Industry positions

The aim of insurance as a business sector is to be part of the everyday life of people, companies and institutions. It comes into play when an unforeseen event takes place, and its goal is to ensure that everything is satisfactorily resolved as soon as possible.

The corporations that form part of UNESPA like to engage in everything we do. For this reason, the Spanish Association of Insurers conveys the industry’s position on the issues that involve the sector, as well as the subjects that shape the current situation of Spain. The positions taken by the Spanish insurance industry on certain issues of special relevance are summarised below.

 

TARGETED CONSUMER INFORMATION

For the industry to be more efficient, it is essential that it invests in offering information that is clear and simple. Customers must be kept informed of the key elements that define any product in which they might be interested.

Less is more. The famous line quoted by architect Mies van der Rohe is not only applicable to buildings, but also to insurance. For the industry to be more efficient, it’s essential that it invests in offering information that is clear and simple. Customers must be kept informed of the key elements that define any product in which they might be interested. They need to have the right information to make an informed decision. Too much detail creates confusion, not greater clarity.

It’s important to bear in mind that insurance is subject to regulations from different areas that frequently overlap with each other. International, European, national and local regulations apply. This makes it difficult to provide consumers with simple, transparent and above all useful information when they are offered a particular product. It’s therefore essential to avoid overlaps between standards when drawing up any new legislation or amending existing regulations.

UPDATED LAWS

Insurance is a highly competitive industry sector that needs constantly to adapt to the needs of its customers. However, to do so it needs its legislation to be equally dynamic and adaptable.

Insurance is a highly competitive industry sector that needs constantly to adapt to the needs of its customers. But to do so, it requires neutral legislation that supports innovation and digitisation within insurance. Traditionally, insurance industry laws were developed through a dialogue between the regulator, legislators and industry representatives. At a time like the present, full of new challenges and circumstances in the market, this exchange of views is even more vital. Digitisation, new forms of recruitment, changes in consumers’ habits are some of the challenges.

All this means that Spanish, European and global regulation needs to free itself of red tape for which there might have been a rationale in the past, but which is no longer compatible with the current situation. Consumers demand simple, easy-to-buy products. The obligation on insurers is to work to achieve this. But they need the support of legislators and regulators. The regulatory framework should ideally be technologically neutral.

A SPECIALISED SUPERVISOR

Insurance is a supervised business activity. To provide the best service, the insurance industry needs the best possible supervision.

Insurance is a supervised business activity. That is to say, it is subject to supervision by public authorities. This is why, in order to provide the best service, the insurance industry needs the best possible supervision. The authorities must be capable of understanding the idiosyncrasies of this business and support it as it evolves. The insurance industry therefore calls for a supervisor that meets the following characteristics:

Capability: the insurance supervisor has an important and sophisticated technical role to perform. It therefore needs the appropriate resources (financial, human and technological) to carry out its work with maximum efficiency and for it to be able to operate at the same level as other European supervisors..
Independence: following the recommendations set out by international organisations, the insurance supervisor must be independent of political power, both actually and practically, so that it can fulfil its supervisory tasks based on strictly technical criteria.s.
Secialization: the financial sector covers many activities, including lending, asset management, insurance, payment systems, and so on. Some may view these as being all the same. Yet they represent very different business models. Their dynamics are different. The insurance industry therefore needs its own supervisor that specialises in the subject and understands the factors that influence it. Ultimately, the industry needs a supervisor that understands the nuances that shape it and with which it can maintain a technical, formed and fluid dialogue. Insurance consumers also deserve specific protection given how their needs vary considerably when searching for a specific financial product..

PREVENTING INSURANCE FRAUD

Insurance fraud is antisocial behaviour. The measures implemented by insurers to prevent it are aimed at defending the interests of their clients.

Insurance fraud is any situation in which a customer, or someone involved in a claim, takes what is not rightfully his or hers. Initially, one might believe that this is purely a problem for the insurer. However, the insurer merely manages the resources of other people; that is, customers who pay their insurance. So anyone stealing from an insurer is in fact stealing from other customers. And it is they – and their wallets – that pay for the consequences.

Insurance fraud is antisocial behaviour and shifts the burden of its cost on to the vast majority of honest customers. When insurers establish policies to prevent and investigate fraud, they are only doing what they should be doing to defend the legitimate interests of their customers. Insurance fraud is a scourge that must and can be fought, above all, by using increasingly sophisticated tools and procedures, and by working with state security forces and bodies..

RETIREMENT AND SOCIAL SECURITY

Spain must ensure that tomorrow’s pensioners are able to live within financial comfort. And insurance offers a way of achieving this.

Spanish society is ageing – just like many other developed countries. This process, which is great news for social progress, is a challenge for those countries when it comes to providing older people with the standard of living and service to which they are entitled. However, the issues generated by the growing impact of older people within the population can be solved if saving for retirement is encouraged among those who are now economically active. Ultimately, the challenge of ageing can be resolved if people act early enough.

Spain must ensure that its pensioners of tomorrow are able to live within financial comfort. Only then will the country be able to grow economically and generate prosperity for its people. To ensure the wellbeing of older people, retired people need to have increasing sources of income. Without calling into question the necessary first pillar that is provided by public social security systems, it’s deemed appropriate to supplement public pensions with corporate pension schemes (second pillar) as well as private pension plans and individuals’ savings plans (third pillar). This three-pillar model is featured under the Spanish Constitution and forms part of the recommendations of the main European institutions (European Parliament and European Commission).

