The insurance industry should seize the opportunity to support society in ensuring sustained economic growth, helping nations recover from disasters and lifting people out of poverty, says Arthur Wightman, PwC Bermuda territory leader and insurance leader.
On September 25, 2015, the 193 countries of the United Nations General Assembly adopted the 2030 Development Agenda: Transforming our world. This included 17 sustainable development goals (SDGs) to achieve three extraordinary things in the next 15 years: to end extreme poverty, fight inequality and injustice and fix climate change.
Earlier this year, PwC conducted the PwC SDG Engagement Survey of approximately 1,000 global corporations to see how aware they were and how they were planning to engage with the goals. Ninety-two percent of companies were aware of the new SDGs, but while governments were seen as having primary responsibility for achieving these goals, only 4 percent of businesses said they were determining what they would be doing against them five years from now.
This is of not inconsiderable concern. When looking at the goals themselves the insurance industry is facing some significant threats, but is also presented with some vast opportunities. The sector delivers huge value to society and contributes to the efficient functioning of markets. Its role could be a catalyst to the success of the Development Agenda through the realisation of opportunities, as long as it is able to mitigate some of the threats it faces.
One the most fundamental inhibitors to the industry’s future success is the lack of diversity in its talent pool. As an example, in PwC’s 18th Annual Global CEO Survey, more than three-quarters of CEOs believe that diversity has enhanced innovation, customer satisfaction and overall business performance. Notably, however, in another survey by PwC, Female Millennials in Financial Services: Strategies for a new era of talent, of more than 8,000 women born between 1980 and 1995, respondents are interested less in working in the insurance industry than any other industry. Thirteen percent wouldn’t work in insurance because of its image.
This goes much deeper than gender or age to race and ethnicity, education and opportunity. Attend any insurance event and it is plain to see how singularly lacking the industry is when it comes to diversity. And yet, its long-term success depends on it. At PwC, our belief is quite simple: we respect and value differences. We know that when people from different backgrounds and with different points of view work together, we create the most value—for our clients, our people and society. In that lies an enormous opportunity for the insurance industry.
Closing the insurance gap
Underinsurance represents a gap between the current state and the full potential of the insurance industry in serving the economy. The gap is currently significant. As an example, Swiss Re uses its sigma catastrophe database to track the non-life insurance gap over time. During the past 40 years, the shortfall has widened continuously, from about 0.02 percent to more than 0.13 percent of global GDP, as total losses have grown significantly faster than insured losses.
As Ban Ki-moon, United Nations secretary general has said: “Economic losses from disasters are out of control and can only be reduced in partnership with the private sector.”
This is a role where the value of insurance to society is critical. Insurance can have a positive outcome on almost every one of the 17 SDGs. The challenge is how the industry collaborates, invests, innovates and perseveres for long-term good. On the other hand, in creating a positive result for society, the outcome for the industry could be transformational from a commercial standpoint.
If the insurance industry is able to resolve some of the structural weaknesses and threats it faces over the medium term, and if it is able to work with clients, governments and agencies to take advantage of the opportunities ahead, it will be able to support society in ensuring sustained economic growth and an ability to recover from disasters and to lift people out of poverty over the long term.
Not only will it do this, but it will lead other industries in enabling the UN’s SDGs to come to fruition.
Arthur Wightman, PwC Bermuda, Bermuda