Why most economic and societal losses remain uninsured - A global perspective on protection gaps

My key takeaways from the Malaysia Insurance Institute (MII) Talk

Talk Title: Why most economic and societal losses remain uninsured - A global perspective on protection gaps, by Dr. Kai-Uwe Schanz (The Geneva Association) 

Uninsured losses = risk protection gap 

Insurance Protection gap
Uninsured losses as a share of total economic losses. 30% insured globally 

Historical data (Natural catastrophe/Nat Cat): 90% of the protection gap is due to natural catastrophe

Our industry is not relevant in the low income and lower-middle-income group for natural catastrophe

Over the period of 30 years, the high-income group show that they are insured about 70 - 80%

Low income countries show an enormous degree of vulnerability as a result of underinsurance

In emerging Asia, protection gap exceeds 90% for major perils (storms, floods and earthquakes)

Forward looking data
World's biggest economies, US, China, and Japan have the largest expected uninsured catastrophe risk

Philippines and Taiwan exhibit the largest macro-economic exposure

Nat cat protection gap - 70% globally
Cyber protection gap is even more dramatic than nat cat protection gap. Global cyber losses are estimated at about usd500bn per annum which is 4x bigger than Nat cat. 1 per million total insurance globally

10 - 15 years we can become irrelevant if we are not concerned about cyber insurance. We need to secure our relevance to the digital society 

▹The world spent 8 trillion USD on healthcare. Surging expenses as a root cause driven by medical inflation, expanding treatment options and higher customer expectations. The growth is higher than economic growth. Upper middle-income country (Malaysia)

Healthcare - personalised business/service

Health protection gap - cost drivers
Demography - aging (end of life morbidity) 
Income - driving demand in healthcare expenses
Technology - make healthcare more efficient 
Productivity - wage is higher than productivity
Policy - funding mix in different countries

Healthcare financing systems
1. General taxation 
2. Social insurance
3. Private health insurance
4. Out of pocket expenditure (self-financing) 

Health protection gap = stressful self-financing costs + estimated non-treatment costs due to unaffordability. This causes an estimated size of USD 1.4 trillion for emerging Asia. More than 8% of the regional GDP. For Malaysia, it is assumed 50% out of pocket is stressful

Technology adds the appeal and help in Healthcare, health insurance sector

Protection gaps are a serious threat to economic growth. Governments play a bigger role in addressing the gaps. Insurers need to improve service quality, customer experience, and product innovation and improve awareness of building

Medical inflation and aging populations add to coverage gaps

Root causes - awareness matters more than affordability. Technology is seen as the most effective remedy to protection gaps

Root causes - Supply, not enough supply of insurance. If no excess income, tough to buy insurance. Demand - Triple-A, Awareness, Affordability, Appeal

We are business of trust, promises

Why people don't want to buy insurance? 
1. Misunderstanding - do not communicate in a consumer-friendly way
2. Distrust - push products that customer do not need
3. Uncertainty - cannot be protected against everything

Findings from online interviews 
Less than 30% of those who own insurance policy feel secured and protected and more than 50% had a bad experience with an insurer 

Key obstacles to further sales
1. Trust 
2. Understanding of products
3. Transparency/communication of the industry
4. Cost

Insurance protection gap is tough to be measured. General protection gap can be measured and help insurers to mitigate risks 

Key challenge - make insurance an affordable, appealing and well-understood tool to relieve society from severe financial hardship

Healthcare and cyber protection gaps are under-researched. Narrowing these gaps is imperative to maintain the industry's relevance

Lifelong student, 

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