The insurance industry has not suffered the same reputation-damaging scandals as the banking industry, however, for some consumers, as insurers are financial institutions they have been tarred with the same brush – and need to prove their worth.
In a recent survey conducted by the Economist Intelligence Unit, insurers agreed that they have a duty to contribute positively to society. However some quite bravely admitted that they are not meeting their societal responsibilities. What’s getting in their way?
Regulation looks like the main culprit. Over half of survey respondents 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.
Almost three quarters of survey respondents agree that individuals will have inadequate private savings and pensions as a long-term consequence of new regulation, while just over half 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 – including regulation - life insurers are offering fewer products, limiting guarantees and raising prices. But are these changes in the best interests of consumers? While the aims of regulation such as stronger policyholder protection are laudable, almost fourth-fifths of our respondents said that regulators should balance these concerns with other socioeconomic objectives, such as promoting savings. Almost half went a step further and said that policymakers should incorporate socioeconomic goals into regulators' remits.
But what is not clear is whether insurers are actually willing to sign up to further regulation which incorporates socioeconomic goals, or whether they just believe that the current regulation is too focussed on short-term fixes, without considering the long-term ramifications. My money is on the latter – how many industries ask for more regulation? – but they have a point. If too much regulation of the insurance industry leads to more expensive insurance that doesn’t meet consumers’ needs, no one wins.
To read more about insurers and society, read our latest report.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
