Government-supported social retirement plans (Pillar I) are under extreme financial pressure due increased life expectancies and low fertility rates. Individuals are compelled to provide for themselves a suitable retirement through occupational pensions (Pillar II) and personal savings (Pillar III). The insurance industry can help as it is the only industry that accepts longevity risk as a core business, and is a long-term provider of lifetime annuities—an insurance that a person will not outlive their retirement savings.
Technology and new data sources are changing our economy and society fundamentally, and promise to transform the insurance industry as well. Digitalization is changing the role of insurance, from pure risk protection towards predicting and preventing risks. The risks insurers cover and the ways they underwrite, distribute, and manage claims are also changing. In an increasingly digitalized world some risks will become less frequent, while others, like cyber, will gain in importance, and again others may cease to exist.
The emergence of big data analytics and artificial intelligence has triggered a deep transformation of the insurance industry. Established insurers invest in the digitisation of their processes and products, while an increasing number of InsurTech companies are entering the market as insurers, distributors of insurance solutions, and at other points along the industry’s value chain. Both incumbents and newcomers are developing insurance products that use large amounts of data to assess, select, price, predict and prevent risks that in some cases were previously considered uninsurable.
Risk exposures, driven by digitisation, urbanisation and climate change as well as value accumulation and concentration, tend to outgrow insurance premiums, leaving individuals, households, firms and the public sector alike underinsured. The root causes and prevalence of insurance protection gaps vary widely across the globe, reflecting different stages of economic development as well as social, institutional and cultural peculiarities.
In emerging countries, the global trend of higher healthcare expenditure has not led to increased penetration of private health insurance, which remains insignificant with a 2% share of total healthcare expenditure. With the right regulatory framework, private health insurance can have an important and beneficial effect on the sustainability of health schemes to which individuals, governments and employers contribute.
A global customer survey commissioned by The Geneva Association corroborates the role of behavioural economics and finance in understanding obstacles to insurance purchases and ways the insurance industry can stimulate demand. A lack of trust in insurers impairs insurance purchasing in mature markets, but encouragingly, this can be effectively addressed by specific measures taken by the insurance industry.
COVID-19’s present and foreseeable social and economic impacts are a call to invigorate and recalibrate discussions to address social inequality. Our research illustrates that private insurance can alleviate social inequality by covering exposures that may push middle-class individuals and families into poverty or perpetuate poverty for low-income households. The report points to specific insurance products and approaches that mitigate the risks of impoverishment and/or contribute to more stable levels of wealth and income.
11-12 July 2019
Advancements in Modelling and Integration of Physical and Transition Climate Risk
Pathways to Climate-Resilient Decarbonised Critical Infrastructure in the 21st Century