Living in a post-pandemic environment, the world is going through major shifts, said Mr Chee Hong Tat, Senior Minister of State, Ministry of Finance & Ministry of Transport.
Speaking at the 19th Asia Pacific Life Insurance Congress (APLIC), he highlighted three of these shifts – Inflation, Ageing, and Technological Change – and how these shifts would impact the insurance industry.
He shared his optimism for the insurance industry as it has “been around for a long time and has seen many ups and downs”, and whenever developments bring about new risks and opportunities, the industry adapts and adjusts in tandem with the changes.
He opined that the high level of inflation we are facing may start to moderate later this year. But compared to the past 10 to 15 years, we are likely to experience higher overall inflation and higher interest rates over the next decade.
How does inflation impact the insurance industry? While insurance is all about risk pooling, the current confluence of geopolitical tensions, higher inflation, higher borrowing costs and uncertain economic climate makes risk management particularly challenging.
One example is the way actuarial models are computed. Many existing models do not fully capture the significant change in inflation that we are experiencing now, so these will need to be adjusted.
And insurers’ ability to continue their operations over the longer term is essential to why people are willing to pay premiums upfront for benefits they will only receive in the future.
You must have confidence, he said. So insurers must ensure they can weather the impact of an extended period of high inflation, including adjusting business models, enhancing existing product designs, and reviewing underwriting and risk assessment methods.
On ageing, he said many societies worldwide, including Singapore, are rapidly ageing due to lower fertility rates and longer life expectancies.
In Singapore, the government has introduced national insurance schemes in recent years, like MediShield Life and CareShield Life, and started programmes like Healthier SG to encourage Singaporeans to take good care of their health and reduce the onset of illness. Insurance companies also offer many complementary products, such as Integrated Shield Plans, riders, and annuity plans.
He shared that in September 2022, the United Kingdom experienced a liability-driven investing crisis in the pensions industry. The crisis came about because many of their pension schemes did not have enough liquid assets.
Liquidity risk is a priority for the insurance agenda. In the current climate, where markets are on the edge, this area warrants closer attention.
Another issue associated with ageing is longevity risks and how changes in life expectancies affect lifetime annuities and life insurance.
While many countries face the issue of outdated mortality data, it is good that the Global Asia Insurance Partnership (GAIP), the Centre of Excellence supported by industry, academia, and regulators, focuses on mortality projections and morbidity implications of COVID-19 as an endemic risk in Asia. They have started work on developing a pandemic risk database and understanding COVID-19’s impact on life and retirement insurance.
“This is just one example. There are many more areas that we can look at, many areas where research and data collection will be important,” he said.
There’s also the impact of climate change on health across different parts of the world.
The different governments are looking at global warming and its impact on food supply, the onset of different kinds of diseases, and the impact on our health and longevity, as recently shared by World Health Organization. “So these are, again, factors which will have a direct or indirect impact on the insurance industry – health care costs, longevity, and so on,” he said.
The last factor he touched on was technological change. “During the pandemic, we saw how digital adoption and the ability of insurers to deliver services to your customers through digital touchpoints became more important. Because we couldn’t meet face-to-face at one point, couldn’t have face-to-face contact, and couldn’t have large group gatherings, we used digital channels and digital methods to serve our customers,” he said.
Representatives were also equipped with better information to provide more personalised advice using technology to augment the human touch and face-to-face services.
He said: “This is why I’m still a firm believer that it cannot be just technology alone. We need both. We need the human touch, we need face-to-face service, and we need the personal interactions to build trust to understand the client’s needs and then to see what products to recommend. But technology can augment and help representatives to do this better, to be more efficient, and to cut down on paperwork so that you can spend more time serving the customers.”
However, digitalisation is not just all plusses; there are also negatives.
The number of cyber-attacks is expected to increase in tandem with the financial industry expanding its digital footprint.
As custodians of sensitive information, insurers will need to put in place strong controls to protect data privacy and prevent data loss. Today, many organisations know the importance of good practices to protect against cyber risks, such as through vulnerability and patch management, security baseline configurations, and privileged access management.
And this is also relevant when you engage a third-party service provider. The third-party service due diligence guidelines developed by the insurance standing committee for cybersecurity are a useful reference in this regard.
Inflation, ageing and technological change are just some of the shifts we will experience in our operating environment over the next decade, he said. “The important point I want to highlight is that we need to prepare ourselves for these shifts by looking ahead to the future and taking steps to work together through our tripartite partnerships; to transform our business models, to train our workers and to update our regulatory policies and goals.”
Skills Upgrading and Lifelong Learning
Skills upgrading and lifelong learning will be an essential component, he said.
The Monetary Authority of Singapore (MAS) has launched the Talent and Leaders in Finance programme (TLF), which will support companies in building competencies in key growth areas and make training support available for Singaporean finance professionals at different stages of their careers.
Insurance companies can tap on available subsidies to upskill their workforce through courses such as those offered by the Singapore College of Insurance. This will help industry professionals upskill continually, and stay relevant to evolving industry needs.
“And I’m also happy to see Income Insurance partnering with polytechnics like Republic Polytechnic to offer internship programmes for our students. This is a very good move. And I hope that more insurance companies will do likewise to attract more young people to join the industry,” he said.
MAS has recently rolled out funding support through the Polytechnic Talent for Finance Scheme, which insurance companies can tap into to offer good jobs and rewarding careers to our Polytechnic graduates.
Importance of Coming Together
Mr Chee said: “We are in a situation where no single society, no single company, and no single individual can claim to fully understand all that is changing around us. It’s just too complex and too fast-moving.”
By coming together and pooling ideas, perspectives and insights, everyone will benefit from this process to have a deeper understanding of the coming changes. And, importantly, the work between government, employers, and unions – in tripartite partnership – to prepare for these changes, he concluded.
About the Asia Pacific Life Insurance Congress (APLIC)
APLIC is aimed at promoting professionalism of financial services advisory in the region. Through various joint educational and professional training courses, seminars and conventions, the APLIC congress aims to raise the standard of professionalism and business practices of financial advisors and managers in the region.
About the Asia Pacific Financial Services Association (APFinSA)
APFinSA is the largest financial services council in Asia Pacific, represented by nine member associations from Australia, Hong Kong, India, Macau, Malaysia, Philippines, Singapore, Taiwan and Thailand.
Established in 1991, APFinSA serves as the pre-eminent cross-border association to address the critical needs and opportunities of the financial advisory profession in the region.
Celebrating its 32nd founding anniversary this year, APFinSA is the organiser of the biennial Asia Pacific Life Insurance Congress (APLIC). The APLIC brings together a global community of financial consultants, executives, policymakers, academics and business leaders who share a common passion for the financial services profession.
About the Insurance and Financial Practitioners Association of Singapore (IFPAS)
Since 1969, the Insurance and Financial Practitioners Association of Singapore (IFPAS) has been the leading professional association for financial advisers in Singapore. It represents the interests of its members
on legislative, regulatory and policy-related matters.
Its role is to advocate, innovate and inspire on behalf of its members to advance the financial advice profession’s social contribution and positively shape consumers’ perceptions of the financial services industry.
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