The chairman of Lloyd’s of London has warned of a “crippling underinsurance crisis” which could leave developing countries unable to fund recovery efforts after a natural disaster.
A study by Lloyd’s and the Centre for Economics and Business Research (CEBR) has found that the insurance gap has hardly closed in six years despite growing concerns surrounding climate change-related catastrophes.
They said $163 billion (£124bn) worth of assets remained underinsured, just 3pc less than in 2012, and warned that this poses “a significant threat to livelihoods and global prosperity”, Lower income countries account for almost all of the gap with Bangladesh, India, Vietnam, Philippines, Indonesia, Egypt and Nigeria each having an insurance penetration rate of less than 1pc.
A country is classed as underinsured if expected losses exceed insurance coverage. “The insurance sector wants to work with government to help people understand the insurance products that are available and to provide improved access to those products,” said Lloyd’s chair Bruce Carnegie-Brown.
“Together we can help tackle the crippling underinsurance crisis and give people in the world’s most exposed economies the security they so desperately need.”
He said that the recent earthquake and tsunami disaster on the Indonesian island of Sulawesi, which left hundreds of people dead, underlines the importance of the issue.
Global economic losses from natural disasters are “substantial and growing” with annual expected economic losses of $165bn, according to Lloyd’s City Risk Index.
Insurance companies have for years tried to come up with innovative ways to get those living on less than $2 a day to buy insurance.
Aviva used to host game shows in rural Indian villages to promote life insurance, while insurer Bima has tapped into the market by pairing up with mobile phone companies and giving staff uniforms branded with the logo of the phone operator.
In Ghana, it offers free life insurance to those that top up their phones with five cedi (81p) a month.
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