There’s a serious gap in the level of insured property risk around the world, and based on modeling projections by Swiss Re, this represents a massive problem for property owners worldwide.
According to the global insurer’s recent study on the topic, underinsurance of property risks is a global challenge, especially with the increase in catastrophic natural events around the world. Modeling potential future events yields a global estimate of expected uninsured losses from natural disasters of $153 billion annually. The US, Japan and China account for most of the global gap ($81 billion).
And that number just represents losses from disasters. The study finds that for general property risks like fire, burglary and water, there is a general protection gap of $68 billion worldwide.
To help bridge this gap, the Swiss Re report calls on world governments to provide a strong regulatory environment, to set and enforce building standards, and promote risk mitigation to reduce exposures. This will encourage public-private partnerships that are key to closing the protection gap in cases where there is limited insurability.
For their part, the report suggests that insurers should become more innovative with products and distribution, as well as developing data and analytical tools to better understand the exposures.
For example, in a discussion of high-net-worth individuals, Accenture finds that while many of these types of buyers purchase coverage for loss risks, in many cases the coverage is inadequate, especially when the value of their assets or risks increases.
Accenture recommends four ways to address this shortfall: by enabling flexible distribution channels, engaging mobility and other technology solutions, maximizing customer potential through analytics, and offering innovative pricing options.
Through education, technology and innovative products and services, the insurance industry can help close the protection gap for the world’s property.