Some details on this new report;
Insurance protection gaps are the focus for a new report published jointly by the International Underwriting Association (IUA) and Airmic. Such gaps emerge as organisations face risks that insurance cannot fully cover, as some exposures are too uncertain to price or losses may be too large for commercial markets to absorb. Increasingly, some emerging risks are also simply too new and lack the necessary data for insurance products to have developed.
Meanwhile, the most consistent issue raised by large buyers is that insurance is structured around product lines rather than around the outcomes they need. The paper makes the recommendation for the market to pilot outcome-based policy structures for well-defined risk scenarios – particularly relating to data centre failures and supply chain disruption, both of which combine a number of risks areas.
The new report ‘Closing the Protection Gap’ seeks to address these challenges with other recommendations for how insurance protection gaps can be lessened, and even closed. These include reviewing the process by which policy exclusions are finalised for major classes of business and developing new approaches to testing insurance wordings against loss scenarios.
The report – the result of a series of roundtables held with Airmic and IUA members, with KPMG as a thought leadership partner – also recommends establishing three-way engagement between underwriters, brokers and buyers, as well as greater investment in education for risk managers.
Tom Hughes, Director of Underwriting at the IUA, said: “There is consensus among underwriters and insurance buyers, particularly large organisations, that the protection gap is real, structural, and growing. Both parties want a different conversation and getting that conversation right is the key to ensuring the long-term value of the insurance industry.
“The IUA and Airmic will be working together to promote a new approach with greater communication and sharing of knowledge. A better understanding of clients and risk profiles is in the interests of all and will result in better pricing, fewer disputes, and longer-term relationships.”
Diane Maxwell, CEO of Airmic, said: “The insurance industry is confronting a widening protection gap, as organisations face an unprecedented convergence of emerging risks. They are creating exposures which existing products, distribution channels, and capital structures do not fully address. Better understanding of the client risk profile is in the commercial interest of the market, producing better pricing, and better relationships.”
Read the report here.
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