Future of Insurance in a New Era of Risks
Intervenção de abertura do Presidente da APS - Portuguese Insurance Sector: Shaping the Future
Good afternoon ladies and gentlemen.
I would like to start thanking our host, the British Ambassador in Portugal, dear Mrs. Kirsty Hayes, for organizing this event, full of interesting topics for discussion and debate.
The theme of today¿s event ¿Future of insurance in a New Era of Risks¿ was very well chosen because our industry ¿ and indeed our society - faces potentially huge technological, demographic and climatic shifts. Whatever changes the future may bring, insurers need to be able to continue delivering the valuable products and services that help customers having secure and prosperous lives.
We ought to recognise that in order to serve customers we must embrace new technologies and digitalisation, for they have an enormous potential in helping tackling all the challenges, proper of insurance industry, if used in the right way.
In fact, they are already reshaping the way insurers innovate, distribute, underwrite, manage claims, compete and communicate with costumers. But although customers increasingly want to purchase insurance products online and through smart devices, it is also important that our industry continues to support non-digital consumers, who may find it difficult to use the new digital services or simply prefer not to do so.
This means that the use of new technologies and data, together with the use of traditional technics and ways of doing things, requires good regulations and frameworks, suitable for this new and evolving environment supporting diferent business models.
But digitalization is not the only challenge this industry must face in the near future.
Climate Change is also a huge challenge. 2017 will be remembered for giving rise to three storms of enormous destructive power ¿ Harvey, Irma and José -, with their massive impact on lives, livelihoods and economies. Even Portugal suffered the effects of extreme events. Several wild fires took place in October in our country, producing a great deal of property damage and numerous fatalities. The fires only became catastrophic due to exceptional atmospheric conditions, and to Ophelia¿s winds. The fires of 15th and 16th October originated, in fact, the biggest claim in the history of Portuguese insurance industry, amounting up to 250 million euros.
Recent studies demonstrate that the recovery of economic activity to ¿normal levels¿ after a nat cat event is a process that can last around two years in developed countries and up to eight years in less developed ones, not to mention that some may never be able to recover at all.
That is why Governments around the world are increasingly aware of socio-economic benefits of risk transfer tools like insurance and, on the other hand, are integrating risk management strategies and tecniques into national development planning and budgeting.
In a time where the perception of climate risk is shifting from a social corporate responsibility and sustainability topic to a core business issue, the insurance industry has an important role to play, since, in fact, it has the potential to increase the economic resilience of societies to extreme events and climate risk.
Therefore, we are now starting a dialogue with the Portuguese government and regulator authorities to build an effective public-private partnership in developing a sustainable risk-transfer and insurance program to face natural disasters.
One last word about yet another big challenge.
The widespread ¿greying¿ of populations, as a result of an increasing life expectancy and falling fertility rates in developed countries, is putting unprecedent pressure on statutory pension systems.
As a result, governments are introducing reforms to make their systems more sustainable by raising retirement ages, limiting the access to early retirement and reducing the generosity of benefits. The result is only one, lower pension revenues.
In this context it is fundamental that individuals increase the amount they save in private, funded pension schemes, and insurers, once again, have a significant role to play in any multi-pillar pension system.
In our country, the development of a 3rd pillar is crucial, because the income a personal pension product may provide is often the difference between being able to lead an independent and dignified life after retirement, or not.
All these and other challenges will be addressed here today. And as we will see, as a financial shock-absorber and an enabler of economic activity, insurance is most effective when complemented by risk-reducing strategies and measures that help prevent losses, in order to make insurance solutions more accessible, affordable and sustainable.
At the end of the day, fulfilling expectations of the positive impact of insurance on people¿s lives depends on the capacity of the industry to design and deliver products that respond to people¿s needs.
I wish you all a very enjoyable and profitable conference.
José Galamba de Oliveira