With Singapore declaring 2018 as a ‘Year of Climate Action’ and placing greater emphasis on environmental sustainability, the insurance sector is becoming increasingly involved in building a sustainable corporate environment in the country.
Claudia Salem, management committee member of Singapore’s General Insurance Association (GIA), as well as CEO of AIG Singapore, spoke with Insurance Business regarding the bigger role insurance is playing in promoting a green outlook in the business community.
“The adoption of digital practices leads to numerous benefits for businesses and customers, as well as a positive impact on the environment,” she said.
According to Salem, transitioning from paper-based policies to digitalised documents can do a lot to make insurers more environment-friendly. She said that the top five general insurers in Singapore can save approximately 12.5 million sheets of paper by 2020, by going digital. That’s equivalent to 1,500 trees a year.
Currently, Singapore’s insurance industry has already taken several steps to embrace digitalisation.
“In support of Singapore’s Smart Nation drive, insurers can embrace digitalisation to improve operational efficiency, enhance customer experience, and adopt sustainable business practices,” Salem said. “It is also important that insurers take necessary measures to ensure a sound cyber security environment amid the rapid progress in the nation’s digital initiatives.
“In addition to online direct purchases of insurance, some insurers offer end-to-end digital policy servicing claims and online quote engines, reducing purchase time and increasing customer convenience.”
Salem also mentioned efforts to reduce reliance on cheques, which also add to consumption of paper.
“Today, insurance claims are mostly paid by cheques, accounting for about 10% of corporate cheques issued by DBS bank in Singapore,” she said. “Insurers are also working … to introduce instant claims payments directly to claimants’ bank accounts, reducing the need to pay through cheques.”
The industry is also working on upskilling its workforce, allowing professionals to embrace digital transformation and support their companies as they digitalise.
“Overall, the general insurance industry has observed a growing number of customers engaging digitally, leading to a significant uplift in typical customer satisfaction scores, cost savings and digital financial contribution to the industry,” she said.
Aside from going digital and reducing reliance on paper, Salem shared several other ways insurers are contributing to the sustainability effort.
“With 2018 as the Year of Climate Action in Singapore, progress has been made within the industry, with key insurers participating in thought leadership on climate risk resilience as key influencers,” she said. “The industry continues to make progress on developing sustainable business, underwriting processes and investment strategies that factor in environmental, social and governance (ESG) considerations.”
The GIA has held a masterclass on sustainable insurance for member companies earlier this year, and pledged its support for global standards such as the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Sustainable Insurance.
However, she believes that individual insurers and the industry as a whole need to do more.
“Environmental and social policies, as well as sustainability management systems need to be implemented by insurers,” she said. “This means putting structures in place to monitor sustainability issues up to the level of the board; likewise, insurance executives should expect their boards to challenge on these topics.”
Salem encouraged insurers to take into consideration emerging environmental risks in their Own Risk and Solvency Assessments and adopt recommendations from the Task Force on Climate-related Financial Disclosures to provide more transparency relating to climate-related risk, as much as possible.
This is in line with the Monetary Authority of Singapore’s (MAS) initiative for financial institutions to adopt deeper ESG integration.
“Having such disciplined measures is also beneficial for businesses, in light of growing interests in sustainability from shareholders and potential investors globally,” she said. “On this end, we are supportive of the Singapore Stock Exchange’s move to make sustainability reporting a requirement for all Singapore-listed companies.”
Finally, she called for the entire insurance industry to unite in order to create a more sustainable way of doing business.
“In realising the global green finance and sustainable financing agenda, key stakeholders must share the same goal and continue to work together to implement sustainable initiatives, serving the long-term needs of an inclusive and environmentally sustainable economy,” she said.