Insurance protection gap | 2022

The insurance protection gap is the measurement of the distinction between the volume of insurance actually contracted and the potential for a certain area.

In a given economic situation, the insurance protection gap encompasses the difference between the coverage expected or required and that actually contracted.

That said, this measurement is a tool of the insurer potential that may exist in a particular market.

Within the economic context, it is common to find this concept with the acronym IPG, given its Anglo-Saxon name: insurance protection gap.

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Insurers routinely use it to find out the possibilities or potential opportunities for their business in a given territory.

How the insurance protection gap works

In the field of insurance, insurance companies offer their policies of a different nature to facilitate the performance of tasks and the protection of goods and services.

In this sense, a certain sector or a company is expected to contract a certain number of insurances (both mandatory and voluntary).

The acquisition of a lower volume or number of insurance contracts will establish this gap. Thus, it is confirmed as an element for measuring risks and economic well-being.

This measurement is represented as volume (usually in millions of euros or dollars) with respect to GDP if we talk about potential national insurer.

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Relevance of the insurance protection gap

Beyond the explained concept, the insurance protection gap acquires special importance in the economic day-to-day due to the following points:

  • Micro and macro focus. Its calculation is applicable both to an independent commercial company and to the territorial spectrum or a particular country.
  • Risk meter. As support for the development of economic activities, the contracted insurance must be equivalent to the estimated to avoid situations of economic risk.
  • potential key. At the same time, the insurance business uses this ratio to discover possible opportunities or market niches.

Other aspects related to the insurance protection gap

As has been indicated, this economic term not only has influence in the insurance sector, but also has important connections with the general economic spectrum.

Its evolution will be marked not only by the development of the insurance business. In this sense, both the economic situation and the drift of other ratios such as per capita income affect this measurement.

For example, the decrease in savings levels in a country generally translates into contracting less insurance (it is common to dispense with non-compulsory insurance for companies, for example)

On the other hand, legal or economic security tends to stimulate the reduction of this gap.

This means that developing countries or emerging economies commonly have higher insurance protection gap measurements.

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