The $1.8 Trillion Underinsurance Challenge: 5 Ways Insurtechs Can Help
Underinsurance challenges continue to persist in the insurance industry, creating a pressing need for innovative solutions. A recent report by Swiss Re highlights the staggering $1.8 trillion annual insurance premium required to close the global protection gap for natural catastrophes, crop, mortality, and health insurance. However, there is hope in the form of Insurtech. The increasing relevance of Insurtech in the sector can provide solutions to these challenges. Here are five ways Insurtech can help address underinsurance challenges:
- Fulfilling a Need Insurtechs are designed to support specific parts of the supply chain. When they fulfill a need that has emerged from underinsurance or difficulty providing affordable insurance at scale, they stand a much better chance of having an enduring impact. For example, FloodFlash is using Insurtech to address the challenge of underinsurance in flood risk. Climate change and urbanization are making things worse each year, but the problem is fundamentally one of legacy insurance markets not being able to provide affordable coverage in a sustainable way. FloodFlash’s innovative approach to flood insurance is helping to fill this gap.
- Enhancing the Customer Journey Many insurtechs have a combination of underwriting capability and digital technology, often focused on enhancing the customer journey. Addressing underinsurance gaps often needs both of these skills, and this is where insurtechs are increasingly relevant and performing a key role for customers. For example, Pikl identified an underinsurance gap in the short-term rental markets where homeowners were not getting insurance that met their needs when shopping for home insurance. Pikl’s solution was to work with price comparison websites to change the customer buying journey, enabling them to compare insurance quotes that were relevant to their specific circumstances.
- Using Real-Time Data Technology can play a part in helping to alleviate some of the pressures of underinsurance. For example, insurers can use a range of services, including satellite imagery, street view, and publicly available data to help calculate the rebuild cost of a property. This means that their risk is covered correctly, without any guesswork on behalf of the policyholder, ensuring that all their costs are covered in the case of a claim. Zurich has already implemented this approach.
- Providing Affordable Coverage When difficult-to-cover risks like natural catastrophes endure or new risks emerge, it encourages new approaches that are typically easier for smaller, more agile businesses. Insurtechs are augmenting existing practices and making sure that insurers have access to data and technology that keep them competitive while customers get access to the products they need to recover from any catastrophe that befalls them. This approach can help provide affordable coverage to those who need it most.
- Offering Parametric Insurance Finally, insurtechs like Riskwolf are enabling insurers to build and operate parametric insurance at scale. Using unique real-time data and dynamic risk modeling, Riskwolf turns real-time data into insurance. This approach can help address underinsurance challenges by providing coverage that is tailored to specific risks and events.
In conclusion, the increasing relevance of insurtech in the sector provides hope for addressing the challenge of underinsurance. By fulfilling a need, enhancing the customer journey, using real-time data, providing affordable coverage, and offering parametric insurance, insurtechs are helping to fill gaps in the insurance market and provide solutions to underinsurance challenges. If you’re an insurance executive looking to address underinsurance challenges, get in touch with Riskwolf to develop parametric insurance for your specific case. With Riskwolf, you can turn real-time data into insurance. Using unique real-time data and dynamic risk modeling, we enable insurers to build and operate parametric insurance at scale. Simple. Reliable. Fast. For more information, check out this article from Insurance Times.