Even before the delegates and participating business leaders of the ongoing Asean Summit arrived in Manila, the chairman of the US-Asean Business Council warned his contemporaries about a worrisome trend in the insurance industry.
Evan Greenberg, who concurrently heads the world’s largest property and casualty insurance company, wrote a public letter criticizing insurance brokers for their “abusive behavior” and their propensity to “enrich themselves at the expense of both their customers and underwriters”.
“Cloaked in the mantra of ‘customer best interest’ or ‘treating customers fairly’, these brokers seek the cheapest price and broadest coverage, at commission terms that by any measure are excessive,” Greenberg wrote. “Forcing underwriters to succumb to the lowest common denominator is hardly in the customer’s, or industry’s, best interest,” he added.
According to Greenberg, these so-called predatory behaviors have shown up around the world (including the Asean region) and are simply unsustainable from an underwriting perspective. He further cautioned that this may lead to customer and regulatory backlash, and may usher in a movement toward disintermediation.
Greenberg’s observations are particularly significant in light of the Asean Summit’s objectives, which will focus on accelerated economic integration and reforms among member-nations. Insurance plays a key role in supporting economic growth, including improved resilience, mitigating country risk and helping economies recover after catastrophes.
Notably, a number of Asean countries are susceptible to natural disasters and insurance can make a big difference in terms of financial restoration.
In a research study conducted by Global Counsel Llp., a number of challenges for Asean policy-makers and insurance firms were identified, including the need to address the wide range of regulatory capacity across the region, and ensuring fair and equal treatment for foreign and domestic firms.
It also underscored the lack of a strong institutional center within the Asean, which will be needed for further liberalization and regulatory convergence.
Barely a week after Greenberg issued his statement, the Financial Conduct Authority in the UK announced that they were commencing an investigation into the suspected prohibited conduct of five global reinsurance brokers, namely, Aon, the Jardine Lloyd Thompson Group, Willis Towers Watson, UIB and Marsh. All five reinsurance brokers have operations within the Philippines, and offices within Southeast Asia.