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Why the vulnerability gap is important for insurance companies




Sustainability is an issue of global importance, with unique consequences for insurance companies. In this series, I have discussed the nuanced definition of sustainability for insurance companies in Europe and how this relates to their overall strategy and products. Although concerns about the environment and climate change are a priority, there is another aspect of this that insurance companies need to be clear about. Insurance companies help their customers manage risks, but what happens when some societies are more vulnerable than others. An important social goal for the insurance community must be a focus on improving coverage and affordable prices in historically underserved areas.

Awareness of customer vulnerability

What does this mean? At a basic level, we need to create products and solutions that enable vulnerable and low-income earners with the means to protect themselves against risks. After the covid-1

9 pandemic, this is more important than ever, as many household incomes may have been compromised. Italy, for example, has prioritized this in the training of insurance professionals, where ANIA Academy collaborates with CeTIF (Research Center on Technologies, Innovation and Finance at the Università Cattolica del Sacro Cuore) to offer the first master’s degree in the second level of insurance management, focusing on to respond to the challenges of the “new normal”.

Utilize data for autonomy

When it comes to climate change, insurance companies must work to provide accessible and affordable products that respond to disasters, but also help insurance companies in society to prepare for the ongoing effects of climate change. Thankfully, with tools at our disposal such as aerial imagery and machine learning, we can provide a deeper understanding of risks and generate useful data that helps us better serve vulnerable communities.

The effect of these data can be seen in the UK, where local insurance companies are involved in a range of activities that support national and regional forecasts of future weather and disaster patterns. These data outputs and modeling not only inform about their business practices, including pricing decisions and risk-based capital assessments, but also shape the UK insurance sector’s dialogue with policy makers.

At a global level, data can help us understand our customers’ needs. As Kenneth Saldhana discussed in his latest Insurance News Analysis, the role of the insurance industry in creating greater resilience for vulnerable countries and societies was an important part of the discussion at COP26 and a driving force for the new Global Resilience Index Initiative. The IDF, first announced at the COP21 climate negotiations in Paris in 2015 and formally launched the following year, unveiled several initiatives during the recent COP26 talks in Glasgow, including the Global Resilience Index Initiative (GRII), which will provide a globally consistent model for resilience assessment. in all sectors and geographies. This will be cured on the basis of open source.

To cultivate understanding

Climate resilience ultimately begins before a climate emergency. Insurance customers, especially those in vulnerable areas, need to be equipped to deal with climate threats and their economic impact. Insurance companies in Europe respond to this need through a wide range of awareness-raising campaigns. In Germany, for example, insurance companies work in partnership with government agencies, consumer protection organizations, architects and other stakeholders to raise awareness of the effects of climate change and natural hazards; the benefits of loss prevention and best practices in natural disaster-resistant buildings. This is illustrated by Germany’s relatively low protection gap; and an insurance penetration rate for natural hazards such as storms or hail of more than 90%.

When it comes to protecting vulnerable societies from the effects of climate change, we as insurers can help break the cycle by investing in protection and resilience earlier and creating awareness through data. This should be done in the context that climate incidents do not just happen to individuals, but societies and our planet.


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Disclaimer: This content is provided for general information purposes only and is not intended to be used in consultation with our professional advisors.


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