Over the past weeks, I couldn't help but notice the slew of magazine articles reflecting on whether the world has changed since the 2008 financial crisis… and whether we are prepared for the next one.
I remember the 2008 crisis vividly. I was working at Swiss Re but in a different role when I heard about the bankruptcy of Lehman Brothers, which triggered a stock market crash and the biggest economic crisis ever.
Experts deemed it a "black swan" event because the size of the crisis was associated with a tiny probability of occurring but it had a gigantic impact on the world. For the insurance industry, the crisis had a major impact due to the subsequent reduction of interest rates, money became cheap, and this changed the landscape so a lot of fresh capital flowed in, and our industry became far more competitive.
But the key lesson I took away from 2008 wasn't about corporate risk management but individual – that people live their lives acutely vulnerable to many non-systemic crises which are often avoidable.
The financial crisis dominated the newspapers back then and it affected everyone. But the protection gap is also a trillion dollar issue that affects everyone yet few people talk about it. It's a covert, slow-growing problem and – like a frog in hot water – the danger to most people is imperceptible.
The gap today is wider than it was before the financial crisis of 2008-2009, with life underinsurance averaging about a half a million dollars per household in the US.
We've taken steps to try and solve the gap with the establishment of Life Capital back in 2016. Listening to our customers has allowed us to cover more people, for example at iptiQ, where we launched a new product to protect pregnant women where there was a hole in the market.
Digitalisation and delivering a seamless customer journey will also help us close the protection gap. Tech has become part of everyday life here at Swiss Re, and within Life Capital we regularly organise bootcamps with experts around the world in order to brainstorm new solutions that will help close the gap. Keeping on top of technology and figuring out how to stay relevant is paramount for us as complex technologies such as blockchain and artificial intelligence revolutionize our business models.
Technology solutions like the ones provided by iptiQ that accelerate the underwriting process and leverage big data are crucial so that we can serve the middle class where the protection gap is biggest.
So when I reflect on the 2008 crisis, I don't believe that it was caused by people who weren't smart enough, but rather a lack of common sense. A greater emphasis on common sense is also needed in order to close the protection gap. I believe that insurers must be bolder in educating people about the importance and sensibility of having protection for themselves and their families in case of misfortune.
We can't prevent another black swan-type event from happening, but we can make sure that society is more resilient one person at a time. Click here to learn more about how you can help us close the protection gap.
Location: Zürich, Switzerland