Father John Szatkowski of St. Paul The Apostle Church in Richardson, Texas, swept water from a broken water line out of his church on Wed., Feb. 17, 2021. Father Szatkowski and his staff found the flooding as they prepared for Ash Wednesday services. (AP Photo/Tony Gutierrez) Father John Szatkowski of St. Paul The Apostle Church in Richardson, Texas, swept water from a broken water line out of his church on Wed., Feb. 17, 2021. Father Szatkowski and his staff found the flooding as they prepared for Ash Wednesday services. (AP Photo/Tony Gutierrez)

February’s crisis in Texas has exposed a protection gap that experts say isn’t exclusive to the Lone Star State.

In the weeks after February’s deep freeze and widespread power outages that left millions of Texas residents without heat or clean water, many property owners are finding their insurance policies aren’t covering their claims.

For the farm industry alone, new reporting from The New York Times this week found Texas farmers and ranchers have lost at least $600 million due to Winter Storm Uri, according to researchers at Texas A&M AgriLife Extension Service.

Some experts note how digital transformation in the insurance industry is disrupting the process of claims filing and handling.

Seth Rachlin of Capgemini notes how the recent focus on digitalization and “the quest for better customer experiences and hyper-efficiency” has moved the industry away from traditional means of doing business, which may not fit the level of claims activity the industry is seeing.

“The level of disaster the industry has been forced to deal with, between what you’re seeing in Texas already, what you saw with COVID and business interruption, what you see in cyber where we had the biggest breach of all time this year,” Rachlin said.

“What you see is significant variability in terms of what’s covered and what’s not. I think it ultimately will bring the insurance product back to being front and center.”

Rachlin says that “as the industry has focused so much on price and digital experience, what you’ve had is increased variability in the nature of coverages, as people try to strip the products of capabilities, or as they try to reposition them, and at the end of the day, they’re going to be a lot of unhappy people in Texas with their insurance.”

Rachlin adds that this sentiment will mirror those felt by “unhappy small businesses all across America because of COVI [and] just as there are a lot of unhappy people who bought cyber insurance and found that it doesn’t cover what they expected it to cover.”

A protection gap beyond borders

Rachlin says his personal passion is the concept of the protection gap the U.S. is facing right now.

A recent report from Aon calculated the global economic loss cost of natural disasters in 2020 and found the bill from 416 natural catastrophe events totaled $268 billion in economic losses — $119 billion of which occurred in the U.S.

Of the global loss total, private sector and government-sponsored insurance programs covered $97 billion, creating a protection gap — the portion of economic losses not covered by insurance — of 64%.

Researchers say this protection gap highlights “the importance of addressing the underserved by ensuring that there is increased access to affordable insurance products in the future.”

“It’s a massive amount of suffering that’s not addressed through insurance,” Rachlin said, “and solving that, to me, is job #1 for the industry.”

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