Education key to narrowing protection gap, claims Swiss Re
Better information about natural catastrophes is required to narrow the protection gap in the US, according to Keith Wolfe, president of US property/casualty at Swiss Re.
Wolfe pointed out that the gap between the present level of coverage in some areas and the level that is required to address potential natural catastrophes remains persistent in parts of the US.
“Here in the US it primarily becomes a flood and earthquake discussion. There are other areas where we see gaps between economic and insured losses, but not nearly of the magnitude that we see in those two spaces,” Wolfe told PCI Today.
According to Wolfe, flood is the most current threat in the US, especially after the number of flood events that have taken place in 2016, including those in Maryland, Louisiana, Texas, Georgia and the Carolinas.
“The vast majority of that exposure is uninsured,” Wolfe pointed out, “and will likely be picked up in some fashion by the federal government or other state agencies that can contribute to it from a social welfare standpoint.
“The focus we have is that flood is a totally insurable risk—100 percent of the risk could be transferred to the private market, both on risk assessment and pricing the product—and in terms of capacity available if we really wanted to push it that way. That’s what we’re aiming for, but it takes a long time to get the government out of an insurable space.”
Wolfe stressed that in many cases consumers do not become aware of potential risks such as floods or earthquakes until they actually happen—and then as time passes after an event the level of concern about it falls as memories fade.
As a result, he said, the re/insurance industry needs to concentrate on educating potential customers on how likely they are to be affected by possible events. For example, in October Swiss Re held an earthquake symposium in California, with the aim of bringing together experts to pool their knowledge and then disseminate it.
“It’s incremental, like everything else,” said Wolfe. “It’s change management and it takes a very long time to get a lot of people to move in the same direction.”
