Globally, insurance associations are concerned about awareness, accessibility, affordability and the availability of insurance. The Global Federation of Insurance Associations (GFIA) probes key challenges and presents policy recommendations for each of these in a new paper, Pathways to protection: from challenges to opportunities in insurability.
In addition to key challenges, the paper also presents case studies and policy recommendations for raising awareness, supporting improved accessibility, enhancing affordability and ensuring availability for both life and health and property and casualty (P&C) consumers.
They say the P&C insurance sector faces growing affordability challenges and availability issues due to various external factors beyond insurers’ control. “The increasing frequency and severity of natural catastrophes are also driving up premiums,” they write, “raising discussions about concentration of physical risk, limiting access and affordability in high-risk regions.”
In auto insurance, new technologies are introducing costs and complexity. In life and health, premiums have been stagnating and even declining in some markets since the early 2000s.
An increasingly complex regulatory landscape
“This shift is taking place within an increasingly complex regulatory landscape that, while charged to focus on consumer protection and positive outcomes, can also introduce operational friction and additional costs,” they write. “Efforts to modernize insurance models in response to innovation and emerging risks may inadvertently reduce accessibility and drive premiums even higher, particularly when regulatory demands outpace their practical benefits.”
And while they admit that some risks may no longer be insurable under previous conditions, they add that the industry is actively adapting and innovating to meet evolving needs.
Risk perception and trust
Key challenges identified in the paper include financial literacy, risk perception, and trust. “Insurers continue to face trust deficits, particularly with consumers who may view them as more profit-driven than customer-centric,” the paper states. “Trust remains a foundational issue.”
It also looks at distribution processes and infrastructure and taxes and regulation.
“In many countries, another key challenge to affordability is the imposition of government taxes on insurance products,” they continue. “In such locations, as premiums increase, these taxes place an even greater financial burden on policyholders.”
And while some insurers are exploring innovative approaches, including the development of parametric insurance products, the use of telematics, internet of things (IoT) devices and actuarially justified premium discounts for policyholders who implement risk mitigation measures, they note that lowering premiums sustainably can only be achieved through effective risk mitigation.
