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May 2020

25th anniversary: Value of insurance to society - Making insurance invaluable

Source: Asia Insurance Review | Apr 2015

Within the financial services industry, insurance seems to be colloquially referred to as the “poorer cousin of banking”; and when it comes to a career in the financial services industry, a role in the insurance sector may bring to mind the image of a pesky salesman, vis-à-vis the glitz and glamour that is associated with a banker. 
However, according to Swiss Re’s sigma statistics, global insurance premium amounted to US$4.6 trillion, or 6.13% of world GDP in 2013, whilst a paper released by the Geneva Association which sought to expound upon the real value that insurance offers noted that the sector “directly employs millions of people worldwide and indirectly even more when taking into account subsidiary service providers – often high-skilled and quality jobs in domestic economies”.
The concept of insurance is neither unknown nor new to society; in fact, its modern roots date back to the 17th century. And there is no doubt that the goal of risk mitigation and of pooling risks against misfortune is a noble one.
A business of protecting livelihoods
Asked on his opinion of the noblest aspect of insurance, Mr Moses Ojeisekhoba, CEO, Reinsurance, Asia, for Swiss Re said: “I take pride in working in an industry that is in the business of protecting livelihoods, and I cannot think of a nobler cause than that. The social value of what we do is more relevant than ever, as we are helping to build more resilient societies and give people peace of mind. I have also yet to come across any country that has climbed the development ladder without having insurance as one of its key building blocks.”
The resounding accord and conviction of leaders (see sidebar on “The Noblest Aspect of Insurance”) in the industry – that insurance not just protects and restores livelihoods, but also enables visions and societal development – leave nothing more to be said. 
Yet, why is insurance so misunderstood, when in fact, it should be celebrated for the good it brings to society? What is it that the industry is still not doing right? And more importantly, how can it remedy society’s misconceptions?
In one of our most candid reports so far, here’s a collage of views from a cross-section of the industry’s leaders.
By Dawn Sit
What is it that the industry is still not doing right?
Simply complicated
“We tend to overcomplicate insurance,” said DirectAsia CEO Edip Okur. This complexity in insurance leads to a downward spiral – a “misunderstanding of the cover provided to people versus what their needs might be”, as well as to a “confusion at the time of claim, either over the level of cover provided or over the process of making a claim”. 
Mr Ojeisekhoba took a more optimistic view: “People may not be all warm and fuzzy about insurance, but to say people dislike insurance, is too strong an expression. Insurance is a vital tool for managing risks, and many consumers understand this basic value of insurance.” As such, doing more for people to understand the benefits of insurance in real and simple terms, and increasing their confidence in the reliability of the products and services insurers provide, would go a long way towards addressing any misunderstandings, he said.
Likewise, Mr Amer Ahmed, CEO of Allianz Re, noted that misconceptions on insurance partly stemmed from doubt on cover and reliability, poor experiences and a lack of transparency. “Making products simpler and more transparent and being clear about the purpose and benefits for the policyholder would go a long way to improving this.”
Of legacy and bad reputation
Sales tactics and service standards of insurance intermediaries over the years, have also left a less-than-flattering legacy of the industry. 
QBE CEO of Emerging Markets David Fried said: “One problem we face is that we are collectively judged as an industry on the basis of the actions of various individual companies. As an unfortunate result, because of the actions of a few, we all have a reputation of seeking ‘every way imaginable to avoid paying’ claims.”
Ms Gaelle Olivier, CEO, General Insurance, AXA Asia Pacific, said that “insurance is the only business where customers pay first, sometimes long before getting the service they paid for”. Further, customer interactions are often scarce – at the time of payment – and concerned with a signature on a contract, when instead, insurers should be building the care and attentiveness which are most important in a human relationship.
Dr Khoo Kah Siang, Great Eastern Life Assurance’s CEO admitted that perhaps in the past, the level of professionalism in the industry “could be seen to be lacking, with over-zealous insurance advisers adopting overly-aggressive sales tactics”, a view shared by Mr Teddy Hailamsah, Commissioner, PT Asuransi Central Asia.
“In the past, insurance was not well-received as accidents, injury and death were taboo topics to broach. The public’s lack of understanding on insurance, coupled with a lack of adequate sales training and insurance salesmen resorting to hard-selling, all of which further put the potential customer off from purchasing protection,” said Mr Hailamsah.
Nonetheless, Dr Khoo believes insurance has come a long way since, and companies have made significant investment and developments in their training programmes to build up the competencies and professionalism of their financial advisory force, enabling them so provide better service and appropriate solutions for customers.
No trust, no talk
But the third and perhaps most important factor detrimental to the industry’s image is trust. Mr Manuel Bauer, Allianz SE Board Member for Insurance Growth Markets said that in addition to sales tactics of a few “black sheep distributors”, the lack of trust is the most important factor. According to the global 2015 Edelman Trust Barometer, only 47% of the population trust the insurance industry, he said. 
