October 28th, 2022
Evolving the Insurance Industry
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.
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.”
The National Insurance Board of Trinidad and Tobago (NIB)
Entrusted with the task of protecting insured persons against economic difficulty due to loss of earnings emanating from work-related contingencies, the National Insurance Board of Trinidad & Tobago (NIBTT) is an entity of massive importance for the citizens of T&T. Specifically, 634,381 citizens, or as NIBTT sees it through their client service-oriented approach, ‘customers’.
Having recently celebrated its 50th anniversary, the organisation occupies a unique position to provide a detailed perspective on all aspects of Trinidad and Tobago’s social insurance landscape.
NIBTT’s Executive Director, Niala Persad-Poliah, acknowledged the accomplishments of the organisation saying, “Our golden anniversary is a time to reflect on all that we have accomplished and strategically chart our vision and plans for the future. Fifty years reinforces the knowledge that we have served a noble purpose in the lives of many, and this anniversary is an encouragement for us to press on to sustainability and enhanced service.”
The NIBTT has grown exponentially with the required solidity to achieve its stated aims built around its core values of collaboration and commitment, accountability, resourcefulness, resilience, and empathy. Persad-Poliah provided the specifics of said development. “I reflect on how we have grown. For example, in 1977, our Retirement Benefit expenditure was just about $2 million. Fast forward 20 years to 1997, and Retirement Benefit expenditure was $139 million. We have seen the $1,000 minimum pension in 2004, rise to $2,000 in 2008 and then on to $3,000 in 2012. In 2021, our Retirement Benefit expenditure stood at $4.5 billion with more than 125,000 persons now accessing this benefit.”
The clear intention is to continue NIBTT’s progression through the embracing of continually evolving work practices, not least of which is the inevitable requirement of increased technology implementation. The Executive Director confirms that mass digitisation is fully on the NIBTT horizon. “We are well on our way to a comprehensive digital transformation right now. If I look perhaps five years into the future, the NIBTT will have seen a full transformation and we will be reaping the rewards from our current efforts. I look forward to the implementation of ICT initiatives and other customer-focused projects at the NIBTT, to better serve the needs of our customers.”
There are other factors that must be taken into consideration as the NIBTT moves forward, including the reality that people are living longer and healthier lives. Persad-Poliah acknowledges this social impact and responded, “Strategic reform is an important element. I am pleased to see that the reform measures, as outlined in the 10th Actuarial Review, are being discussed as the Government of the Republic of Trinidad and Tobago (GORTT) has embarked upon stakeholder engagements with Unions, Associations and Chambers on the issue of the gradual increase of the retirement age to 65 years.”
For 2023 and beyond, the intended trajectory is backed by a solid base: “Our large and diverse investment portfolio remains robust, and the NIBTT’s total funds stand at approximately $30 billion as at June 2021. We are always cognisant of our larger mandate of providing excellence in social insurance customer service, to the people of Trinidad and Tobago.”
Article by: Sheldon Waithe