand. We plan to extend this specific technology platform to other parametric insurance offerings—currently, we're working on multiple projects for parametric earthquake covers in Latin America.
One path to close the protection gap is therefore to focus on solutions at the source—the potential client. We need to be more efficient – payouts should be automatic and rely on our new wells of data and enhanced capabilities to respond in real time when the need arises. Clients have to be convinced that the value of their policies is worth more than the premiums they pay and that the value of the policy is real cash in real time if triggered. In other words, one powerful way to tackle the 75% of uninsured values in the world is not indemnity-related.
Category: Climate/natural disasters
Location: Monte Carlo, Monaco-Ville, Monaco