A new discussion about the differences between inclusive and traditional insurance has been published by the Canadian Institute of Actuaries, suggesting that many insurers working to deliver commercially viable products to those not covered by insurance – contract workers, those without employer-sponsored coverage, gig workers and new Canadians – have faced a steep learning curve.
The report, Inclusive Insurance – A Different Game, highlights the large populations around the world without access to insurance. “Inclusive insurance products are relevant to economically disadvantaged groups in all countries, so it is incorrect to presume that these products are only applicable in countries with relatively low average incomes,” the report’s authors state. “The characteristics of these segments of uncovered Canadians are similar to the characteristics of those accessing inclusive insurance internationally – they have variable incomes and are not affiliated with a group or association offering insurance.”
The report’s authors add that traditional carriers have struggled to understand the inherent differences between inclusive and traditional insurance provisions.
“It is well established that increased access to inclusive financial services, including insurance, helps to reduce poverty and improve social and economic development. It is also the case that insurance of all types not only provides protection coverage for adverse risks but also provides the confidence to undertake riskier commercial activities, playing both a positive social and economic incentive role and providing security in adverse circumstances. These supports are especially valuable to those living near the poverty line.”
They add that the inclusive insurance landscape is evolving rapidly, discussing the differences between inclusive and traditional insurance, along with actuarial considerations and presumptions. “There is a risk that standard actuarial tools and approaches may not be appropriate in inclusive insurance markets, and that their application may lead to unintended outcomes, such as inappropriate premiums or claims processing,” they warn.
“Globally there is a great need for inclusive insurance products,” they conclude. “Actuaries need to be aware of the differences between traditional and inclusive insurance products.”
