Bound by necessity
K Sanath Kumar, chairman-cum-managing director, GIC Re, talks about the unbreakable link between the risks being both covered and insured against within the re/insurance industry.
At one of the very many conferences and events associated with insurance that we attend, I came across a quote about our industry—“insurers monitor loss trends, improve catastrophe modelling, address the causes of climate change and prepare for and adapt to the impacts”. How important an industry we are!
Yet we ourselves provide an umbrella to those who contribute to all we need to prepare for and adapt to the impacts.
The industries and organisations that contribute in a very significant manner to climate change in the form of carbon emissions are the ones that are highly insured.
Our industry covers many of those industries that add to either global warming or pollution.
Why can we not wake up before it is too late?
While on the one hand we look for business opportunities, on the other we get ready to pay for the damages caused by these industries.
Have we factored the effects of climate change in our business plans? Are our underwriters sensitive to the fact that their businesses and climate change are inextricably linked?
The insurance industry has very often failed to keep pace with technology. We as an industry insure tomorrow but are unable to read what, yesterday, was the writing on the wall. We are unable to identify the chinks in our armour.
The internet as a game-changer in our lifestyle and the way the world lives and conducts itself was recognised several decades ago. However, the vulnerability of businesses and systems to disruptions by various elements continued to progress rapidly, and we the insurers were caught napping. Today the cyber attackers are one step ahead of the cyber underwriters.
Any re/insurer can remain in business only when it underwrites its business correctly. On most occasions, we assess and evaluate the risk as it exists and the claims that can arise.
However, we are very often unable to assess how the various other unrelated external factors impact on our assessments and evaluations.
To address these very vital and important issues we need to focus on our human resource component. Insurance has largely not been a profession by choice. Hence, very often we are faced with a shortage of qualified talent. We need to address this issue with the gravity that it deserves.
Today Google and Amazon and their like are just a step away from offering insurance to cover the risks of their customers. Where would we be left then?
Of course, I am not being pessimistic. I would like to see the glass half full but it is now time that we, especially in the emerging markets, started to underwrite our own risks.
K Sanath Kumar is chairman-cum-managing director at GIC Re. He can be contacted at: cmd@gicofindia.com.
