Scout InsurTech Spotlight with Charlie Sidoti

Charlie Sidoti is the Executive Director of InnSure, creating an insurance and risk financing system that enables climate-challenged communities and energy transition projects to manage the risks that threaten their success. Charlie was interviewed by Andrew Daniels, Co-Founder at Scout InsurTech and Co-Founder and President at CrashBay.

Charlie, what are the current gaps in the insurance industry, particularly regarding its ability to address community needs and the common good?

“From a purely financial perspective, insurance protection gaps exceed 50 percent, and for some perils, it's much higher. For example, in the case of floods, 70 to 80 percent of people don't have insurance. That represents a major financial gap. The uninsured losses typically aren't pre-financed by disaster relief either. Most disaster relief funding is allocated after the fact. That means we have a risk financing system that has fundamentally failed. Without pre-financing, everything becomes more expensive, and losses grow over time because they aren't addressed quickly.

We see this as the core problem. A big part of the solution lies in capturing the value of investments in risk mitigation and adaptation within insurance markets. If we can fully and quickly capture the value of adaptation investments in the insurance system, we can begin to close those protection gaps. But, it all needs to happen simultaneously.”

How do you see the role of insurance in addressing climate change and making coverage more affordable and accessible, especially in high-risk areas?

“I was touching on that with the idea of a systems-level approach where mitigation, adaptation and protection gap closure happen together. To achieve this, we need to reimagine insurance. We need innovation across the entire value chain. There aren't point solutions that will solve this problem on their own.

We need new products. People are already working on things like microinsurance and parametric insurance. We also need new distribution models. For example, embedding insurance into communities. Community leaders can play a role here; these protection gaps affect their municipal budgets, so they should proactively look for ways to get insurance for residents.

Capital pools also need innovation. We have ideas about how to bring capital closer to communities so it can engage more fully with local realities.”

What do you think about the current state of risk management in the insurance industry?

“Insurers are incredibly effective at managing risk, but their focus is on managing balance sheet risk, meaning the risk that flows through to them. They have powerful levers, and they operate on short timeframes with one-year durations. That lets them exit markets quickly unlike lenders locked into 10, 15 or 30-year mortgages.

They’ve had bad years, but they bounce back quickly because they identify what's driving losses and adjust. Look at their climate disclosures. They tell investors, ‘Don’t worry about us.’ And they’re right. They can tweak policies, exit markets and shorten durations. So, climate risks largely don’t land on insurers; they land on asset owners and governments.

That’s great risk management for them, but it's not necessarily good for the system or for society.”

What do you think is the future of insurance when it comes to local, community-driven solutions versus global capital-driven ones?

“We believe the levers for actual risk reduction lie with community leaders. They control land use, infrastructure and building codes. But, they’ve outsourced risk financing to federal disaster relief and the insurance industry.

When we talk to local leaders, they often say, ‘I don’t understand how insurance works.’ It feels opaque, but they need to lean in and take responsibility. In the end, the financial burden lands on their communities and tax bases.

What we’re advocating is something beyond just resilience planning. We call it insurability planning. That means not only reducing losses through resilience investments, but also shaping local insurance markets. Tools like group purchasing and community engagement in insurance innovation can help.

More catalytic capital is needed to support innovation. Insurance innovators need funding to develop products and again to back those products with reserves. But global capital struggles to recognize innovation happening in small communities like Plymouth, MA or Narrows, VA.

We’ve noticed community development banks are effective here. They lend to communities that seem like bad credit risks on paper, but they succeed because they understand what’s really happening locally. We think a similar model could apply to insurance.

We’ve written a white paper on mission-driven entities close to the community but big enough to pool risk and support insurance innovation. These could serve as laboratories for solving systemic protection gap problems.”

How can smaller, mission-driven insurers or regional players make a meaningful impact on the industry?

“It starts with having a mission rooted in community development, creating physically and financially resilient communities. Then it’s about driving innovation across the value chain: better products, smarter distribution and innovative capital structures that support testing and learning.

This work also requires people outside the industry to engage. Insurance is a systems problem, and solving it means crossing traditional boundaries.

Community leaders need to understand the role of insurance better. Insurance innovators need to understand the needs of the uninsured. Insurance is one of the most efficient ways to finance risk, but it can’t only serve the easiest risks. We need it to reach the most vulnerable communities too. That’s going to take everyone working together.”

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