The Hidden Key to Closing the Protection Gap: 3 Proven Strategies to Cut Costs

Date:June 5, 2024

The insurance industry finds itself caught in a perfect storm, buffeted by the dual forces of a changing climate and soaring costs. Catastrophic events, fuelled by climate change, have doubled in frequency since 2000, leading to a staggering £2.35 trillion in global losses. Meanwhile, inflation squeezes wallets, driving a significant amount of individuals to cancel insurance policies and/or to opt for lower coverage leading to more consumers being underinsured or uninsured. This widens the already alarming “protection gap” (the difference between insurance coverage and global losses), leaving millions exposed to financial ruin when disaster strikes.  

The global protection gap already amounts to £1.43 trillion, largely as a result of rising premium costs, making insuring some risks unaffordable for customers or unviable for insurers. If insurers are unable to provide adequate protection, communities may become disproportionately vulnerable to large scale financial losses. This has driven change in regulation, with the regulator issuing a warning to insurers to ensure customers are adequately covered, by issuing broad guidelines such as reassessing customer needs to align alternative products, cancelling unnecessary products etc

This article explores how UK insurers can manage the protection gap by reducing their cost base. As part of this series, we will continue to explore how insurers across the UK and the continent can tackle the protection gap in a variety of ways.

Why is this a problem?

The ever-widening protection gap in insurance stems from a double-edged challenge. On the one hand, insurers grapple with rising costs due to factors like increasingly frequent extreme weather events and the growing threat of cyberattacks. These factors push the boundaries of insurability, making it harder for insurers to offer affordable coverage.

On the other hand, these rising costs translate into higher premiums for consumers. This creates a situation where insurance becomes increasingly inaccessible, particularly for lower socioeconomic groups. This leaves them exposed to significant financial losses in the event of a major unexpected event. Bridging the protection gap requires innovative solutions that address both sides of this challenge – making insurance more affordable for consumers while also managing emerging risks for insurers.

Closing the Gap: 3 tips for controlling costs

There are several strategies insurers can adopt to address the protection gap, including product development, impact underwriting or digital transformation. However, a focus on reducing costs would have an immediate impact on managing premium prices.

To sustainably reduce premium costs in a challenging macroeconomic environment, insurers can also look at reducing their cost base. We have identified three areas to explore:

1. Performance, people & processes

Enabling high performing teams and optimising processes is foundational in achieving operational excellence by maximising added value and minimising waste. Insurers should look to review their processes to identify areas that are not adding business or customer value. By streamlining these processes, insurers will not only reduce costs, but will also improve customer experience. Once a process is optimal, insurers should look to implement a continuous improvement mindset to enable high performing people & teams. This will increase productivity and reduce ongoing structural costs.

For example, at a retail bank, we achieved 20% cost reductions through delivering a higher level of operational excellence. Our approach was focused on driving sustainable change, where savings were sustained well after the project had ended. We focused on instilling a continuous improvement mindset in teams, and trained the trainers to ensure the client was able to continue to drive efficiency & effectiveness across the business (here).

2. Technology

Identifying opportunities to remove, optimise or consolidate platforms can significantly improve operational efficiency. This may involve delivering cost transparency to identify areas to rationalise vendors and reduce cloud costs. Additionally, embedding robust controls around data quality and incentivising customer self-service, insurers can unlock further opportunities for automation, cost reduction and enhance overall operational efficiency.

For example, our collaboration with a Global financial group focused on enhancing cost transparency within their technology function. Our innovative solution enabled a common language between business & technology stakeholders, supporting exec leadership to make data-driven decisions. This initiative not only yielded substantial cost savings but also laid the groundwork for enhanced data transparency across technology-related services, systems, and costs.

3. Operating structure and oversight

Finally, insurers can look to optimise their operating structure and oversight. This involves a strategic review of the structure of their business to reduce labour costs & enable people to operate more effectively. Additionally, exploring alternate delivery models, such as outsourcing or offshoring, may also drive strong cost benefits.

For example, we collaborated with a market-leading multi-label insurer because they had rising claims and an increase in losses. Together we defined an integral strategic approach which centred around a major re-organisation. We had to integrate 4 labels into one, design a new target operating model (TOM), restructure the customer journey and expedite the claims’ assessments. By temporarily leading the operations department and placing team members in key roles, we ensured seamless adoption of the new processes. This initiative significantly sped up the claims process, increased productivity, reduced workforce requirements, and lowered both the claims ratio and revalidation period, ultimately resulting in substantial cost and claims reductions and improving the combined ratio from >110% to 95% by the third year.


The path to bridging the protection gap hinges on insurers prioritising cost-efficiency. Streamlining operations, optimising processes, and keeping technology costs under control are crucial steps to offering competitive premiums and making coverage more accessible. By achieving operational effectiveness, insurers won’t just bridge the gap, they’ll be well-positioned to thrive in a dynamic marketplace. A commitment to continuous improvement will ensure insurers remain relevant to their customers’ needs while maintaining a healthy bottom line. Through these efforts, insurers can not only close the protection gap but also secure their place as trusted, financially robust partners in an ever-changing world.

Interested in learning more about this topic or sharing your thoughts and additions? Feel free to reach out – we’re always available for a (virtual) chat.

Did this story spark your interest?

About Projective Group

Established in 2006, Projective Group is a leading Financial Services change specialist.

We are recognised within the industry as a complete solutions provider, partnering with clients in Financial Services to provide resolutions that are both holistic and pragmatic.  We have evolved to become a trusted partner for companies that want to thrive and prosper in an ever-changing Financial Services landscape.