The global protection gap, which represents the difference between insured and uninsured losses across life, health, natural catastrophe, and crop insurance, is estimated at £1.4 trillion (about US$1.8 trillion).
As climate-related risks grow and economic losses mount, the insurance industry is under pressure to address this gap.
A recent survey by Economist Impact and data and AI company SAS, involving more than 500 insurance executives from 17 countries, found that 79% of respondents believe the industry has an ethical obligation to reduce the disparity.
The report, “Revealing the Paths to 2040: A Global Industry Survey Report,” examines the factors shaping the future of insurance. It identifies technology as a primary method for insurers to address the protection gap, with 76% of those surveyed viewing it as a significant business opportunity.
The report also explores the risks and opportunities facing the industry, including climate change, data innovation, and the rising threats of fraud and cybersecurity breaches.
In 2024, natural disasters such as wildfires, floods, storms, and earthquakes caused £289 billion in global economic losses, with 60% of those losses being uninsured.
The property and casualty sector faces particular challenges in regions vulnerable to climate change, where insurance remains either unaffordable or inaccessible. This coverage gap also extends to life and health insurance, disproportionately affecting underserved populations.
The report suggests that climate change will exacerbate these inequalities, as extreme weather events pose increased health risks to children, the elderly, and socioeconomically disadvantaged groups.
Sabine VanderLinden, CEO and co-founder of Alchemy Crew, said the industry is confronting a range of issues, from climate-related losses to fraud and cyber risks, with a substantial protection gap that remains unresolved.
“Insurance has always been about building resilience, and today, the stakes have never been higher,” said VanderLinden.
Insurance Information Institute CEO Sean Kevelighan said insurers must shift their focus from reacting to disasters to predicting and preventing future risks.
He also noted that encouraging changes in consumer behavior and improving risk prevention strategies could reduce the protection gap over time.
However, despite the recognition of these challenges, the survey revealed several barriers that limit insurers' ability to respond effectively.
Executives identified a lack of understanding of consumer needs (76%), limited awareness of external factors (75%), outdated technology systems (75%), operational silos (74%), slow innovation processes (74%), and insufficient resources (73%) as key obstacles.
Another challenge is public trust, which 77% of respondents cited as a significant barrier.
Andrew Pollard, an insurance specialist at SAS UK & Ireland, said that confidence in the industry is affected by insurers withdrawing from disaster-prone areas and facing criticism over data privacy issues.
“All of these situations can impact consumer and regulator confidence, and carriers must act decisively while also being transparent about their data and invest in responsible tools. This would be a significant step forward to building trust and improving their reputation – some of the positive outcomes that surveyed execs said could arise from addressing the protection gap,” said Pollard.
The survey also found that many insurers view technology as the most effective means to close the protection gap. Some companies are already applying advanced tools to reduce insurance costs, with 40% of respondents reporting the adoption of these measures. Others are developing new products, such as parametric or microinsurance, which 40% of organizations are currently using. Additionally, 28% of firms are engaging with regulators through industry bodies, while 32% are using data to improve risk assessment and product design.
VanderLinden said that the industry’s future depends on its ability to adopt AI, data, and emerging technologies. She added that the insurance sector’s responsibility goes beyond providing financial coverage and includes fostering trust and improving access to protection for underserved communities.
What strategies do you think insurers should prioritize to close the global protection gap? Share your thoughts in the comments.
