Evolving the Insurance Industry
May 22nd, 2023
CEO, Guardian Group Shared Services
Battered by the pandemic like most sectors, but with sufficient strength in depth to navigate its way through the lockdown aftermath and the continuing effects of the global economic downturn. That is the synopsis for the insurance sector as it turns towards 2023.
An industry that was directly impacted by the illness, medical requirements, and deaths from the Coronavirus knows that as markets reopen amongst the uncertainty, astute management of a robust sector such as insurance is crucial.
CEO of Guardian Group Shared Services, Ravi Tewari, offered an overview of the past year and the challenges involved, “(It has) been a very challenging time for the insurance sector for a number of reasons related to the pandemic. The slowdown of economic activity due to the lockdowns has significantly dampened the sale of new insurance policies. Of even greater significance is that there has been a sharp increase in the number of people who are no longer able to pay for existing policies resulting in the cessation of many of these policies for outstanding premiums.”
Tewari cited a wider scenario, “The industry has also seen a sharp increase in claims due to Covid-related deaths. At the start of the pandemic, there was a decrease in claims on health policies as many people were not accessing regular preventative medical treatments due to the lockdowns. However, as the pandemic progressed, this lack of preventative treatments triggered a sharp rise in medical claims. In addition, the industry has suffered losses in its equity portfolios as globally, equity markets have registered declines.”
Across the economy, the lockdown aftermath is seen as an opportunity to explore new markets, new means of generating income and forex as industries move forward. Tewari agrees, “Many of the large domestic insurers are already net earners of foreign exchange. However, the sector has massive potential to generate even more forex. Insurance is naturally a service business that depends on technology for competitiveness. In recent years, technology has evolved so that software is now accessed as a transactional service through the internet and cloud computing. In other words, massive capital investments are no longer needed to access the most sophisticated insurance technology in the world. Now, all players anywhere in the world, regardless of size, have access to the same technology. This creates unprecedented opportunities for local insurers.”
He does, however, allude to certain requirements. “It is a prerequisite that all insurers are tightly regulated. For global success, it is also necessary that regulations and regulators are proactive in seeking the growth of the sector. This is the aspect that will determine which jurisdictions cultivate the successful insurers of the future. This area needs to be significantly enhanced in the local environment.”
In Tewari’s view, such initiatives also require Government’s assistance together with alliances through the public and private sectors “When insurance companies sell insurance policies, they need to invest to assure payment of benefits under those policies. There is a major problem in the Trinidad and Caribbean markets in that long-term assets are in short supply. The natural solution to this would be for the development of a vibrant market where insurance capital funds projects to enhance our infrastructure and economy in general.”
He believes that the means to stimulate the sector to maximise its potential is through changing restrictive legislation, offering an example, “Insurance legislation stifles this activity and instead pushes insurance capital to support government-issued bonds. As an example, suppose that an independent non-political feasibility assessment proved that a toll road was viable between Port of Spain and San Fernando to generate a rate of return of 10% over 40 years. This would be a great investment for insurance capital. Developers could compete for the project ensuring the most efficient delivery. However, existing legislation prevents this. Instead, it allows the insurance industry to support a government bond to finance such a venture. This latter approach is sub-optimal for several reasons:
• the inception of such a project is slow
• there is less competition
• there is less transparency; and
• entrepreneurship is stifled.
From this example, there is a pressing need for both legislative reform and public/private partnerships.”
Highlighting that the sector must embrace technology for the immediate future, Tewari observed, “Customers rightly demand to access service when they choose, where they choose, at real or virtual locations, and through the medium that they choose.”
In recognition of this, he confirmed “Guardian is launching a brand-new customer service portal to completely overhaul our interactions with our customers. In addition, there is a massive exercise to totally restructure our operations concerning customer service.”
For 2023 and beyond? “It is a complicated dynamic. On the one hand, the world is entering a phase of high inflation and interest rates connected with a high probability of recession. Trinidad and Tobago and our wider region will not be spared. On the other hand, economic activity was so heavily curtailed during the pandemic that there will be natural growth as full economic activity resumes. In addition, the sharp rise in hydrocarbon prices will certainly benefit Trinidad and Tobago. With so many interwoven factors, it is critical for management to constantly monitor the environment to be able to rapidly pivot as necessary.”
Article by: Sheldon Waithe