Insurance Cost Challenges

𝗜𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘄𝗶𝗹𝗹 𝗯𝗲 𝘁𝗵𝗲 𝗳𝗶𝗿𝘀𝘁 𝘀𝘆𝘀𝘁𝗲𝗺 𝘁𝗼 𝗰𝗿𝗮𝗰𝗸 𝘂𝗻𝗱𝗲𝗿 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 — 𝗮𝗻𝗱 𝗶𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗰𝗼𝗻𝗰𝗲𝗿𝗻 𝘂𝘀 𝗮𝗹𝗹. Natural disasters caused $𝟯𝟲𝟴 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 in global economic losses last year, according to Aon — the ninth year in a row losses topped $300 billion. Only 𝟰𝟬% of those losses were insured. The protection gap is widening. As insurers retreat from high-risk regions, public safety nets — often overstretched — are stepping in. More households, businesses, and governments are being left to absorb risks they cannot afford. This isn’t just about insurance anymore. When insurance breaks down, so does credit. When credit dries up, property values fall, costs rise, and resilience weakens — just when it’s needed most. @Günther Thallinger 𝗳𝗿𝗼𝗺 𝗔𝗹𝗹𝗶𝗮𝗻𝘇 put it starkly: “𝘛𝘩𝘦𝘳𝘦 𝘪𝘴 𝘯𝘰 𝘤𝘢𝘱𝘪𝘵𝘢𝘭𝘪𝘴𝘮 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘧𝘶𝘯𝘤𝘵𝘪𝘰𝘯𝘪𝘯𝘨 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴. 𝘈𝘯𝘥 𝘵𝘩𝘦𝘳𝘦 𝘢𝘳𝘦 𝘯𝘰 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘵𝘩𝘦 𝘢𝘣𝘪𝘭𝘪𝘵𝘺 𝘵𝘰 𝘱𝘳𝘪𝘤𝘦 𝘢𝘯𝘥 𝘮𝘢𝘯𝘢𝘨𝘦 𝘤𝘭𝘪𝘮𝘢𝘵𝘦 𝘳𝘪𝘴𝘬.” The Institute and Faculty of Actuaries (IFoA) project a 𝟱𝟬% 𝗰𝗼𝗹𝗹𝗮𝗽𝘀𝗲 𝗶𝗻 𝗴𝗹𝗼𝗯𝗮𝗹 𝗚𝗗𝗣 𝘄𝗶𝘁𝗵𝗶𝗻 𝗱𝗲𝗰𝗮𝗱𝗲𝘀 if climate risk is not properly managed. Climate risk is no longer a future scenario. It is here. It is compounding. And it is reshaping our economy in real time. There are positive signs: ➤ Hannover Re and Swiss Re are restricting fossil fuel underwriting. ➤ Parametric insurance models are speeding up disaster recovery. ➤ EIOPA and the European Central Bank are pushing for public-private risk sharing. These are encouraging — but early signs. 𝗠𝘆 𝘁𝗮𝗸𝗲: Climate risk is already disrupting the systems we rely on: insurance, credit, asset valuation, and public finances. Systems change is needed. The insurance sector holds a unique vantage point — but leadership now demands rethinking long-held assumptions about risk, resilience, and responsibility. The sector has an opportunity to lead: ➤ Embed forward-looking climate risk into underwriting ➤ Signal future exposures more transparently ➤ Drive transition finance to accelerate decarbonisation ➤ Redirect investment into adaptation ➤ Co-design shared risk pools and resilience bonds Collaboration between insurers, financiers, and governments is no longer optional — it is the foundation for economic stability in a climate-disrupted world. The sooner we align risk pricing with physical reality, the stronger our chances of building a more resilient economy for the future. #climaterisk #insurance #resilience #finance #sustainability #systemicrisk #adaptation –––––––––– For updates on sustainability, climate, and innovation, follow me on LinkedIn: @Scott Kelly

When I was running MicroEnsure I found dealing with insurers to be really frustrating. It was always a struggle to get the products we wanted from them (coverage, exclusions, price, customer UX etc) and when we did manage to get a product launched it was not long before they were going behind our backs and trying to disintermediate us. And then there was the issue of getting paid for the value we created; I mean we did most of the work but getting more than a standard commission rate was pretty hard at times. This experience helped inform a project I am working on. Imagine being an insurtech who was given the authority to create your own product with no need to get it signed off or approved. Imagine if you had authority to pay your own claims on the same day they came in. Imagine if you got to keep 80% of the premiums from which you had to pay claims and the rest was your to keep. What would you do if someone gave you their license and capital for 20% of the premiums? Its insurance, just up-side-down. Discuss!

