Two industry experts give their views on whether the insurtech sector can help solve the problem of underinsurance.
This article originally appeared in our sister publication Insurance Times and has been adapted for risk managers
WE ASKED: How does insurtech provide hope for addressing the challenge of underinsurance?
Ian Bartholomew, chief underwriting officer, FloodFlash:
The challenge of underinsurance is what is leading to the increased relevance of insurtechs.
Take flooding for instance. Around 80% of the world’s annual flood losses are uninsured.
Climate change and urbanisation are making things worse each year, but the problem is fundamentally one of legacy insurance markets not being able to provide affordable coverage in a sustainable way.
When difficult-to-cover risks like natural catastrophes endure or new risks emerge, it encourages new approaches that are typically easier for smaller, more agile businesses.
“It’s not a case of reinvention, but of augmenting existing practices”
This isn’t a case of insurtech working in opposition to the market though.
Insurtechs are mostly designed to support specific parts of the supply chain. It’s not a case of reinvention, but of augmenting existing practices and making sure that insurers have access to data and technology that keep them competitive whilst customers get access to the products they need to recover from any catastrophe that befalls them.
When insurtechs fulfil a need that has emerged from underinsurance or difficulty providing affordable insurance at scale then they stand a much better chance of having an enduring impact.
Mark Budd, head of innovation, Zurich UK
Across the industry, the issue of underinsurance has become more pressing this year as the challenging economic climate led some policyholders to reassess their level of cover.
Rising inflation has also caused repair costs to climb across some sections of the market, meaning that existing cover may no longer be adequate in the event of a claim.
Technology can play its part in helping to alleviate some of these pressures.
For example, insurers can also use a range of services including satellite imagery, street view and publicly available data to help calculate the rebuild cost of a property.
”Technology cannot replicate the value of human expertise and interaction, but it can certainly complement it.”
This means that their risk is covered correctly, without any guesswork on behalf of the policyholder, ensuring that all their costs are covered in the case of a claim.
Zurich has already implemented this technology when assessing the potential rebuild cost of schools.
However, it’s important to remember that the issue of underinsurance cannot be fixed by innovation alone. The value of brokers cannot be understated in this debate.
Technology cannot replicate the value of human expertise and interaction, but it can certainly complement it.