What is the purpose of the insurance sector? Presumably, it’s to provide financial security to individuals, enterprises and communities by transferring risk in a way that provides a degree of certainty to policyholders.

Unfortunately, climate change and the large, ever-growing insurance protection gap are fundamentally incompatible with this core purpose. Therefore, it’s essential that individual insurance corporations help to lead a collaborative effort to address this market failure and substantially increase industry R&D expenditures.

Communities can never be financially secure with protection gaps near or greater than 50 percent for catastrophic perils. If communities are insecure, individuals and enterprises within them are, too, regardless of the insurance coverage they individually possess. Existing insurance products and services provide significantly less value if whole communities are insecure, putting the current business model for insurance at risk. Doing nothing but raising rates and removing coverage is not a viable business strategy. The current way insurance is delivered needs to be reimagined.

We understand — insuring high-risk individuals, enterprises and communities is difficult, especially when risk is rapidly increasing. Some may even say those customers are uninsurable. We don’t blame the industry for raising prices and removing coverage because we know that increasing risk means that the cost to transfer risk must increase, too. But this is not the whole story.

Raising prices and removing coverage are not the only tools in the carrier toolkit for responding to climate change. We can also innovate. The Massachusetts Institute of Technology defines innovation as “the process of taking ideas from inception to impact.” The impact we need right now is to close the protection gap — not just for catastrophic property insurance but also for coverages like performance guarantees and insurance for emerging climate technology that will accelerate the transition to a low carbon economy and life, health and benefits solutions that will provide financial security against the human impacts of climate change-driven catastrophes.

While InsurTech has been the poster child for insurance ingenuity, the industry in general hasn’t been a driver of innovation, especially with respect to closing the protection gap or ensuring insurance keeps pace with climate technology advancements. The time has come for this to change.

We call on insurance industry leaders to look beyond anecdotal stories of cool products and services or war stories about failed efforts and to consider how and how much the industry invests into research and development (R&D) as its leading metric. Unfortunately, the record here isn’t great compared to all sectors, and it’s even worse compared to relevant sectors like information and professional/technical.

Absent R&D investment, innovation simply is not possible. Absent innovation, the only solution that can be offered is to raise prices and remove coverage, which isn’t good for anyone.

If the industry doesn’t lead, and lead with dramatic increases in R&D, the regulators will. It’s happening already. The U.S. Treasury created an insurance office and is doing data calls to support the exploration of how the federal government can engage. The National Science Foundation and the National Oceanic and Atmospheric Administration are partnering to support insurance loss modeling initiatives. If the industry cedes innovation leadership, it is essentially ceding the market and asking for regulators to intervene in a bigger and more disruptive manner.

On the other hand, closing the protection gap potentially unlocks the capture of large new markets, such as community embedded insurance solutions purchased as a group solution by community leaders. This is but one example of how innovation can bring opportunity.

The industry has a choice to make. We believe that bold leadership will be rewarded and a failure to take charge will bring negative repercussions. Step up! It’s time to lead.