This approach requires a broad consensus among political agents as well as among corporate representatives. Spain needs to take the path that many countries around it have undertaken, and which has been shown to be beneficial for everyone. Especially for retirees themselves. But above all, we need to set off down that road soon because citizens need long periods of time to accumulate sufficient levels of resources to act as a source of supplementary income once they reach retirement age.

In addition to the political consensus, structural reforms are also required in line with what other European countries are doing, where auto-enrolment opt-out pension schemes have been introduced. That is, workers are automatically included in company pension schemes unless they expressly state that they wish not to be.

PROMOTING ANNUITIES

Annuities are tools that complement social security systems and allow retirees to transform their assets into a regular source of income for life.

Insured annuities are the best vehicles to complement the benefits provided by the state social security system. They supplement state pensions up until the death of the insured person – even if he or she lives longer than expected. The insurer assumes the interest rate risk and/or actuarial risk of survival based on deviations between theoretical life expectancy and the insured party’s actual duration of life.

Introducing insurance annuities will increase retirees’ consumption capacity, with a consequent positive impact on the Spanish economy. Insured annuities are an ideal means of reducing uncertainty and maximising wealth/expenditure vs income in retirement. Without an annuity, retirees have to decide for themselves how to spend their assets based on their own sense of life expectancy, running the risk of either running out early due to having underestimated their own longevity, or alternatively living under their means due to having overestimated how long they would live.

These annuities are also an ideal tool for converting a retiree’s property and other assets into accessible funds. Because of their flexibility, they can be adapted to each insured person’s actual circumstances and family situation.

Corporate pension schemes, along with any other saving instruments, should therefore be encouraged in the form of guaranteed lifetime incomes, with relevant tax incentives being established for this purpose.

HEALTHCARE

The insurance industry champions public-private partnership as the way of achieving the best healthcare with the resources available within a context of an ageing population.

Access to healthcare is one of the main pillars of welfare for Spanish citizens. Access to public healthcare is guaranteed, but an aging population puts pressure on state budgets. In order to ensure the best possible service with the resources available, the insurance industry presents proposals to public authorities.Access to healthcare is one of the main pillars of welfare for Spanish citizens. Access to public healthcare is guaranteed, but an aging population puts pressure on state budgets. In order to ensure the best possible service with the resources available, the insurance industry presents proposals to public authorities.

On the one hand, the industry suggests establishing frameworks for public-private collaboration where healthcare is provided by the most efficient party, whilst maintaining universality of access to the service. Creating these agreements enables:

  • Reductions in the cost of healthcare or, to put it another way, serving more people, better, with the same amount of money.
  • Reductions in waiting lists and improvements in the quality of patient care.
  • Keeping much of the private health infrastructure.

At the same time, and with the aim of reducing the burden on public healthcare, a number of tax incentives can be established to encourage private health insurance – based on the principle that every patient who is cared for in this way generates no costs for the national health network. It is also proposed to improve the system of financing Spain’s civil service mutual societies (MUFACE, MUGEJU and ISFAS) in light of their positive experience and given that 86% of their members choose private insurance.

In short, the insurance industry is calling for available healthcare resources, public or private, to be optimised. This is the only way of serving as many people as possible in the best possible way.

ROAD SAFETY

The insurance industry fully understands the consequences of traffic accidents. This is why it supports measures to increase road safety.

Insurance is the safety net that covers all road traffic. Drivers, cyclists and pedestrians travel along streets, roads and highways knowing that if an accident occurs and someone is hurt, there will be insurance to cover them and repair the damage. The insurance industry is thoroughly familiar with the reality of traffic accidents. This is why it’s a strong advocate for measures that are put in place by both government and civil society to improve road safety. The insurance industry will always be there, backing prudence behind the wheel and the culture of accident prevention. Because road accidents bear a high cost for society, in terms of lives cut short.

CLIMATE CHANGE, NATURAL AND OTHER DISASTERS

Insurance and reinsurance can protect against natural disasters, climate change and man-made disasters.

Insurance is a mechanism designed by humans to protect themselves against natural disasters, effects of climate change and man-made disasters. Insurance and reinsurance have a role to play when major events occur. Earthquakes, floods, tropical storms, sea storms, volcanic eruptions, droughts, toxic waste, nuclear radiation, terrorist attacks… Insurance provides cover for all these risks.

Tackling the economic consequences of natural and man-made catastrophes is in the interest of any developed society because associated losses can be very high. In this respect, Spain is at the forefront of disaster insurance through the public institution Consorcio de Compensación de Seguros, which has more than proven its worth over the last half century. However, in the face of enemies as strong and unpredictable as catastrophes, it’s never over.

We need to reflect on what efficient prevention measures are needed to mitigate against bad consequences when they occur. The insurance industry will always support initiatives like the construction of levees and embankments, the clearing of riverbeds, the development and implementation of strict building standards to protect against earthquakes, building standards that encourage sustainable construction and saving energy, protecting the environment with timely maintenance and scrupulous checks of nuclear power plants, controlling chemical plants and all types of facilities where toxic and polluting products are handled, as well as the proper care of water management infrastructure. In short, the insurance sector will do everything it can to prevent disasters or, where this is not possible, minimise the impact from catastrophic events.