Global law firm Clyde & Co has today launched the second in a series of reports exploring how to build greater resilience to natural and manmade perils, including those caused by climate change.
Closing the protection gap through inclusive insurance, assesses the challenges of providing insurance cover to the 4bn individuals in emerging markets who are under or uninsured and at present, drawing on extensive research, interviews with leading players in the market, and insight from firm’s legal and regulatory experts in this space.
With the G7 aiming to extend climate risk insurance coverage to an additional 400 million people in emerging markets by 2020 and the think-tank Centre for Financial Inclusion at Accion reporting that there are 60 global insurers involved in providing inclusive insurance (up from only seven in 2005) the report explores the cultural, technical, legal and regulatory barriers insurers face as they seek to develop new and innovative product offerings for new markets.
According to the report, the signs are positive for a rapid uptick in inclusive insurance penetration in emerging economies due to a combination of factors including a global shift from low to middle incomes, technological developments driving incremental costs down, and governments increasingly recognising the benefits of protecting their emergent middle classes.
Nigel Brook, partner at Clyde & Co, comments:
“Introducing so-called inclusive insurance has required a fundamental rethink from insurers on how they ‘go to market’ because they are selling to customers with low or unstable incomes, in economies where formal identification documents may not be available, where the concept of risk transfer is not understood, and where traditional distribution channels don’t exist.
“Carriers are showing great creativity in harnessing technology and developing new partnerships, new business models and new products, all of which inevitably raise legal and regulatory considerations.”
The report explores international attitudes to inclusive insurance and provides an analysis of the strategies deployed by global and local players in emerging markets. It suggests that insurers need to focus on three critical success factors: building trust, building transaction capability, and demonstrating ongoing value for customers.
When considering the legal and regulatory challenges of operating in this space, Brook comments:
“In our view a positive regulatory approach, information-sharing across jurisdictions and greater encouragement of public-private partnerships could help engender an environment where further progress is made.
“Doing this will allow insurers to harness the power of insurtech to help close the protection gap and build resilience in emerging markets.”
The report contains insights from global insurers, NGOs, government bodies, and academics in the inclusive insurance space, including Paula Pagniez of Willis Towers Watson, Garance Wattez-Richard and Quentin Gisserot of AXA’s Emerging Customers, Sarah Schneider-Olié of Allianz SE, Fiona Stewart of the World Bank, Hannah Grant of the Access to Insurance Initiative (A2ii), and Ana Gonzalez Pelaez of the Cambridge Institute for Sustainability Leadership. The report was also informed by discussions with the UK’s Department for International Development, Cenfri and the InsuResilience Global Partnership.
Earlier this year Clyde & Cowhich examined the part parametric (or index) insurance plays in building resilience by providing cover to whole communities and regions, often in association with governments or NGOs.
To read the report in full