Boosting Take-Up

A perennial concern of insurers everywhere is why take-up rates for certain insurance coverages remain low, even as the risks increase. How to boost take-up rates among individuals and businesses is an ongoing challenge as insurance competes with any number of products and choices with higher priority on the shopping list. Earthquake, flood, terrorism, and renters insurance are just some examples. Let’s take earthquake. The powerful quake in Japan this week is a reminder of the importance of having adequate coverage. In Japan, as in the U.S., residential earthquake coverage is available in the form of an endorsement. While traditionally the take-up rate of residential earthquake coverage in Japan has been low, recent reports suggest it has been rising and is now at around 37 percent. Meanwhile in California, the U.S. state most commonly associated with earthquakes, it’s estimated that only 13 percent of homeowners buy the coverage. It’s hard to generalize on the reasons why, particularly across countries and different risks, but some contributing factors may be: perceived high cost of insurance, lack of awareness about the risk, and the mindset that expects a government bail-out to follow a disaster. People also may be more likely to buy insurance when the perceived need is greatest (i.e. just after a major disaster has struck). So how can we change the stats and make our products more desirable to the buying public? What are your thoughts? For more on earthquakes and other catastrophes, check out the I.I.I.’s disaster site and facts & stats.

One thought on “Boosting Take-Up”

  1. Following 2005 hurricane season many commercial insureds (in the cat wind exposed southeast) were either unable to get wind coverage or it was too expensive. Therefore, in 2006 the bet that they were forced to take (no coverage and hope that there is no wind event) paid off!

    The market is softening and cat wind is becoming increasingly available. However, there are commercial insureds that are choosing to continue with the bet (i.e. “go without wind cover and hope there is no wind event”).

    Some thoughts:
    1. Lending institutions strict enforcement of policies to ensure commercial borrowers have and maintain the cat covers;

    2. Collaborative efforts on the part of lending institutions and insurance companies; so that funds and cat cover are mutually available;

    3. Let the market do its job! Right now it is a one way street. Typically no one has issue with allowing the market forces drive price declines, but when those same market forces drive price increases governments jumps in to set a ceiling or cap.

    Easy for me to say.

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