“And especially in countries where financial literacy is low, using fear or ‘negative selling’ adds to creating such a misunderstanding of insurance.”
In Korea, the general perception, which is also one of the biggest complaints from the public, is that “signing up for insurance” and “getting paid by insurance” are two different matters altogether. Insurance commercials and agents promise potential clients a great deal in order to close a deal, however, when an unfortunate event occurs and there is a claim to be made, “all kindness and promises are nowhere to be seen”, said Mr Won Jong Gyu, President & CEO of Korean Re.
He added: “Something comes up in the fine print and your policy claim is declined. This is a common misunderstanding people have in general about insurance. And I think that is something the industry should take seriously as it has everything to do with trust.”
Mrs Alice Vaidyan, General Manager of GIC Re concurred: “People around the world are very consistent in their views, problems and hope for insurance protection. But they all face similar barriers – affordability and understanding if the product meets their needs. Often, even if they’re unsure after buying, all they want to know is whether they are working with a company they can trust.”
To shy from pricing one’s own risk is human
Meanwhile, Mr Roland Eckl, Chief Executive for Asia Pacific Non-Life, Munich Re, offered a behavioural reason as to why insurance could be so misunderstood. 
“Most people are still not very comfortable with facing the big risks in their lives, and putting a price tag on each of these risks prompts a human reaction to shy away from such scenarios and its accompanying decisions – ie buying insurance – and thus it tends to be misunderstood.”
How can the insurance industry remedy society’s misconceptions?
Reinventing insurance’s image
Despite the issues that mar the image of insurance, the industry is unfazed, and instead marches on with its efforts to reinvent and redefine its image and noble purpose. 
On how to go about doing it, Mr Okur put it succinctly: “Provide a ‘direct, simple and clear’ message that everyone ca understand; ensure our products are focussed and tailored to the ever-changing needs of the consumer; and make insurance purchase as fast, easy, and convenient as possible – integrating today’s customer behaviour and the growing use of technology.”
Education is the starting point
For one, industry leaders have unanimously agreed that education and awareness is a key area of focus.
“Financial education is the key, because if people start to think more about their goals in life, insurance will become more of a normal financial service sector in helping people to reach these goals,” said Mr Bauer. 
“Education and raising society’s awareness of risks is the key solution. Insurers’ payout of claims in light of recent major catastrophes have also been highlighted in mass media, hence I believe this is critical in helping people to understand the contribution of insurance, as well as increase the awareness on the need for protection,” said Mr Hailamsah.
Similarly, Mr Ahmed and Mr Eckl both hold the view that continuous public education and promotion are important, and that the industry has to play its part in increasing not just public, but political awareness and convey the message on how insurance can help build resilience and benefits to a country’s economy.
Meet the needs
Aside from educating people, families and societies on their understanding of risks, the other key area to address is to ensure that insurers “design products and services that meet those needs”. “When we address these two basic things, then the ‘pull’ factor of insurance should increase,” said Mr Ojeisekhoba.
For Mrs Vaidyan, the insurer’s fundamental obligation is “to understand, even anticipate the needs of our customers and effectively respond to those needs”. Quoting an Accenture survey which found that 67% of respondents were prepared to purchase insurance from non-insurance companies including Google and Amazon, she added: “If the insurance industry is to succeed, we must become creative leaders and innovation must be the new normal.”
Make insurance accessible, but also make it “human”
In lieu of today’s digital trends, insurers also recognise that accessibility is no longer a desire, but an expectation. On top of that, Dr Khoo said the role of advisory needs to continuously evolve alongside technology to better engage with customers.
“Customers today want to use channels that are most convenient to them at any given moment, and they expect these delivery channels to be seamless and painless. They are also not shy about making it known when their expectations are not met,” said Mr Fried. As such, he highlighted that insurers’ response to the demand for increased access must be “on the customers’ terms, not ours”. 
While recognising the opportunities that an increasingly connected world creates for the industry, Ms Olivier said insurers should take the opportunity to “bring back the human nature in our relationships in an increasingly dehumanised world”. 
“There is an opportunity to bring simple solutions and explanations, the opportunity to be available anytime, anywhere to better support our customers, and the opportunity to accompany the evolving risks of our societies. We have an intrinsically noble business, but it is our responsibility to do it well and be close to your customers.”
Walk the talk
Finally, after all is said and done, there is no better way for insurance companies to uphold the nobility of insurance and to gain clients’ trust than to “walk the walk and talk the talk”. “Insurers need to make sure their commercials and ads are not misleading and that the terms and policies are written in plain language,” said Mr Won.
“It is also important that the industry constantly works to improve the quality of services that it provides through enhanced client relationship management,” he added.
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