Do insurers have an ethical obligation to close the global protection gap?

March 24, 2025 3:07 PM

New research from SAS shows that the majority of insurance executives want to address the global protection gap, last estimated at $1.8 trillion across life, health, natural catastrophe and crop insurance.

In "Revealing the paths to 2040: global insurance survey report," conducted by Economist Impact and sponsored by SAS, 79% of insurance executives say they believe the industry has an "ethical obligation" to close the protection gap, and three-quarters of respondents view closing the gap as a "significant" business opportunity. Of the 500 executives surveyed in September and October 2024, three in four respondents see diminished trust and lack of affordability as two significant barriers, but say that technology is the most effective way for their organizations to address these challenges and close the protection gap.

In a webinar about the SAS and Economic Impact's most recent publications, held March 6, 2025, panelists analyzed the global insurance survey and shared additional insights and strategic implications on its findings. The analysts not only discussed the opportunities available to insurers in addressing the worldwide protection gap, but also the apparent shift in the insurance industry from climate recovery to climate resilience.

Seventy-six percent of insurance leaders view closing the gap as a significant business opportunity.

Execs identified market dynamics and AI as the greatest trends most likely to shape the industry moving forward and were more likely to view these as opportunities rather than risks.

Andre Belelieu, head of financial services from the World Economic Forum, said, "One of the areas we're going to see a huge shift in the insurance industry, and in the years ahead, is the workforce. The workforces that were built for the insurance companies of the past are not going to or cannot look like the workforces of the insurance industry in the future…"

"There's a huge ongoing effort in the industry to upskill employees, but also to start recruiting for different profiles that will help insurance companies seize the opportunities that we see here. Overall, the message again here is one of optimism," Belelieu stated." I think the industry is thinking very deeply about where it needs to go in the years ahead, and as you see through the report, there's a lot of different areas where it needs to play a critical and central role in helping us devise solutions and innovations for the future."

Seventy-seven percent of execs identify lack of trust in the industry as a significant barrier to closing the protection gap.

Despite general optimism towards innovation in closing the protection gap, most insurers have not started implementing this tech to close the gap just yet. The survey reveals that top insurance leaders see climate risk, geopolitics and cybersecurity as posing the greatest challenges to their organizations.

Internal barriers that limit organizations' ability to take advantage of industry trends include: understanding of consumer needs, understanding of the external environment, outdated technology systems, working in silos, slow rate of innovation, lack of resources and focus on the near term.

"What we see is an industry that's looking to adapt and remake itself across many different areas at the same time, which for any industry, is particularly challenging. For the insurance industry, which is traditionally innovative more slowly than other areas, it's quite an undertaking," said Belelieu. "I do share some of the optimism…in the insurance industry's ability to adapt to many of these challenges, mostly because it has to. If you look at what the insurance industry is faced with, what our economy and societies are faced with, whether it's climate, technology or demographics... insurance is central to the solutions we need to build for the world."

Forty-eight percent believe using technologies to make insurance products more affordable will help address the protection gap.

Only 40% of the respondents' organizations are currently deploying tech to address the protection gap. Executives also identified avenues to address the protection gap that included developing innovative insurance products such as parametric or microinsurance, engaging with regulations via insurance organizations and leveraging data to better assess risks and design products. Though these areas are considered popular methods, not many organizations have reported these innovations, likely due to the many internal and external barriers insurers face.

The panelists discussed the shifting dynamics of the consumer and of the rising middle class, which Stu Bradley, SAS senior vice president of risk, fraud and compliance solutions, identified as a significant trend.

"That changing dynamic is also changing the consumer expectations around how insurance should be offered, that we used to do risk-based segmentation based on geography and other types of demographics," explained Bradley. "And now consumers expect a segment of 'one' based on their individual and specific behaviors and overall risk factors. As that pertains to IT and needed transformations in the industry, this is going to mean different data. It's a completely different data ecosystem that's required to be able to meet those consumer expectations."