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Embrace sustainable practices not just for today’s bottom line, but as a strategic investment
Kampala, Uganda | JULIUS BUSINGE | Insurance players have been urged to embrace the aspect of sustainability in their operations to positively impact communities, the environment, and related fields in their business.
“In the realm of insurance, risk assessment extends beyond policies. Embrace sustainable practices not just for today’s bottom line, but as a strategic investment in resilience ensuring your company’s enduring success in a world that demands environmental and social responsibility,” said Kaddunabbi Ibrahim Lubega, the chief executive officer at Insurance Regulatory Authority (IRA).
Kaddunabbi was speaking at IRA’s 58th CEOs Breakfast Meeting held at Kampala Serena Hotel on Dec.14 under the theme “Beyond the numbers; navigating the landscape of sustainable business”.
He told attendees to transition from traditional metrics of doing business (sales, profitability) to holistic sustainability to be able to address the critical matters and emerging trends for the long-term health of the insurance industry.
Kaddunabbi said sustainable business means achieving long-term success by companies through integrating environmental, social, and governance (ESG) factors – shift from short-term gains to enduring stability – long-term success of the business/company.
On environment, he said, it refers to how a company performs as a steward of the natural or physical environment – mining the impact of nature. The social aspect is the way a company interacts with its workforce, the societies in which it operates, and the political environment; governance is how the company makes decisions and reports and ensures ethical behavior.
The need for sustainability in the insurance sector is currently being influenced by global economic shifts, climate change, societal expectations, and related challenges.
“Ensuring resilience and adaptability in the face of unforeseen challenges like pandemics, how climate change will impact agricultural insurance are things for us to think about,” Kaddunabbi said.
According to the UN Global Compact Accenture CEO study, the majority of the respondents agreed that sustainability matters in business. For instance, 93% said, sustainability is important for the future success of their business; 80% said it is a route to competitive advantage in their industry and 78% said, sustainability is an opportunity for growth and innovation.
A sustainable insurance business requires key pillars including ESG Integration – embedding environmental, social, and governance factors into business strategies, enhancing risk management, and long-term performance. The other pillars have to do with technology for efficiency – artificial intelligence, big data, internet of things, cloud computing amongst others; then managing cyber risks by recognizing the increasing threat of cyber risks and adopting preventive measures.
In addition, other pillars encourage a culture of innovation and disruption through deliberate investment in research and development for future competitiveness, fostering diversity (deep and surface diversity) in the workplace (recruiting people with different cognitive strengths), and creating a non-toxic corporate culture.
Kaddunabbi also said, that inclusive insurance is a major pillar for sustainability in the insurance sector and this can be achieved by expanding the accessibility and affordability of insurance products, addressing the needs of underserved markets, and finding new distribution channels like telcos and cooperatives, digital channels.
He urged the players to embrace the idea of responsible insurance by promoting ethical practices and responsible policies, building trust among stakeholders, and simplifying products so that they are easy to understand, easy to enroll in, and easy to claim.
Regulatory Lens
From a regulatory angle, Kaddunabbi said, sustainable business is good for the industry as it creates a strong, stable, and developed insurance industry.
He said the ESG strategy and framework for the insurance industry are being developed – but insurers need to start aligning to ESG requirements.
He said sustainability disclosures will feature prominently in the related regulatory framework. With the advent of Risk Based Supervision, effective risk governance is critical to avoid regulatory and compliance breaches and technology & innovation attract cyber risk, insurers need to be prepared for the damage cyber-attacks can cause.
“If you have any issues regarding standards, you can raise them with me directly,” Kaddunabbi told the attendees.
