As the Global dynamic shifts take a more dramatic turn and prove to be challenging for insurers, there are many viable paths for insurers to drive innovation-led growth across the industry. A significant protection gap lies in the widening gaps against protection in cyber and climate threats and reports say that 99% of the losses are from cyberattacks and 60% are from natural disasters that remain uninsured. This humongous protection gap offers the insurers a massive opportunity to bridge this gap and innovate while offering value to the customers. Keep reading to know more!
How can Insurers Contribute to Bridging the Protection Gap in Insurance?
Time to talk about the elephant in the room- the increasing necessity for value-driven innovation and not just blindly contributing to technology adoption. For the rest of 2025, insurers need to move beyond just prioritizing new Product development, M&A, and Geographic expansion in their growth strategies.
Here are some of the growth strategies insurers can adopt to bridge the widening insurance gap and offer value to customers:
Personalized Offering for Expanding Share of Wallet
Personalization is a key trend in 2025 that insurers cannot miss! Insurers need to focus on offering Usage-based products, Modular add-on features, and tailored pricing will leave the impression that insurers are moving forward with a more committed approach to addressing their unique needs. Additionally, a proven way to address loyalty and engagement. That’s where AI in insurance comes into the picture! Artificial Intelligence (AI) tools can help in this area with tailored messaging, more accurate pricing as well as faster underwriting and binding processes.
Designing Purposeful Products
Delivering purposeful products is one key area that insurers need to focus on to drive more value in 2025. It’s important to understand that the demographics of insurance purchasers are changing, now the Millennials and Gen Z are the new customer segment that focuses on getting more value-driven products rather than just an ‘Insurance policy’.
With these customer segments changing, there also lies a gap between understanding their unique needs and designing products catering to individual needs. For instance, the biggest protection gaps- retirement savings and climate are poised to get even bigger. The global retirement savings gap is set to grow from US$106 trillion in 2022 to US$483 trillion in 2025. Insurers can focus on bridging this critical gap by addressing the ‘silver tsunami’ which is by catering products for addressing the demographic wave of baby boomers who are reaching retirement age. This will cause a spike in demand for financial estate planning services as well as Life and Health insurance which is augmented with wellness programs. With innovative insurance technology, insurers can enhance their risk analysis approach to increase scrutiny in risk management as well as offer better coverage options.
A Unified Data Strategy
A successful value-driven insurance landscape in 2025 would include a unified data strategy. The one which is comprehensive and is led by the C-suite. This is where insurers looking to drive value this year need to keep an eye on. Better data underpins every aspect of the business and is extremely crucial for innovation. A key factor that most of the insurance companies overlook is data handling. The data and the technology agenda must be driven by the C-suite executives and with strategic planning and resource allocation, data strategy can be better managed.
Here is again where insurers can leverage AI in insurance and other advanced technologies. A clear data strategy that reflects the need to harness the power of AI and other advanced technologies will help define the necessary components of a flexible, future-ready data infrastructure.
Opening the Forum for More Innovation
Innovation is the key enabler to drive value in 2025. Insurers with a lean and highly automated operating environment will be able to scale low-margin products to newer segments via partners and ecosystems along with other channels. This rapid expansion of embedded offerings increasingly demonstrates this possibility. As we speak of innovation, Parametric insurance is driving popularity in 2025.
Parametric insurance is the policy that pays out when specific events occur. This expands the type of products that insurers can deliver to newer customers. Parametric insurance does project a brighter future and is projected to grow to US$29.3 billion by 2031. This type of solution has gained traction in the agricultural industry and as protection against natural disasters, but can also be applied to business interruptions, supply chain disruptions and cyber-attacks.
Focusing on serving the Underserved
Every industry is hungry to get new customers, same for insurance. However, what happens when a large chunk of the target customer isn’t aware of your product? Insurers are devising new solutions for just 1% of the estimated 4 billion underserved people worldwide which can potentially result in 40 million new customers. Affordability holds the key to increasing insurance accessibility to the underserved population. For instance, Parametric insurance, microinsurance for smaller farmers, and precise coverages for small businesses and gig workers are some of the keyways where the insurers can create value for the underserved segments. There is a requirement for bold strategic thinking and creative action to deliver what the customers and what they can afford.
Conclusion
Uncertainty and increased volatility are increasingly shaping the global insurance market, and this is across individual and regional markets. The run for economic prosperity as well as integration has benefited the financial services sector for several decades. However, with AI-powered technology and stronger data management capabilities, insurers can now better innovate and deliver products faster to the customers. To bridge the insurance gap, insurers need to understand the key strategies that they need to adopt to address the customer’s unique needs across demographics.
