Purpose in a time of crisis

EY’s Penney Frohling on how (re)insurers that demonstrate leadership and deliver on their purpose today will be even more formidable tomorrow.

The Covid-19 crisis has placed the insurance industry in a potentially uncomfortable spotlight, given the prominence of purpose statements on company’s agendas and websites. Consider how governments are questioning the denial of business interruption claims and the way the media is covering the significant litigation already underway.


Reinsurers are engaged in these developments, given their role in backstopping insurers that may be forced to pay and the likely development of government reinsurance programs for future pandemics.

To be clear, paying out every Covid-19-related claim would bankrupt the industry and leave individuals, businesses and governments in a very difficult situation. In many cases, pandemic exclusions in BI policies are clearly worded. Reinsurers’ reluctance to covering pandemics is well founded, in light of the enormous scale of the risk. Still, (re)insurers should evaluate the upside of doing what many consider to be the right thing.

Purpose statements

Typically, the insurance industry’s purpose statements speak to universal ideals, such as, “peace of mind now and in the future” and “a lifetime of financial security.”

Reinsurers’ mission statements can also be quite aspirational, speaking to a more resilient world, a more sustainable economy and benefits that go beyond the bottom line to include employees and society at large.

The basic tension is this: insurers and reinsurers may be contractually correct that they are not on the hook for many claims related to the pandemic; however, they have a clear opportunity to live their purpose and share their unique risk expertise in ways that benefit society as a whole. Regulators and the media will ask probing questions that senior leaders must be prepared to answer. For instance, is the purpose statement an organisational “north star” to guide corporate culture and shape operating principles? Or is it simply a public relations exercise?

The attention on the Black Lives Matter movement in the US and subsequent demonstrations in many countries has increased the visibility of corporate social responsibility agendas and created additional scrutiny on purpose statements. At the same time, the Covid-19-sparked economic crisis has furthered discussions for more inclusive capitalism. All these forces underscore the need for high-functioning (re)insurance industries that can help lead a global economic recovery.

”All these forces underscore the need for high-functioning (re)insurance industries that can help lead a global economic recovery”

(Re)insurers in different jurisdictions will face different levels of scrutiny. Despite being many months into the pandemic, with much unresolved and massive uncertainty, all industry stakeholders need to prepare for the long game. Given the likelihood of additional waves of this pandemic and the probability of new ones in the future, (re)insurers need to develop risk coverage and transfer strategies to reabsorb and reallocate risk in such a way that can restore and sustain healthy economies. This is what the industry is uniquely able to do — and precisely what the world needs it to do.

During its long history, the insurance industry has shown remarkable resilience in helping society overcome great losses and understand unprecedented risks, from natural disasters to terrorism. Covid-19 will be no different in that the (re)insurers who take bold action during and after a crisis tend to emerge as winners.