I am happy to co-author this article with Beatrice WEDER DI MAURO, President of the CEPR - Centre for Economic Policy Research, reflecting on the urgent need to engage in collective thinking and action to adapt our response to the challenge of insurability in the face of escalating climate risks. This article, which captures key convictions from our joint workshop hosted at Collège de France by the AXA Research Fund and CEPR - Centre for Economic Policy Research, couldn't have been more timely.   Devastating floods in Valencia, the wildfires in Los Angeles, the typhoons in Mayotte and La Réunion... These recent climate catastrophes show a clear reality: climate risks are intensifying and the protection gap for local communities and economies are becoming evident. Global economic losses from extreme weather events reached $320 billion in 2024, while in Europe, only 25% of economic losses were insured - leaving individuals, businesses, and communities vulnerable.    To address this, we need to enhance risk-sharing mechanisms and promote partnerships between public institutions and private companies.   Ensuring insurance accessibility and effectiveness is crucial. This can be done through: ➡️ Hybrid models, combining market mechanisms with public-private partnerships, to help ensure broad coverage and affordability. France’s CatNat regime and Switzerland’s hybrid model offer valuable insights. These models can be adapted to regions facing extreme exposure, such as sea level risks. ➡️ Greater investment in prevention and risk-sharing mechanisms. Initiatives like local municipal risk assessments can help small municipalities assess and mitigate local climate risks. ➡️ Impact underwriting, where insurers incentivize policyholders to adopt risk-reducing measures in exchange for lower premiums. ➡️ Public education on climate risks and stronger coordination between insurers, governments, and consumers to ensure preventive measures are taken seriously.   As we move forward, it's clear that policymakers, insurers, and society must work together to strike a sustainable balance between affordability and fiscal viability. This is not just about who pays the bill. It is about how we manage risk in an increasingly uncertain climate landscape. Let's continue to foster collaboration and innovation to close the protection gap and build a resilient future. 👇 https://lnkd.in/er6BkrtZ

💣 In for a contrarian view: "#Insurtechs fail at scaling #microinsurance" That’s according to research by Yannick Perticone and Jean-Christophe Graz, recently published in Cambridge University Press. The authors argue that Insurtech’s promises fall short of expectations because of the contradiction between the principles of platform scalability and insurance risk pooling. ___ Here's what the authors argue in this paper: Insurance is based on pooling risks, whereas insurtech platforms are often premised on unpooling risks. These two opposing forces create a challenging case for insurtech as a viable enabler for microinsurance. The study highlights three key dimensions of digital insurance that, while central to insurtech platforms, may also hinder their success: 🔗 Interoperability Insurtechs rely on data from other parties, such as MNOs. Due to data protection regulations and practices, the data they receive is often limited, which could result in mispricing of insurance solutions. 💴Valuation Platform owners collect data for specific purposes, which may not be sufficient for accurate risk pricing in insurance. This mismatch between the data needed for risk assessment and what is actually available may lead to incorrect pricing and, ultimately, incorrect premiums. ⚛️ Aggregation Insurtechs atomise risk pools, breaking them into smaller segments to facilitate precise risk profiling. However, this reduces the pool size, undermining the fundamental principle of insurance as a solidarity risk-sharing mechanism, which may lead to higher, not lower prices. According to the authors, these three challenges make insurtechs an unlikely solution for the growth of inclusive or microinsurance. _____ ⁉️ Do you agree? This is certainly one of the more thought-provoking views I’ve shared here. While I may not fully align with the author’s conclusions, I believe it raises important points worth discussing. I’m eager to hear your thoughts and learn from your perspectives. 𝘛𝘩𝘦 𝘩𝘪𝘨𝘩𝘭𝘪𝘨𝘩𝘵𝘴 𝘪𝘯 𝘵𝘩𝘦 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘱𝘢𝘱𝘦𝘳 𝘢𝘳𝘦 𝘮𝘪𝘯𝘦. 𝘈 𝘭𝘪𝘯𝘬 𝘵𝘰 𝘵𝘩𝘦 𝘴𝘰𝘶𝘳𝘤𝘦 𝘪𝘴 𝘪𝘯 𝘵𝘩𝘦 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴. ━━━━━━━━━━━━━━━ 🤝 Hi, I'm Bert. I'm passionate about staying up-to-date with the latest in #microinsurance. I'd be delighted to connect and exchange insights with you. 🚀 With the annual Microinsurance Master Master accelerator program, we are on a mission to help organisations thrive. Join us in March 2025 to make a difference in the business of reducing the risks of low-income communities. ⠀

