Including financial inclusion efforts into their ESG reporting, a potential step towards reducing the insurance gap

2 May 2022 — Daniela GHETU
At most, one in five people on the planet have access to insurance, while the remaining 80% is largely formed by people earning between USD 2 and USD 20 per day, found out the Microinsurance Network, an international non-profit organization aiming to extend the reach of insurance protection as a means of poverty alleviation.

The network's annual research covers 35 countries and is based on voluntary responses from insurers. Unlike the usual measurement method used by the re/insurance industry to assess the insurance gap, a comparison between insured losses and total economic losses, the Microinsurance Network has chosen to "focus on a people protection gap - the number of people on the planet who have no access to any form of risk management or insurance services, or only limited access," Katharine PULVERMACHER, the network's executive director explained for The ESG insurer.

The research findings show that, while the number of potential customers that insurers may target is very large, capturing this mass of clients is also challenging, as their purchasing power is very low. However, it is precisely their poverty that makes them more vulnerable to loss.

The number of insurers entering this space, driven by the awareness that this is a whole set of customers whose needs have never been addressed, is increasing although there are still thousands of insurers across the world who have not engaged, PULVERMACHER said. She explained that "it is critical that products and services are carefully designed so that they meet the needs of customers." This way, insurance may become affordable for larger groups of customers.

"We would love to engage with more insurers in a meaningful way to help embed sustainability into their ESG strategies - this will be a benefit rather than a cost to them," Pulvermacher said in the interview, also emphasizing that carriers undertaking the task of providing insurance coverage for very small businesses or low-income families should not expect immediate gains. "We would love to engage with more insurers in a meaningful way to help embed sustainability into their ESG strategies - this will be a benefit rather than a cost to them," she said. In fact, as ESG criteria and sustainability are becoming more and more important for investors, as well as for the large public of customers, getting involved in actions aiming to improve communities' resilience by improving their members' personal financial resilience through insurance would be beneficial also for insurers.

Read the full interview on The ESG INSURER.

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[a|daniela.ghetu]

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