Into to future
In March 2011, the global consultation process to develop the Principles for Sustainable Insurance (PSI), which spanned seven regions around the world, was hosted in Johannesburg.
Seven years later, the annual meeting returned to Johannesburg. We chatted to Vanessa Otto-Mentz, Head of Group Strategy at Santam and the United Nations Environment PSI’s Board Member for Africa, to find out more about the 2018 meeting.
What was the focus of the PSI meeting this year?
Our hope was to catalyse action towards addressing the environmental, social and governance (ESG) issues.
These ESG issues are vast and act as a drag on development. Examples are climate change, income inequality, youth unemployment, urbanisation, and food security.
We believe that the broader insurance sector – as society’s risk manager, risk carrier and asset manager, (together with partners, including national and local government as well as regulators) – can play a positive role to address the downside of the ESG issues we face. In addition, we will be able to respond effectively to the opportunity it presents.
A way to summarise this is to say we are continually hoping to answer to the world’s strategy in addressing the sustainable development goals. This can be done by working with others to improve risk management, risk carrying and asset management on the continent so that it addresses these issues whilst doing its business.
The themes we chose to focus on at the meeting included:
- The risk protection gap;
- resilient cities; and
- agriculture and the food system.
What will the role of the broker/adviser be in a ESG focused future?
Good risk management advice has existed for centuries. In a world where risk is increasing, and change is commonplace, the value of good risk advice increases.
Brokers and advisers who adapt and use technological developments to support them to provide their customers with good risk advice will do very well.
Further, in Africa (the insurance sector outside of South Africa, Namibia, Tunisia and Morroco), insurance is generally under-represented. It presents a very large risk protection gap and also potential customers who require support to understand and manage their risks. Brokers and advisors can add a lot of value here to address these needs.
Have the original objectives of the PSI been achieved?
During the first seven years of the PSI, we asked: should there be sustainable insurance? This discussion was focused on defining what sustainable insurance is and what a group of sector players and supporters should strive to embed in their business.
This work culminated in the drafting of the PSI Principles, their adoption by members (representing over 20% of global premium), and a vast number of supporting institutions joining the cause.
I think the main achievement of these first years was the acknowledgement that insurance is part of a nested system in the world; therefore, we must consider relevant and material ESG issues in its business activities.
I believe the PSI is shaping and positively influencing risk management.
What role does technology play in the future of sustainable insurance?
In my view, this is another risk protection gap.
On the one hand, it leaves developing economies out of the advantages presented by the Fourth Industrial Revolution. In addition, it exacerbates the income inequality gap. We therefore have energy poverty as well as digital poverty.
Productive risk taking supports business development. We are already seeing it in how mobile phones are impacting emerging farmers on the continent by giving them access to markets and information. We are also seeing it in how technology is creating precision and so called smart farming where exact fertiliser and water is determined. These developments all present productive risk taking.
These new developments also bring with it the need for new forms of risk protection, such as cyber insurance. However, this also presents a threat in that automation may reduce employment, the insurance sector and its partners will need to address this so that we do not inadvertently increase the risk protection gap.
Editor’s Thoughts:
ESG is increasingly being focused on within the insurance as well as the investment industries. There is a greater desire from clients to do business with companies that align corporate goals with their client’s personal feelings regarding the environment. How can we increase our focus in this area? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
