Significant protection gaps exist in societies and economies around the world and coordinated action is required from policymakers, insurers and the public to address them.
Andreas Brandstetter, Insurance Europe president / UNIQA Group, outlined three common areas where protection gaps exist:
- A lack of pension provision — Throughout the world, governments face a huge challenge in providing funds for retired citizens as the proportion of workers to retirees falls in most countries. This, in turn, impacts pay-as-you-go pension systems.
- A lack of cover for natural catastrophes — While the situation varies significantly across the world, the scale of natural catastrophe protection gaps is often shocking and can be particularly acute for emerging economies. Climate change will add to the challenge.
- A lack of cover for cyber risk — Ongoing cyber-attacks show just how exposed societies and economies are to online criminals. There is, therefore, a clear need to increase cyber resilience.
Brandstetter said the further development of multi-pillar pension systems — where insurers play a key role as providers of second and third pillar pensions — could help to make national pension systems more sustainable
For this to be a success, however, policymakers must be clear that the public needs to save more for retirement, and then encourage them to do so through tax incentives, pension tracking services or auto-enrolment.
On natural catastrophe risk, Brandstetter said that policymakers must do their upmost to limit climate change, which is already significantly increasing the frequency and severity of natural catastrophes. At the same time, it is vital for urgent steps to be taken to adapt societies to an already changing climate.
While the primary responsibility for this lies with public authorities, insurers can also help these adaptation efforts via their extensive cutting-edge modelling capabilities and, where possible, the public should take steps to make their homes more resilient to natural catastrophe events.
While awareness about the need to protect against cyber risks is increasing in both businesses and the public, more needs to be done. Insurers can play a role, and indeed an increasing number are making products available.
Andreas Brandstetter
There are, however, barriers: in particular, the lack of data available to model and price the risks is limiting the development of the market. Policymakers can address this by allowing insurers access to cyber incident data in an aggregated and anonymised format. This would help insurers to increase their modelling capacity, and therefore the protection they can offer.
Finally, Brandstetter stressed the need for policymakers to ensure that regulatory frameworks are fit for purpose and that rules do not act as a barrier to either the protection insurers offer, or their capacity to invest in the economy.
Furthermore, rules must not unnecessarily discourage insurers from using tools, as such artificial intelligence and the increased volume of available data, that can help to further reduce protection gaps.
