Two of the largest issues faced today by the Southeast Asian region are the COVID-19 pandemic and climate change. Both perils are complex and multi-faceted, requiring action from all sectors – public and private – to effectively tackle.
Karine Kam (pictured above), CEO of the Singapore College of Insurance (SCI), shared with Insurance Business the importance of having a strong insurance industry in today’s economic and environmental landscape.
According to Kam, while Southeast Asian nations have fared relatively well compared to the other global regions, the pandemic has still greatly affected the nations’ economies, causing a huge increase in public health costs.
“While it is predicted that the economy will recover soon, much of it is dependent on the individual nation’s vaccination programmes,” Kam said. “Challenges remain in terms of securing enough doses as well as addressing the logistical issues of distribution. However, the recent announcements of an ASEAN digital vaccine certificate coupled with successful vaccination programmes should boost economic recovery and revive the region’s ailing tourism sector. But such gains can be lost if things do not turn out as planned.”
With regard to climate change, Kam cited a study by the World Climate Research Programme, in which climate scientists found that abrupt thawing of polar ice caused by continued high carbon emissions could lead to cumulative carbon emissions doubling. This will cause a far greater increase of greenhouse gases in comparison to gradual thaw processes.
“The issue is exacerbated as this may not have been included in global climate models,” Kam said. “Such emissions could increase by 100% compared to that envisaged under original moderate and high emissions scenarios. As such, green investments should become a priority post-pandemic, to build sustainable and resilient human societies.”
How is the insurance industry helping?
According to Kam, insurers in ASEAN can help mitigate the economic effects of the pandemic by maintaining relief measures introduced locally. This will help customers facing temporary cash flow difficulties to maintain their insurance coverage. Measures include penalty waivers and extensions of grace periods for late premium payments. Insurers can also grant additional benefits to give policyholders better protection, including free additional COVID-19 coverage.
“As for climate situations, insurers can introduce risk-mitigation measures while promoting the adoption of environmental, social and governance (ESG) principles, both inside and outside the insurance industry,” Kam said. “The sector needs to be resilient against climate-related risks by conceptualising appropriate insurance products to pursue more green projects across the region.”
At the recent ASEAN Insurance Summit, one of the main discussion agendas was making ASEAN more climate resilient.
“Industry leaders noted that challenges remained in addressing insurance gaps amongst customers from lower income groups,” Kam said. “There were also renewed calls for digital inclusion and empowerment to be made a post-COVID priority. Apart from post-pandemic recovery, these calls were to create new values and competitive advantages from digitalisation.”
At the ASEAN Insurance Regulators’ Forum, regulators outlined their initiatives in strengthening financial resilience in their respective jurisdictions.
“Another takeaway from the session emphasised that a sustainable finance taxonomy will help orient capital towards the right investments and green activities, thereby aiding companies in transitioning towards their sustainability goals,” Kam said.
Kam said that more priority should be placed in accelerated talent and capacity building in the areas of sustainable finance, customer-centric digital transformation and ESG.
“In this regard, SCI, alongside regional training providers, set up the ASEAN School of Insurtech, Analytics and Innovation to provide avenues for insurtechs to leverage AI and analytics to reduce costs, speed up response times, and improve customer service,” she said. “SCI also launched an executive certificate in green insurance and an executive certificate in sustainable finance to provide senior executives, leaders and board members of general insurance companies with the necessary skills that will guide the development of green initiatives within their companies.”
Moving forward, Kam predicts that the insurance industry will no longer be focused on product-led offerings but instead will be service-led, which will better serve customers seeking a holistic experience.
“Big data, blockchain, AI, and IoT will become an integral part of insurance solutions,” Kam said. “The industry will transit towards an innovation-focused culture. Underwriting, claims handling, and marketing will be done digitally as part of the digital culture and empowerment. Legacy-based systems will slowly but surely be eschewed. Artificial intelligence will bring about an evolution in the industry, enabling stakeholders to transition from an investigative- and indemnity-based approach to a predictive- and prevention-based one. This will greatly impact every stage of the insurance supply chain and process. Policyholders, intermediaries, and insurers will apply technologies to make required decisions, hence boosting productivity and enhancing efficiency and customer satisfaction.”