Insurer Priorities Differ Around The Globe

Asia Correspondent

Singapore

The biggest concern of the insurance industry today ismaintaining competitive pricing with adequate profitability,according to a survey of attendees here at the annual seminar ofthe International Insurance Society.

The second most pressing worry for attendees in general was theability to meet customer demands, although insurers in the UnitedStates and Canada differed in that they regard managing risk astheir second biggest challenge.

The IIS survey revealed how insurers today have vastly differentworries than they did over the past two years, when the mostimportant concerns were “meeting customer demand” in 2001 and the“influence of technology and e-commerce” in 2000.

A total of 73 firms participated in the survey, with 17 comingfrom the United States and Canada, 31 from Asia, 14 from Europe,and 11 from a fourth region described as “other,” comprised ofrespondents from Latin America, the Caribbean, Australia, theMiddle East and Africa.

“There is a lot of worry about what is happening in the equitymarkets. The insurance industry has been severely battered, bothbecause it is a major investor and also because it is the providerof liability products,” explained IIS Chairman Douglas Leatherdaleafter announcing the results of the survey. Mr. Leatherdale is theretired chairman and CEO of the Minnesota-based St. PaulCompanies.

“This is an industry that moves along business cycles andpendulum swings. The recent events have broken this system ofcycles,” said Andrew F. Giffin, principal of the New York-basedTillinghast-Towers Perrin.

He struck a positive note by saying that “substantial newcapital is coming into the industry. There is no problem aboutadequate capitalization.”

The concerns differ from region to region. The greatest worry inthe United States, Canada and Asia is maintaining competitivepricing with adequate profitability, while this comes up as thesecond most pressing concern among European insurers. Europeanfirms ranked “managing risk” as the primary concern, something thatcame up as the second biggest worry in Asia, the United States andCanada.

The three regions differed when it came to choosing their thirdmajor concern, which was “merging or acquiring for needed growth”in the United States and Canada, “meeting customer demand” inEurope, and “keeping and building talent” in Asia.

Attendees from the fourth region described as “other” listedtheir biggest concern as meeting customer demand, followed by“maintaining competitive pricing with adequate profitability.” Thethird major concern for attendees from this region was regulatoryoversight, something that did not come up as a matter of concern inthe other regions.

“The focus has clearly shifted from e-commerce to pricing.Branding is a new topic that many companies are talking about.European insurers seem to be making a greater impact on branding ascompared to the American ones,” said IIS President and ChiefExecutive Officer Patrick Kenny, echoing the concerns of insurancecompanies that had participated in the survey.

“I guess the board of directors will put managements under muchgreater pressure to ensure they maintain very high standards ofaccountability,” Mr. Leatherdale said.

The IIS officials were asked if it was time for regulators tostep in and make sure that the insurance industry did not sufferwith regard to the growing concern over accounting standardsfollowed by the industry in general.

“What the regulator can do is very limited. They can take careof extreme cases. But for the most part, the industry will have tolook after corporate governance and maintain high standards ofaccountability on its own,” Mr. Giffin said.

“You have to have a partnership with the regulator. There is adifference in the way auditors do things in the U.S. and in UnitedKingdom. I guess we need to carefully look at how things are doneelsewhere,” Mr. Kenny said.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, July 29, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.