Insurance executives see opportunity in $1.8 trillion gap

A recent survey involving over 500 insurance executives by Economist Impact and SAS indicates that 79% of respondents feel a moral responsibility to address the global protection gap, which is estimated at USD $1.8 trillion.

The protection gap represents the difference between insured and uninsured losses in areas such as life, health, natural catastrophes, and crop insurance. Executives indicated that technological advancements could play a crucial role in bridging this gap. The survey revealed that as climate change continues to cause significant financial losses for insurers, closing the protection gap is seen by 76% of executives as a substantial business opportunity.

The "future of insurance" survey report outlines the risks, opportunities, and trends anticipated to impact the insurance sector through 2040. The report addresses the pressing global protection gap alongside other challenges such as the climate emergency, innovations in data and AI, and increasing instances of fraud and cybersecurity threats.

Sabine VanderLinden, CEO and co-founder of Alchemy Crew, remarked, "Insurance has always been about building resilience, and today, the stakes have never been higher. With a $1.8 trillion global protection gap and mounting challenges, from climate change to fraud and cyber threats, the industry stands at a crossroads."

The protection gap is exemplified by economic losses due to natural disasters, which amounted to USD $368 billion in 2024 alone, with 60% being uninsured. This issue predominantly affects vulnerable communities in high-risk areas, where climate change exacerbates the difficulty of affording insurance.

There is also an urgent need to extend insurance coverage to underserved populations in the health and life sectors, as the impacts of climate change are anticipated to disproportionately harm children, the elderly, and socioeconomically disadvantaged individuals. Sean Kevelighan, CEO of the Insurance Information Institute, stated, "As financial first responders, insurance leaders understand that shifting from detecting and repairing after catastrophe to predicting and preventing is critical to addressing increasing climate risk and insurance affordability challenges at hand."

The survey also identified key barriers that significantly restrict organisations from taking advantage of industry trends, including addressing the protection gap. Notable barriers include a lack of understanding of consumer needs (76%), knowledge of the external environment (75%), outdated technology systems (75%), siloed operations (74%), slow innovation rates (74%), and inadequate resources (73%).

Franklin Manchester, Principal Global Insurance Advisor at SAS, commented, "Three-quarters [77%] of insurance leaders identify lack of trust in the industry as a significant barrier to closing the protection gap, and it's no wonder why. As carriers retreat from disaster-prone areas and data privacy violations are revealed, insurers must act decisively to regain consumer and regulator confidence."

The survey indicated that executives believe employing technology could significantly aid in targeting the protection gap. Effective strategies include using technology to make insurance more affordable (48%), with 40% of organisations already implementing this method. Introducing innovative products like parametric or microinsurance is supported by 42% of respondents, while 39% advocate for regulatory engagement. Leveraging data to refine risk assessment and product design is also crucial, with 38% of respondents focusing on this approach.

VanderLinden added, "The future belongs to those who harness innovation - AI, data and emerging frontier technologies - to make insurance not just more accessible but more equitable. The industry must certainly cover risks. It also must empower communities, create trust and bridge the divide for a more secure tomorrow."