SIA chairman Rolf Dörig takes a look at the current challenges facing the Swiss insurance industry. During the pandemic, insurers continued to fulfil their mandate and provide their contractual benefits, and thus support both the economy and society at large in the crisis.
Rolf Dörig, the pandemic has dominated our daily lives: did private insurers have any other issues on their agenda last year?
Like society and the economy as a whole, COVID-19 created a huge challenge for us as well. As a result of the pandemic, private insurers made claims payments of about CHF 1 billion last year. Just as they did before the outbreak of the COVID-19 crisis, they have continued to pay out a daily average of CHF 140 million in pensions and claims payments to private individuals and companies.
And yet nevertheless insurers came under fire …
I can understand that someone who might have expected their insurer to pay out more will have been less than happy. But if we want to ensure that the insurance principle is not undermined, private insurers can pay out benefits in the event of a claim only if premiums have actually been paid for these benefits in advance. This meant that despite the extraordinary situation, our member companies had to insist on compliance with the policies. But they also took a generous and unbureaucratic approach at the same time and helped many of their SME clients with quick and targeted support.
Does that mean there is no such thing as an insurance solution for risks such as a pandemic?
Not at the moment. First, it has proved difficult in the past to assess the impact of a pandemic accurately because the data required has not been available. Second, risks that materialise on a global scale, such as a pandemic, go against the central principles of insurability: the damage or loss occurs at the same time for almost everyone, making risk diversification impossible. This means that purely private insurance solutions are not effective enough for major risks as these. And this is precisely why we, as private insurers, have been on a quest with the federal government in recent months to find various possible approaches to a joint insurance solution for the next pandemic.
On 31 March 2021, the Federal Council made the decision not to continue with the concept of pandemic insurance. Do you understand the decision?
No. Development of the concept of pandemic insurance might still be at an early stage, but it is incomprehensible that the Federal Council has now announced that the entire exercise will be abandoned. If you are faced with major risks such as this one, it is essential to look into preventative measures!
You wanted to contribute insurers’ expertise?
Exactly. Prevention and risk assessment are part of private insurers’ DNA. Allocation of funds in the event of a claim is one thing, but the question as to who receives which funds – and how these funds can be paid out efficiently – is much more of a challenge. This is an area in which private insurers have well-established processes, expertise and human resources to offer. We can process a claim within a short space of time and identify whether the claimant is eligible or not. This creates transparency, prevents any unjustified payouts and means that injured parties receive fast, efficient and effective help. So our industry’s expertise is very valuable when it comes to ensuring support for a future solution among the general population.
Is that the advantage over a purely state-led approach?
First and foremost, it’s the advantage of an insurance solution. Instead of distributing funds indiscriminately in retrospect and at the sole expense of the country’s taxpayers, an insurance solution allows a planned approach and provides legal certainty long before a claim is made. If an incident occurs, it then ensures that help goes to those who really need it as soon as possible, namely in line with the rules of play that were agreed beforehand and are based on the principle of solidarity.
Rolf Dörig,President of the Swiss Insurance Association SIA, takes a look at the current challenges facing the Swiss insurance industry.
You mention the principle of solidarity. Is this not also at risk in terms of retirement provision, particularly in the second pillar?
Unfortunately, it is. There has been an urgent and pressing need for action in this area for a long time now. Policymakers are facing challenges to their reform projects for the first and second pillars. There is broad acceptance for the Swiss three-pillar system, which has proved successful. But it has become outdated – and attempts are now being made to incorporate non-system elements into the second pillar. This is something we are vehemently opposed to. We do not need to fundamentally rebuild the balanced system. We just need to ensure, and this is all the more urgent, that it is adapted to today’s demographic and economic realities.
What do you make of the Federal Council's proposal for the OPA reform overall?
It features key elements to stabilise the second pillar. We support the core of the reform – the one-step reduction of the OPA minimum conversion rate to 6.0 per cent.
And which aspects do you criticise?
In particular, the Federal Council’s proposed pension surcharge and the idea of an unlimited salary contribution. A scattergun approach is something that has to be rejected at all costs. Rather, compensation has to be targeted and needs-based. This is why we want compensation payments to benefit the transitional generation within the second pillar to be limited in duration and to end automatically after this period. This is the only sustainable way to reform the pension system.
You want to see sustainability in retirement provision?
Yes, sustainability is imperative when it comes to retirement provision. It is about not living at the expense of the next generation and leaving behind an intact environment. It is precisely the redistribution in the second pillar that we have today that runs counter to the principle of sustainability. We need sustainability in retirement provision as well as in environmental matters …
… where the focus is also on the financial sector and as a result on private insurers, too.
This issue is not new for our member companies, as sustainability is at the core of their business model. As professionals in risk evaluation, and also in our capacity as major investors, we have an economic responsibility to live up to. Companies that invest their clients’ premium funds have a long-term perspective and thus also an interest in sustainable commitments.
And what measures are insurers taking?
Many insurers have been addressing sustainability for years now and have built up corresponding expertise in this area. With the first Sustainability Report published last year, the private insurers allowed statements to be made about the industry as a whole for the first time. We have further enhanced this report for 2021, enabling us to provide more transparent information on how we are contributing to this issue.
The federal government’s financial centre strategy also addresses the topic of sustainability.
We welcome the federal government’s approach – and not only in terms of sustainability. The updated financial centre strategy ensures continuity and is designed in a targeted manner. The Federal Council addresses what we see as the key action areas: this will allow Switzerland to remain competitive as a financial centre in the years ahead.
There is also competition among the SIA’s members. Does that not lead to competing interests?
That’s par for the course in any association. The SIA thrives on diversity. Small niche insurers, national all-line insurers, health and accident insurers and global direct insurers and reinsurers are all members of the SIA. It goes without saying that they sometimes have differing views and needs.
You manage an association. The pandemic meant that political business also did not always go as planned. However, the partial revision of the Insurance Contract Act was completed in 2020. Are you satisfied with the outcome?
The lively discussion surrounding it shows just how important it is. Our efforts paid off. We believe that the partial revision is balanced. It strengthens policyholder rights in a variety of ways and allows policy processing that meets the needs of our digital age.
Parliament will discuss the partial revision of the Insurance Supervision Act next.
We expect the partial revision to adapt the Act to reflect the latest requirements. An Insurance Supervision Act that is fit for the future has to put overall conditions in place that facilitate technological progress. In terms of policyholder protection, differentiated solutions should be possible depending on the need for customer protection. As you can see, the association’s work is set to remain challenging and exciting in 2021.