The insurance industry has to ensure that it learns the lessons of the mistakes made during the COVID pandemic.
Speaking at the two day event “Addressing the protection gap for pandemic risk” organised by the OECD, Lloyd’s CEO John Neal (above) and CEO of UK terrorism insurer of last resort Pool Re, Julian Enoizi, said the insurance industry had a role to play in meeting the major challenges facing the planet.
Mr Neal said the industry had to play a full part in the major risks of the future and to do so it needed to create a better understanding of the value if insurance with the clients.
Looking to the pandemic and the support from global governments Mr Neal said the numbers were “mind boggling”.
“The UK government has borrowed 70% of its GDP, which leaves the country with same level of debt as it had following the end of the second world war,” he added. “Across the world governments have borrowed $14 trillion which is a huge sum.”
Looking to the future Mr Neal said when it came to the risks that face the world the industry has a “responsibility to stand up and innovate”.
“If you look at climate change, for every issue we face you can put an insurance solution alongside it and the same has to go for systemic risks,” explained Mr Neal. “When disasters happen, we are brilliant at reacting and getting money to people when they need it.”
Going forward he said the global insurance industry controlled more money than the pension funds and as such had a key role to play in rebuilding the future economy via investment and divestment.”
Mr Enoizi added that the industry had to ensure it played a role in the protection from future systemic and major risks.
“I think if you look at the future, the risk of not getting involved is too great, we will become irrelevant,” he added. “We have to play a role but governments have an implicit role to act as the final guarantee.”
Mr Enoizi added: “There is also an innovation and profit opportunity here and we should not be afraid to say it.”
Mr Neal said the market had lessons to be learned from the pandemic.
“There are big lessons learned coming out of the pandemic,” he explained. “Whatever we say, and Lloyd’s is set to pay £6 billion in COVID related claims, customers feel they were not represented the way they should have been.
“We need to be clear in the future so the client understands what they have from their insurer. We need to understand the risks and work to educate the client as to what insurance can do.”
Fundamentally in the future as the new economy and new way of working continues Mr Neal said the products the industry offered had to be innovative.
Mr Enoizi said the insurance industry was aware of the issues of the low take up for some time.
“Post the end of the economic crisis in 2008, the economy recovered at a faster rate than the growth of insurance,” he explained. “Business leader said that only 20% of the risks that they are worried about are insurance at present.
“We have to act as an industry before someone comes in and does it themselves.”
Mr Neal said the industry had to take a step back and “learn some lessons for what did not work in the pandemic”.
“The other side of the issue is that it has put the issue of risk at the forefront of clients’ thinking,” he added. “We now need to explain the value proposition of insurance.”