Editor’s comment–The law of unintended consequences

Global corporate insurance has been caught by this law through no fault of its own. Firstly, the insurance industry was affected by the financial crisis. Created entirely by the banks, the insurance sector was tainted by association (financial services) and has been a victim of the regulatory fervour over the banks. Then, there have been the mis-selling scandals of payment protection insurance and other types of cover.

Regulators globally began tightening up laws and regulations in order to protect the consumer and to ensure there was no threat to individual consumers. Corporate insurance, on a global basis, has also faced tightening of rules and increased scrutiny from tax and regulatory authorities.

There seems to be little desire among regulators to separate corporate insurance in a global programme from consumer protection, despite campaigns by insurers, brokers, associations such as ECIROA, and risk and insurance management associations. The reasons may be related to financial costs – not just the need for jurisdictions to maximise tax receipts, and keep premium in the country. There is also the issue of supervisory authorities facing cutbacks and austerity measures – many are under under-staffed and over-worked and it is no surprise that their focus is on consumer issues, not foreign corporations.

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What can be done? More lobbying, more awareness-raising, and more education of how global programmes actually work is perhaps the only way forward. As Sergio Balbinot, deputy group CEO of Generali Group and president of Insurance Europe told Insurance Europe’s 6th International Conference in Malta, “We will continue to convey to legislators, investors, the media and the general public the vital need to properly take into account the distinctive characteristics of the insurance business.”

And he acknowledged that perhaps the biggest ongoing challenge faced by Insurance Europe is to increase understanding of the role of insurance, its benefits and how its unique business model works. “In particular, we devote significant resources to explaining how that model differs substantially from those of other financial sectors, such as banking or the asset management industry, and why rules created for those other sectors cannot simply be copied and applied to insurance. If they are, unintended consequences are the result.”

Similarly, the corporate global programme sector differs from consumer insurance, and rules created for consumer insurance cannot simply be copied and applied to corporate insurance. Or else, again, there might well be unintended consequences.