In recent years, there has been a significant increase in natural disasters, resulting in substantial financial losses exceeding $100 billion for four consecutive years. Even in 2023, which was considered a relatively quiet year for tropical storms, there were a record-breaking 37 events, each costing at least $1 billion in losses. This situation raises concerns about the role of the insurance industry in managing and mitigating such losses, as well as the sustainability of the traditional insurance model to a transformative model. The insurance industry's outdated risk assessment models may have failed to keep pace with the accelerating impacts of climate change. The reliance on historical data and the short-term nature of insurance policies have led to an underestimation of the risks posed by extreme weather events. As a result, insurers have been forced to raise premiums, reduce coverage, or withdraw from high-risk areas altogether, leaving vulnerable communities in need of more protection. This approach is not sustainable in the long run. By integrating climate risk considerations into their underwriting and investment strategies and using innovative financing, insurers can incentivize companies to adopt more sustainable practices and accelerate the transition to a low-carbon economy. The threat of an "uninsurable world" caused by climate change is a stark reminder of the urgent need for action. The insurance industry must adapt and evolve to meet the challenges of our changing climate, embracing a long-term, collaborative, and sustainable approach.

The #insurance protection gap is widening and #climatechange is accelerating the risk. In 2024, disasters caused $318B in losses, with 60% uninsured globally. Why it matters: Climate risks are no longer just environmental. They are impacting financial stability, straining public budgets, and limiting growth, especially in vulnerable economies. Key challenges: 🔹 Insurers exiting high-risk markets as premiums surge 🔹 Building in flood-prone zones 🔹 Emerging markets with 1–2% insurance penetration and limited fiscal space What’s needed: ✅ Public-private disaster insurance pools (e.g., EU-level proposals) ✅ Parametric insurance, catastrophe bonds, and regional risk pools for developing nations ✅ Risk-based planning, resilient infrastructure, and individual preparedness ✅ Stronger links between insurance, adaptation, and growth financing Bridging the protection gap demands collaboration across governments, insurers, and regulators. Without it, rising disaster costs risk becoming a systemic financial and societal crisis. #sustainability #climateaction #resilience #adaptation

Many Indians are puzzled by life insurance! This confusion is primarily due to the prevalent practice of selling life insurance as a savings product rather than a protection tool. This approach often leads to misaligned expectations and misunderstandings about the primary purpose of life insurance. In India, life insurance policies are frequently marketed with an emphasis on their investment components, tax benefits, overshadowing their fundamental role of providing financial protection against unforeseen events. This trend is driven by commission structures that incentivize agents to promote products with higher savings elements, potentially compromising the adequacy of coverage. The Insurance Regulatory and Development Authority of India (IRDAI) mandates that agents conduct a thorough needs analysis before recommending policies. This process ensures that the suggested plans align with the genuine needs of clients, focusing primarily on protection. However, the current sales practices often prioritize products that offer higher commissions, leading to a mismatch between the policyholder's needs and the product sold. To address this issue, it's essential to realign the sales process with the core objective of life insurance: protection! Agents should prioritize conducting comprehensive needs assessments to determine the appropriate coverage for clients. By doing so, they can recommend policies that offer adequate protection, ensuring that the primary purpose of life insurance is fulfilled. Additionally, restructuring incentive models to reward agents for proper needs analysis and the sale of protection-focused products can lead to more ethical sales practices. This shift would ensure that clients receive policies tailored to their actual needs, enhancing trust in the insurance industry and promoting a better understanding of life insurance's true purpose. Nithin Kamath #Insurancenews #Lifeinsurance #Policyholders #IRDAI https://lnkd.in/g9D5E23K

No. of farmer families with insurance has jumped from 26% to a huge 86% in 5 years! 🌾 With over 58% of the Indian workforce (that’s as many as ~600 million people) engaged in agriculture, ensuring that our farmers can thrive is more essential now than ever. Yet, many face daunting challenges - from unpredictable weather to rising costs - that can threaten their very existence. So, when I read the recent report from NABARD (National Bank for Agriculture and Rural Development), I felt hopeful. More and more farmers are understanding the importance of insurance, and protecting what’s their own. Insurance applications under the PM Fasal Bima Yojana (PMFBY), a crop insurance scheme, too have surged from 5.3 crore in 2018 to an astounding 14.2 crore in 2023! These aren’t just numbers; they represent families who can now face the future with a little more confidence. And this matters because farming is often like a gamble with nature. Imagine a farmer pouring every rupee they have into seeds, fertilisers, and equipment, only to watch it all wash away in a storm. Without insurance, many end up drowning in debt, taking high-interest loans, or even selling their possessions just to recover. But challenges definitely remain. Delays in insurance claims, disputes over yield data, and a lack of local support mean farmers sometimes wait months - if not years - for relief. In the meantime, their livelihoods are in jeopardy. So what can we collectively do? 🔺 As an insurance sector, we need to spend some more time designing affordable microinsurance products that cater to small farmers with lower incomes. Leveraging technology to streamline claims and gather real-time data can help make payouts faster and fairer. 🔺 The government has a role to play too, running awareness campaigns to inform farmers about the benefits of insurance and simplifying the application process. Local offices with knowledgeable agents who can guide farmers through these systems would be great too. Together, I do feel we can bridge the gap and make sure insurance actually delivers on its promises. Let’s stand together to ensure that every farmer in India can cultivate not just their fields but also their dreams. :) Your views on this? 👇 #agriculture #insurance #farmers #PMFBY #ruralindia #sustainablefarming

