Insurance sector must evolve in line with increased public expectations and changing risks
Building public confidence in the insurance sector requires more effort from all industry participants, Reserve Bank of New Zealand Governor Adrian Orr said in a speech to the Insurance Council of New Zealand today.
Through the Insurance (Prudential Supervision) Act, the Reserve Bank is tasked with maintaining industry soundness and public confidence in the insurance sector.
Mr Orr says “The insurance sector is part of the ecosystem that society relies heavily on to both mitigate risks and/or transfer the risk-burden to those best able to manage it.”
Insurers need to manage the evolving risks facing the sector. For example, climate change is leading to more frequent insurance events. Likewise, advances in science and technology are providing more data and insight for insurance risk-pricing. And, public expectations of what constitutes good conduct and culture have sharpened - alongside the recent regulator reviews that highlighted significant shortcomings.
Now is the time for the insurance sector to review and improve their conduct and culture, and innovate in their business models. The insurance sector must use high-quality risk management capability to support their business decisions and risk-pricing. This is an important foundation for a sound insurance sector. Likewise, the Reserve Bank will monitor the sector’s risk management to ensure the industry provides appropriate outcomes for society as a whole.
“The public is demanding that both insurers and regulators play their part in providing greater confidence in the insurance sector. The Reserve Bank will prioritise insurance policy and supervision reviews in 2020 and beyond, and enable individuals and firms to actively participate in shaping the industry’s future.”