One of the major promises of insurance's digital transformation is the ability to cover more risks for more people. That's the view of the Geneva Association, an international insurance think tank, which issued a recent report stating that radical changes to the insurance value chain brought about by digitalization are expected to boost insurance demand via three major areas: affordability, awareness, and appeal.

In its report, “Harnessing Technology to Narrow the Insurance Protection Gap,” the organization analyzed how digital technologies can help the insurance industry narrow protection gaps in both mature and developing markets through risk mitigation and protection products and solutions.

There’s no doubt that the gap the Geneva Association is talking about is one of the most serious issues facing global society, and it’s fueling daily discussion about issues such as how mobile technologies and digital communications can support microinsurance in underserved areas of the world, and how it can play a more enhanced role in mitigating the impact of pandemics and natural disasters.

In an addendum to the report, Robert Hartwig, immediate past president and special consultant to the Insurance Information Institute, argues that underinsurance is not restricted to developing or emerging markets. “In the U.S., for example, 30% to 50% of economic losses from natural disasters remain uninsured. Cyber risk is another area exhibiting a huge protection gap. Insurers can harness smart analytics to narrow these gaps,” he says.

For most insurers, the digital empowerment related to affordability, awareness and appeal tends to be most visible in the insurance distribution and marketing areas, where straight-through-processing tied to efficient digital underwriting systems sets the stage for customers from all walks of life to be courted on their terms with competitive pricing.

If this sounds like digital Nirvana, it is. The bottom line is that an efficient digital operating environment can facilitate the engagement and retention of digital natives, but getting there is another story.

Why? First, because the global insurance industry is known for its conservative, “walk before you run” culture, and for insurers of all sizes, digitization requires an enterprise-wide transformation of technology, vision, and execution. In other words, digitizing the entire value chain will require significant investment of time and resources over a multi-year period, notes the Geneva Association.

Second, many insurers still operate with legacy IT challenges that plague day-to-day functioning. Says Fexlis Tenniglo, co-founder and managing partner at InShared, a Dutch insurer: “In areas such as product development, underwriting and claims settlement, traditional insurers will not lose their competitive edge any time soon. They are more at risk of disruption in distribution and marketing where we are witnessing the fastest pace of change. Incumbent players need to adapt quickly in order to defend the all-important customer interface.”

This last point is well taken: In the history of the insurance industry’s “walk before you run culture,” fully digitalized entrants such as Lemonade are proving that speed now matters.

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