It is a challenging time for everyone. Economic challenges such as rising global inflation rates pushing food and energy prices sky high, even possible stagflation in the United States and Europe, geopolitical conflict such as the war in Ukraine, and the lingering impact of the COVID-19 pandemic are creating a sobering vision of the near future.
In a developing country like the Philippines, the stakes are high and the risks are numerous. Millions of Filipino lives have been greatly affected by the pandemic, and life has only recently started to return to some semblance of normalcy. It is in these situations that the insurance sector can step up.
“Insurers often characterize themselves as the economy’s financial first responders, helping policyholders respond to and recover from some of the most challenging times in their lives by paying to repair or replace damaged properties and cover their liabilities,” global consultancy firm Deloitte said in their 2022 Insurance Industry Outlook.
The report added that trust distinguishes and elevates the roles of companies like insurers, connecting them with “the common good,” according to Deloitte’s report linking trust with economic prosperity.
“Insurers are likely to be increasingly called upon to take steps to rebuild trust, contribute to a more just and sustainable world, and build a more equitable financial services industry where profit and societal impact coexist amicably,” the report said.
In an article on their UK website about insurance themes and trends for the year, multinational professional services firm Grant Thornton echoed the sentiment, saying that consumer trust in the insurance industry has been gradually eroding in recent years, as insurers have narrowed their eligibility criteria and scope of cover. The responses by insurers to the COVID-19 pandemic, the widespread failure to pay many coronavirus claims, alongside other issues, have created the perception among consumers that the economic interests of their insurers are at odds with their own.
“Without fundamental change, we envisage a hollowing out of the industry, whereby only the healthy and/or wealthy can obtain their desired insurance. Gaps will emerge for the poorer, less healthy, and most vulnerable groups, which will likely result in increased government intervention,” Grant Thornton wrote.
“This will increase the risk transfer onto the state, something that is already being seen to an extent in the medical and social care sectors. There are however two key developments that provide insurers with the capacity to revert the negative public image that has been adopted in recent times.”
Rebuilding and protecting the trust of consumers
Grant Thornton suggested that insurers should look towards the adoption of new technologies such as artificial intelligence, predictive analytics, and the Internet of Things to create a better, more robust foundation upon which risks can be minimized and premiums reduced. Such technologies can give insurers to gain a holistic view of their customer base and provide fair, affordable coverage. However, much of this development also relies on insurance regulators.
“The regulation of this is crucial in ensuring that vulnerable customers are not negatively impacted by such technological advances. Should developments advance over the coming year as expected, we envisage the regulators taking swift action to ensure the benefits to consumers are put first,” the firm wrote.
Another way to refocus an organization’s purpose is through the ESG agenda. “The social aspect to ESG
ESG (environmental, social and governance), focusing on equality, trust, and welfare in society, as well as privacy and data security, provides a strong foundation upon which insurers can improve public perception. Insurers must seize this opportunity to regain consumer confidence and return to its simplest form of reducing individual risk,” the firm added.
Deloitte’s report suggested the same, with the caveat that insurers also bolster trust by becoming more open and collaborative with consumers on how all the new personal data available is being gathered and utilized.
“There are additional steps individual carriers could take to build greater trust and burnish the industry’s reputation as risk managers. One way they might accomplish this is by leading efforts to come up with alternative financing mechanisms to cover a wider range of future pandemic losses, including potential public-private partnerships patterned after the one now supporting the terrorism insurance market,” Deloitte’s report said.
Furthermore, Deloitte suggested that insurers could be more proactive in ESG initiatives not only to improve their public image, but also to limit the causes of climate risk at its source, recruit a more diverse workforce and leadership team, as well as launch new products and services to alleviate coverage gaps for underserved communities.
“Since insurance ultimately comes down to a matter of trust — the consumer’s confidence that their premiums will pay off in the end if they suffer a loss — maintaining and bolstering that bond should therefore be an ongoing priority,” the firm added.
“Put trust at the forefront of your planning, strategy, and purpose, and your customers will put trust in you.” — Bjorn Biel M. Beltran