Adrian J. Galea explains how the Malta Insurance Association fosters the professionalism that both industry and customer deserve.
The Malta Insurance Association is a non profit-making organisation that represents the views and common interests of all indigenous and foreign insurance companies in Malta. Over the years, the Association has been successful in promoting excellence in service and insurance products, hence protecting the common commercial and trading interests of insurers in Malta. The Association also relentlessly seeks to facilitate wider public understanding of local insurance practices and procedures.
The Association is responsible for the implementation of a professional code of conduct within the industry and supports market players to subscribe to such codes of practice. This fosters a healthy business that benefits both insurer and insured. The Association provides its members with the opportunity to exchange and analyse external developments and issues relevant to their industry’s wellbeing. In fact, part of our mission is to offer training initiatives and events targeting general and specialised lines of insurance business. In this way, the Association fosters the professionalism that both industry and customer deserve.
The Association’s biggest strength lies in the effectiveness with which it helps members deal with changes to their business environment. Not surprisingly, the demands for assistance never cease, as the insurance industry faces wave after wave of major changes.
One such major area of change is in the field of retirement. This change is driven by limited resources at national level which will increase demand for private retirement schemes. The Association’s objective in this evolutionary trend has been to emphasise the major role that insurers can play in financing retirement.
In the debate on pension reform, we continue to emphasise that the indexation of the pension age with life expectancy will not, on its own, lead to the sustainability of retirement income. Adequate retirement income can only be ensured with increased long-term savings, and such savings will only be fostered through adequate fiscal incentives or, as a minimum, the removal of current market disincentives. The imminent maturity of a considerable number of life endowments should also give us the opportunity to convert these matured benefits into pensions.
We have also emphasised the importance of introducing financial education to encourage individuals to understand investment tools, as well as the fostering of a robust regulatory infrastructure to gain the trust of both government and potential clients.
A changing regulatory environment
The Solvency II Framework Directive, now agreed by EU legislators, will radically overhaul insurance regulation by fostering risk assessments and rationalising the management of insurance entities. In anticipation of the new Solvency II regime, local insurers have been updating their management processes and systems and improving their ability to track and report their exposure to risk. This has been assisted by the Association’s efforts to familiarise its members with these changes.
Apart from promoting various training initiatives, the Association made technical consultancy available to its members and provided them with various training sessions. The EU assessment report for Malta showed that Maltese insurers are generally well prepared for Solvency II, and that there had been a noticeable step-up in their preparation pace. Overall, Maltese companies achieved a good rating to the required input data and to the reliability of the results. Moreover participating members were well capitalised at slightly above the European level.
Moral hazard
The hardened economic climate has brought about tougher competition that is preventing any real premium growth as well increased moral hazard.
Against this background, the Association has assisted insurance companies, most notably in the motor sector, to take action in order to reduce inadmissible claims. Two local warden companies have been recruited to assist motorists involved in traffic accidents. In this way, law-abiding citizens are protected against the potential for exaggerated or false accident claims. The Association has also facilitated the use of new technologies for motor surveying and has introduced its members to sophisticated data systems that uncover fraud.
Human resources
Mobility and advancement within the insurance field has raised the demand for employment in this sector.
Until recently, very little had been done to attract students to our industry and there were no specialised insurance studies at University. Our challenge has been to create an academic training avenue leading to a bachelor degree in insurance, and to reinforce this initiative by raising awareness in insurance opportunities.
A four-year sponsorship agreement with the University of Malta has given a kick-start to a university course of training in insurance. This sponsorship draws to a close this year, but the legacy will live on among a growing number of students who choose to graduate in insurance. The primary aim of this subsidy agreement had been to kick-start insurance education at tertiary level in the light of encouraging career opportunities within the industry.
Natural catastrophe
Not as successful have been our engagements with government on the need for developing a sustainable response to the occurrence of an earthquake or other natural catastrophe in the Maltese Islands. Questions on how to prepare for and minimise financial losses arising from them have gained more attention with the magnitude of recent disasters. There is a public perception that the islands are relatively safe, and this is probably due to the fact that the most damaging earthquake to hit Malta was in 1693, and that the last occurrence of serious damage was almost a century ago. Our engagement with policymakers has failed to shake this complacency or impress upon the need for more public-private cooperation in this field.
Strengthening the core values
The Association has contributed significantly at fostering the insurance industry in Malta through its traditional methods of lobbying with governments or relevant authorities, working closely with the regulators such as the MFSA and voicing its concerns where the need arises. Although, by its very nature of existence, the Association represents the interests of its members, yet an interesting part of this equation is the general public as the consumer of insurance products. It is this segment that the Association needs to reach out to.
The insurance industry sometimes carries a negative perception, more often than not prompted by unfavourable situations experienced by individual consumers themselves. This is to be expected as consumers pay for an intangible service, for which, unless the unexpected occurs, there is no return.
In reality, the insurance industry is more than just insurance premiums – the flip-side of the coin is the payouts, in the form of compensation for sometimes material financial losses. The insurance industry contributes significantly towards restoring the financial stability of a consumer in the event of a financial loss. During 2010 the life insurance sector paid out €110 million (Malta Insurance Association statistics) by way of benefits, while the non-life sector paid out €62.2 million (Malta Insurance Association statistics) in compensation for financial losses suffered by customers. The Association needs to accomplish this role of reaching out to the general public and highlight the importance of using insurance as a means of protection against the unexpected and emphasise the contribution that insurance has towards the economy.
The Association is keen to work closely with other partners who foster the growth of the insurance industry in Malta. High on the priority list are the local regulators (MFSA) and education colleges and institutes. We also seek to strengthen existing relationships, so as to ensure that the voice of the insurance industry remains relevant.
We will continue to make the best use of the resources available, such as the Association’s talented human resources and the Association’s website to promulgate industry-related information and analysis. The ultimate objective is that of raising public awareness to the significance that the insurance industry has within the Maltese economy. The insurance industry is a significant employer by providing career prospects to hundreds of employees and is a major investor on the local stock market and the Maltese economy.
Key to this is our close relationship and membership with the European Association of National Insurance Associations, Insurance Europe (formerly known as Comite Europeen des Assurances or CEA). As a member of this European insurance and re-insurance federation, the Association remains at the forefront and has a voice at a European level with all matters directly influencing the business we represent. The Association aligns its principles with those of its European counterparts and encourages initiatives that enable and foster business growth.
Adrian J. Galea is Director General of the Malta Insurance Association.