Insurance Protection Gaps: Where Shall We Start?

Given the vast number of proposals to close ‘the protection gap’ offered by regulators, reinsurers, insurers, brokers and other industry participants in recent years, it is a wonder that it persists.

But to many observers, it seems blindingly obvious that there are multiple protection gaps -- functions of geography, known perils and other factors -- some of which are explored in this article. And it seems equally obvious that neither insurance regulators nor insurers know how to close the gaps -- or that they alone have the tools to do so.

There is a behavioral science principle, variously attributed, stating that if the only tool one has in hand is a hammer, every problem looks like a nail.

After decades of fruitless attempts to close the protection gap in the United States, it seems likely that insurance education efforts, calls for lower-cost insurance products, or attempts to develop new insurance products are inadequate solutions to the challenge.

To be sure, insurers and insurance regulators have roles to play. But we need to cast a wider net.