Insurers and the regulator must work on increasing financial literacy in order to reduce the insurance gap

Ljiljana Marić, the Head of the Insurance, Leasing and Factoring Supervision Division at Hanfa, took part in a round table organised by Poslovni dnevnik, on the topic “Catastrophic risks – Is it time for the state and entrepreneurs to rely on insurers.“

During the round table, the panelists discussed the problem of the lack of insurance protection, commonly known as the protection gap, in Croatia. For example, only 0.5% of HRK 128 billion in total damage resulting from the Zagreb and Petrinja earthquakes were covered by insurance, and out of the total assessed amount for recovery of EUR 17 billion, insurers paid 0.5% of the total damage caused by the earthquakes. This represents an enormous gap, which is not unique to Croatia, although it is significantly smaller in Europe and worldwide. Marić presented data showing that insurance against earthquakes accounts for only 1.7 percent of the total premium in non-life insurance, whereas floods make up only 0.7 percent, although they are a frequent occurrence. “Croatia is among the EU Member States that are least covered by insurance against catastrophic risks, and something needs to be done to rectify the situation. Both insurers and regulators should work on strengthening financial literacy among citizens and entrepreneurs and communicate very clearly about what is covered by individual insurance policies,“ believes Ljiljana Marić.

Climate change impacts the increased frequency of catastrophic events, and Croatia is highly exposed in this regard, as noted by the panelists, emphasising agriculture, tourism and hospitality among the most vulnerable sectors.

The panelists agreed that the consequences of the next natural catastrophe cannot and must not be covered by the state given that the state manages taxpayers’ money, and future generations should not be burdened with events from the past. Therefore, it is necessary to intensify financial literacy among the public and raise awareness among citizens and entrepreneurs that insurance is not an expense but an investment in a safer future.

Experts gathered at the round table are of the opinion that there can be a slight increase in the insurance market against catastrophic events in the coming period, but this growth will still be weaker than the European Union average. An increase in the share of brokers in signing insurance policies is also expected, but financial literacy should be enhanced on all levels.

Furthermore, European regulators have recently drawn attention to the fact that in the EU, only one quarter of climate-related disaster losses are insured. The gap is expected to increase as the influence of climate change increases. The lack of insurance poses risks for the economy and financial stability. EIOPA and the ECB draw policy options to promote insurance against climate disasters. European regulators will collect feedback on policy options and discuss them at a workshop with regulators, policymakers, insurers and academicians on 22 May 2023. More detailed information can be found in their joint press release.


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