Not that Berry is trying to blame super funds for the decreasing premiums. He also cautions insurers and reinsurers to be careful about the risks they take on and the terms they allow, yet he says super funds need to be part of the discussion about concerns arising from the current environment. “Ultimately, the funds also need to be part of this discussion, since any downturn in experience may be met by insurers in the short term but in the long term will be met by an increased cost to members,” he says.
Only time will tell whether the economy reverses the decreasing claims rate. However, both the insurers and reinsurers reassure that they’re not about to have their money trees shaken free of all fruit. As Berry says, past experience serves to prepare the insurance market for what may lie ahead.
Recent analysis by RGA has shown that imperfect correlations exist between industries, so a group insurer can diversify its risk by diversifying across industries. Reinsurers also have a strong role in this regard, he says, apart from helping insurers spread their exposure on large or riskier schemes, “because our risks are spread across multiple industries, we may be able to offset a downturn in one industry with good experience in another”.
MetLife’s Burke is also confident of the insurance market’s preparedness for whatever lies ahead. “We can’t actually put prices up, so it is the skill of our overall financial strength, combined with our reserving that makes it very comforting for our clients and ourselves. All downturns are followed by upturns, and you can’t gamble with clients.” He says while it is not always easy to achieve the ideal mix for an insurers’ portfolio, as you can’t reconstruct your clients’ profile, he feels MetLife has a good spread of occupations and genders. “Insurers – I can only speak for MetLife – have been through the worst of recessions and depressions and downturns in the economy, which can’t naturally be forecast to any great accuracy,” he says.
“The industry has been through these situations in the past, we’ll go through them in the future. We’ve got more experience, greater controls, greater forecasting, and it doesn’t keep me awake at night.”