Harnessing Technology to Narrow Insurance Protection Gap

Article Synopsis :

The global protection gap is a pressing issue. Leading insurance industry think tank, the Geneva Association, has published a new report describing how digital and other modern technologies can and should be harnessed by insurance industry players to narrow protection gaps in both mature and developing insurance markets, by enhancing the awareness, affordability and attractiveness of insurance products and solutions.

The protection gap can be closed utilizing digital technologies

The report provides a comprehensive analysis of major concepts of insurance economics (e.g., moral hazard, asymmetric information, transaction costs) applied to the digital age, focusing on how technology can alleviate long-standing insurance market inefficiencies. Further, the study presents topical case studies, including a conceptual framework, from global players such as Aviva, Axa, Bain & Company, BIMA, Google, InShared, Leapfrog, Peking University and Ping An. Key takeaways from the report include:

• Technology will pave the way for higher insurance penetration by tackling long-standing market inefficiencies such as adverse selection and moral hazard
• Digital transformation of the insurance industry could enable a dramatic reduction in transaction costs, including claims settlement, acquisition and administration
• Overall, technology will boost the affordability, awareness and appeal of insurance globally
• Regulators, largely inexperienced in the digital space, are faced with a daunting challenge: how can one promote the development of financial technology, enhancing traditional as well as facilitating new business models, while at the same time preventing failures eroding public confidence? How can a balance be struck between innovation and safety?

Even though the insurance industry’s digital (r)evolution has just begun, technology has already contributed to narrowing protection gaps. Examples, as presented in the case studies of this report, include climate insurance based on parametric covers, mobile distribution of microinsurance, and web-based product design and sales in more mature markets

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