Here's How to Close the Protection Gap

Shifting distribution tactics, focusing on more personalized coverage, designing new products and partnering across industry lines can all narrow the gap. 

A bridge with one car on it across a body of water

The goal of the insurance industry has always been simple: to be there for people when they need it most. With our world today facing debilitating events like weather catastrophes, war and global financial woes, our role has never been more important.

Hurricane Ian exposed the unfortunate reality that not enough people have flood insurance. According to FEMA, floods are the most common natural disaster in the U.S. and have affected 99% of counties between 1996 and 2019, yet home insurance policies alone do not cover flood-related damages.

As risks emerge, or intensify, seemingly daily, there remains a gap between these risks and the coverage in place to mitigate them — this is the protection gap.

As an extension of our mission to help people when they need us, it’s our duty as an industry to close the protection gap and empower more people with financial stability. We may not be able to close it completely, but we can help shrink it through innovative, strategic and creative thinking. Here’s how:

Let’s get digital 

Today’s consumers are hungry for digital experiences and solutions. We order our coffee through an app that lets us skip the line. We fill our online shopping carts with holiday gifts instead of braving the crowds at our local malls. We can now even see a doctor without ever leaving the house (or changing out of our pajamas!). As we do more business and live more of our lives online, insurance providers need to get with the (digital) picture. 

62% of Millennial and Gen Z insurance buyers said they’d be willing to pay more for a policy from a company that offers a user-friendly digital experience. By pivoting to or layering in digital sales and distribution  strategies, providers can reach a broader audience of potential buyers. Accessibility is key to closing the protection gap. 

Let’s get personal 

Personalized coverage makes insurance more relevant to any given customer, and if a potential buyer feels you’re speaking directly to their specific needs, they’ll be more likely to purchase. The best way to guarantee personalized coverage is through the effective use of data. 

A recent survey from Capco Intelligence revealed that 72% of consumers would willingly share personal data to get lower insurance premiums. Providers should use this to their advantage. With the consent of customers, providers can use consumer information to design coverage that’s right for them, instead of foisting broad-range packages on them that they feel may not fit their needs or that they are overpaying for. 

See also: Closing the Protection Gap

Let’s get creative 

As issues like climate change, inflation and the pandemic persist, providing comprehensive coverage can seem impossible. However, through new product development and a little out-of-the-box thinking, insurers can solve for emergent needs. 

This is where “inclusive insurance” comes into play: Coverage in this bucket is aimed at capturing untapped or underinsured markets to bring affordable products to those who need it most. Maybe you’ll come up with a microinsurance product that covers your customers’ daily commutes, or an app that guides people through designing their own protection plans. Regardless of your approach, reaching those underserved markets can be a huge boon to your business - and your customers’ lives. 

Let’s get together

Closing the protection gap will never be the result of efforts by one entity alone. Partnering with brands in adjacent industries, from financial services to consumer products, will enable insurance providers to identify and reach new customers at a greater scale and lower costs. Leveraging partnerships with brands that already have well-established and loyal customer bases also gives insurers the ability to piggyback on existing brand equity and expand their market share.

Embedding insurance offers within relevant purchasing paths also offers a lucrative opportunity for everyone within the insurance value chain. Embedded insurance makes customer and partnership acquisition efforts (and therefore costs) organically low. Insurers get their product lines in front of the right customer, at the right time; partners get the opportunity to leverage the data they already own to generate new lines of revenue; the end consumer seamlessly gets a highly relevant offer that they may have not otherwise pursued. With embedded insurance, nobody needs much additional incentive because everyone already benefits. 

Mind the gap 

Closing the protection gap should be a priority for providers across the globe. Whether you’re shifting your distribution tactics, focusing on more personalized coverage, designing new products or partnering across industry lines, there’s certainly no shortage of methods to help contribute to closing the gap. Any and all efforts will help the insurance industry grow and innovate as a whole while enabling consumers to find proper coverage — especially in the midst of emerging risks — and for insurers to meet them wherever and whenever they need us most. 

For more tips on how you can work towards closing the protection gap, check out our recently released research report, Insurance at a Crossroads - The path toward closing the global protection gap.

Bill Suneson

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Bill Suneson

Bill Suneson is the co-founder and CEO of Bindable, a national leader in digital insurance and alternative distribution technology. He also co-founded and serves on the board of Next Generation Insurance Group, which operates GradGuard.


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