Overzealous regulation will hamper innovation


The slow creep of overenthusiastic regulation risks hindering the insurance industry’s ability and desire to help solve some of the big challenges of our age, says Mike Morrissey.

European policymakers and regulators are, despite all good intentions, driving the insurance industry to a more tightly regulated but less innovative and socially responsive future.

Macroeconomic uncertainty persists, as continued slow growth in the developed world is increasingly accompanied by slowing growth in the BRIC countries (Brazil, Russia, India and China) and other previously robust countries. The low interest rate environment that characterises this low demand growth, low inflation period has produced a severe drag on insurer profitability, although this problem has elicited little or no empathy from regulatory officials.

It is entirely understandable that regulators were traumatised by the financial crisis, and determined to exercise their power to prevent future calamities in the financial markets. Their actions and aspirations, not only to increase capital standards, but to impose onerous reporting requirements on insurers, have added substantial costs and uncertainties to the industry. Less obviously, these actions have diminished the industry’s ability to innovate and meet consumers’—and ultimately society’s—needs.

Regulation, Mike Morrissey, Insurance, Europe, US

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