Reputational risk drivers for the insurance industry

Many issues factor into how the insurance industry is perceived, but the root of its reputation lies inside its operational DNA, according to experts at the Swiss Re Centre for Global Dialogue's session, "Reputational risk drivers in the insurance industry."

The 2007 financial crisis exposed profound mistakes at a range of institutions. One trusted name after another was ruined as the crisis unfolded - sometimes overnight. Though the first names to fall belonged to banks, insurers soon came under scrutiny as well. The value and fragility of corporate reputations had been laid bare.

Experts from industry, government, academia, and the non-profit sector gathered on 28 May at Swiss Re's Centre for Global Dialogue to discuss reputational risk drivers for the insurance industry.

All participants agreed that the crisis was a defining moment for reputational risk. However, they also pointed to larger and more lasting trends now at work. News flow is quicker and more distributed (think Twitter), keeping corporate reputations in a constant state of play. Financial analysts have taken a more direct interest in intangibles such as reputation, thus linking a corporation's reputation to its share price and cost of capital. The behaviour of corporations is evaluated and ranked within and across sectors (including meta-rankings of reputations themselves), making reputation a competitive and comparable asset.

Consistency, constructiveness key

Participants mentioned some expected sources as drivers: the way they do business, the way they communicate their actions and values in formal reporting, as well as the way they react when things go wrong. Insurers especially are judged by the customers they serve. Consistent and constructive behaviour in environmental, social and governance matters is thus a core driver – and possibly an enhancer – of an insurers' reputation.

Indeed many speakers reinforced the notion that insurers can turn the current climate – which some called a 'post-trust' environment – to their advantage. Insurance has clear social value that all insurers can help to communicate. Sector leaders can go further by applying the traditional insurance business model to address broad social issues such as poverty and food security.

Cultivating reputation through culture

While many spoke of the rules, processes and regulations that help to protect a reputation from harm, most agreed that culture was the true source of a sterling reputation. Insurers that embody ethical values will invariably reflect those values in their day-to-day operations, even (or especially) when something goes wrong. And this, participants repeatedly mentioned, was the moment of truth: walking the talk. Over time, reputation is a matter of decision-making, which is itself a broad form of governance. And governance, as one participant put it, is just another form of insurance.

Published 3 June 2013

sigma 5/2016 – Strategic reinsurance...

There is a growing trend toward more holistic and customised use of reinsurance and insurance solutions.

Read the whole story

sigma 4/2016 - Mutual insurance...

Over the past few years, premiums written by mutual insurers have outpaced the growth of the wider insurance market. The sector has undergone a modest recovery but also faces new challenges.

Read the whole story