"Do not mix insurance and investment" is classist advice. It misses an important nuance. The advice regarding buying Term plans and then invest rest in MFs, fits mainly one kind of India. People with income proof. Salary slips. ITRs. People who can easily qualify for Term Insurance. There is another BIGGER India. And here, the picture changes. 1) People who cannot get Term Insurance Many self-employed. Many in small business. Many do not file ITRs regularly. Underwriting often rejects them. In my own community, which is a business-driven community, that may not have eligibility to buy term insurance - I have seen early deaths. In those moments, even a 25 lakh cheque from a "toxic" plan became a lifeline for the dependent family. Not ideal returns, but better than zero protection. For such people, ULIPs with high life cover (plans available now with 100x cover, instead of 10x) or savings plus life cover plans may be the only option to secure the family. 2) People who do not understand why insurance does not return money This is not stupidity or ignorance. This is decades of education, culture that insurance is investment. A large number of Indians want return of money, not return on money. They are fine with low growth, but they want safety. They want capital back. We cannot blame them. Schools never explained insurance. At least my school didn't Dinner tables never spoke about risk. To change this thinking, we need a high scale "Do boond zindagi ke" level national campaign written by someone as brilliant as late Piyush Pandey. Till then, whether we like it or not, endowment and savings plans will work like sugar syrup for giving people, the real medicine, which is financial protection. The real point, the bottom line. - No product is good or bad for everyone. - A product can be right for one family, wrong for another. - Most products are not the problem. - The problem is HOW THEY ARE SOLD. - Overselling returns to someone who needs protection is wrong. - But not offering a savings plan to someone who cannot get term cover may also be wrong. So, the focus should not be on just painting products black and white. The focus should be on suitability and delivery of available best solution. Here's how I would guide: If you are eligible for adequate Term Insurance, then not mixing insurance and investment is correct advice. Buy term. Invest the rest separately. If you are not eligible for Term Insurance, do not buy blindly. Spend time in finding a good advisor who will do a detailed assessment. Choose what gives your family protection, even if returns are lower. There are several Indias. We need to offer advice that is nuanced for each of them.

❓ Why is Insurance sold, and not bought?🧐 Literally earlier today my local GP asked what I do, as soon as I said software, he was like ''oh that's exciting and interesting'' but once I mentioned Insurance he was like ''Oh....maybe not''. This mindset towards insurance needs to change! Most people don’t wake up thinking about buying insurance and it is not top of their life priority list. It doesn’t have to be this way though! Insurance is typically bought because of a trigger—an external nudge, a regulation, or a life event—or because a skilled agent or marketer has guided and advised its importance to you and the impact it can have on your daily life to protect you from unforeseen risks and negative life events. ❓ Why is Insurance sold and not bought? 🧐 ❌ Intangible nature of products - Insurance isn’t a tangible item you can see, touch, or immediately benefit from. People often struggle to perceive its value because the benefits materialize only during a claim, often years after purchase or sometimes never. ❌Low Awareness of Need - Many people underestimate risks or believe "it won’t happen to me." This makes them less proactive about getting coverage. ❌Complexity of Insurance products - Insurance policies often involve complex legal jargon/terminology, exclusions, and fine print that make them confusing. This complexity creates a barrier to entry and often imposes expert guidance to make the sale. ❌Mandatory/Regulatory nature - For many products like Car or Health insurance (in some countries), regulations require people to buy coverage. This leads to a compliance mindset rather than an essential desire to buy. What can we do to change this mindset? 👍Educate Customers Proactively - Share stories and case studies that highlight the real-world importance of insurance. Focus on simplifying insurance products and showcasing their relevance at different life stages with impactful, meaningful metrics and how the insurance helped or supported a person or business in a time of need. 👍Focus on Digital Experiences - Many modern consumers and businesses prefer self-service. Allowing them to compare, understand, and buy insurance online empowers them to feel like active participants in the purchasing process. 👍Reframe Marketing Strategies - Highlight the aspirational and protective aspects of insurance rather than treating it as a necessary expense. Focus more on the impact, protection rather than the premium costs. 👍 Build Trust Through Transparency – Be upfront about exclusions, terms, and pricing. Transparency helps people feel they are making informed decisions rather than being pressured into a sale of something they don’t quite understand. 😀 Making insurance "bought" transforms it into a trusted and valued service. This approach builds deeper customer relationships, enhances brand reputation, and ensures the industry evolves into a proactive partner in people’s lives rather than a reactive necessity. #Insurance #InsurTech