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As a result insurers are rethinking business processes and product ranges in order to remain competitive under new risk-based capital regimes, to meet the evolving needs of their customer base and to continue to play a beneficial role in the economy and broader society over the next two decades.
The key findings of the study – Insurers & society: Challenges and opportunities in the period to 2030 – include:
Macroeconomic uncertainty, regulation and risk of contagion – Macroeconomic uncertainty is seen by survey respondents as the main challenge facing both life and non-life insurers (36% and 39% respectively) in the period to 2030. Regulation is the second-biggest challenge facing life insurers (34%), while risk of contagion from other parts of the financial system is a major concern for non-life insurers and reinsurers (33%).
Regulators and policymakers should consider socioeconomic goals – Almost four-fifths (79%) of respondents agree that regulators should balance concerns for policyholder protection with other socioeconomic objectives, such as promoting savings, while almost half (48%) believe that policymakers should incorporate socioeconomic goals into regulators' remits. Over half (54%) believe that regulators and legislators are focusing on near-term stability at the expense of longer-term economic growth.
- Insurers are not doing enough to meet societal responsibilities – A strong majority (80%) of respondents agree that insurers have a duty to contribute positively to society, with all regions in equal agreement, yet only 55% agree that insurers are fulfilling that role. Overall, intermediaries are slightly less convinced that insurers are contributing (53%, compared with 56% of insurers, with the biggest discrepancy between the two groups seen in
North America, where those figures are 64% of insurers but just 36% of intermediaries.
- Regulation is hampering insurers' ability to meet consumers' needs – 70% of respondents agree that individuals will have inadequate private savings and pensions as a long-term consequence of new regulation, while just over a half (51%) believe that current regulatory and accounting rules encourage insurers to move away from guaranteed products, leaving individuals with the burden of investment risk. In response to changes affecting the industry, life insurers are offering fewer products (49%), limiting guarantees (40%) and raising prices (35%).
- Insurers are needed more than ever but are at risk of irrelevance – Over a half of respondents (54%) believe that regulation reduces insurers' ability to shift risk away from households and transform financial market risk into reliable streams of retirement income and other benefits – one of the industry's core functions. The same proportion believe that the burden will fall on governments to make up for individuals' private pension shortfalls, but almost half (45%) worry that they will not be able to afford to do so.
- Insurers need help to support developing countries and emerging economies – Nearly a half (45%) of respondents said that supranational organisations should prioritise working with developing countries to better inform policymakers of the value of catastrophe and other forms of insurance. Over half worry that, without adequate data, reinsurers may withdraw from providing catastrophe reinsurance in emerging markets (55%); and that if reinsurers pull back from these markets, individuals and corporates will be forced to go underinsured (52%). Respondents (57%) also fear that the absence of reinsurance will slow investment into emerging economies, which in turn will slow these countries' economic growth – a major concern, given the importance of emerging economies to pulling the global economy out of stagnation.
A copy of the full report can be found at http://www.bnymellon.com/foresight/pdf/eiu-insurance-0213.pdf
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