A new report by the Global Federation of Insurance Associations (GFIA) has flagged some of the most pressing insurance protection gaps facing the world currently, and explored ways to help close them.
Among the largest annual global protection gaps identified by GFIA were a $1 trillion gap for pensions, $900 billion for cyber, $800 billion for health and $100 billion for natural catastrophes.
Addressing the largest of these – pensions – GFIA notes that demographic changes are putting unprecedented pressure on pension systems globally, requiring them to sustain more people as the expected lifespan after retirement increases alongside the number of people entering the systems.
What’s more, public pension schemes are under pressure as fewer people in the workforce support the inflow of funds into the schemes due to falling birth rates coupled with the increasing number of people receiving disbursements.
Given that pension needs are likely to continue to grow faster than the available funds, analysts warn that the gap will further increase, especially because decreasing investment returns are expected to hit pension schemes worldwide.
Due to the size of the gap, GFIA recommends close collaboration between public and private stakeholders, for example by balancing appropriate regulatory conditions and tax incentives with innovative and flexible products.
On cyber, meanwhile, although the supply of cyber insurance is expected to grow, GFIA feels it is unlikely that the cyber protection gap will be closed soon due to the small share of insured losses today and the rapid speed of digitisation, making businesses increasingly vulnerable to cyber attacks.
Furthermore, since they are dependent on the regulatory environment and public cybersecurity infrastructure, analysts suggest that insurers will not be able to narrow the cyber protection gap alone, meaning private and public stakeholders need again need to collaborate to address the fast-growing protection gap.
Here, GFIA advocates for levers to incentivise and support prevention, conduct awareness campaigns, develop incident-reporting frameworks, and foster adaptation measures.
Various potential levers exist for private and public stakeholders to use to address the protection gap. These include: incentivising and supporting prevention; conducting awareness campaigns; developing incident-reporting frameworks; and fostering adaptation measures.
“Insurers around the world play a vital role in helping to protect people and businesses from the risks they face, and to recover when those risks materialise. However, as this report highlights, a range of factors have led to huge and growing global protection gaps that could have profound impacts on people’s lives and livelihoods,” said GFIA President Susan Neely.
“Insurers can, and are, taking steps to address these gaps. These include using technology to assess risks and claims, and to make insurance more accessible for people and businesses. However, closing the gaps will also require action from policymakers to create environments in which risks can be managed and mitigated. These actions will help keep risks insurable and insurance protection affordable,” she continued.
“The report makes clear the steps that are needed to reduce the protection gaps and to help people and businesses access the insurance services they need to succeed and thrive.”
