Insurance For All
December 2013 - Editorial
At this time last year, the talk of the industry was Superstorm Sandy and the tens of billions of dollars in economic and insured losses it caused in the Northeastern US and Canada. I used my editorial in last December’s issue to point out that, despite this devastation, a large portion of the losses were insured and members of the industry could feel proud that they were playing a socially important role in helping people get back on their feet and businesses re-opened.
A year later, we are talking about another storm, but on the other side of the world. On November 8, Typhoon Haiyan, one of the strongest storms to make landfall since the beginning of modern record keeping, swept across the Philippines, killing thousands and completely overwhelming the preparations that were made against it. Unlike Sandy, which used up a significant chunk of capacity, Haiyan is sadly almost a non-story as far as insured losses are concerned, due to low insurance penetration in the Philippines. According to early estimates from modeling company AIR Worldwide, Haiyan caused somewhere between USD$6.5 and $14.5 billion in total property damage to commercial and residential buildings and agriculture. However, the insured portion is a mere fraction of that, not exceeding USD$700 million.
The aftermath of Typhoon Haiyan brings into sharp relief an area of difference between the haves of the developed world and the have-nots of emerging economies. The extremely low average incomes for the majority of people living in the Philippines and other countries throughout Asia and Oceania mean that traditional (i.e., Western) business models for insurance are simply not viable. Consequently, other models have had to be developed and there is now a fast-growing “microinsurance” sector in that part of the globe. Recent research conducted by the Munich Re Foundation and German development company GIZ shows that microinsurance in Asia and Oceania is growing quickly, with an annual growth rate of 40% between 2010 and 2012 and over 172 million lives and properties now covered. Still, that’s less than 5% of people in the region, many of whom work in factories providing products for Western markets.
For business leaders in Canada—your clients—this is not just an “over there” problem that you and they can conveniently ignore. In our increasingly interconnected world, it’s no longer acceptable to leave the most vulnerable unprotected from the elements.
Copyright 2013 Rogers Publishing Ltd. This article first appeared in the December 2013 edition of Canadian Insurance Top Broker magazine