Can the Insurance Industry Continue to Grow?

2. Can the Insurance Industry Continue to Grow? 2008 Global Financial Crisis • Sharp increase in policy cancellation during Q3, 2008 • Total policy cancellation amount up by 30.0% from Q2, 2008 Insurance industry at a crossroads?

3. Can Consumers Trust Insurance Companies? Local NGO’s analysis of investment yields of variable insurance policies (Apr. 2012) • Investment yield lower than inflation • Loss of initial investment possible even after 10 years Insurance industry in a crisis of confidence? • 40 to 50% drop in the number of variable insurance policies sold, up to 70% for some life insurers 2

4. Content • Ⅰ. Sustainable Growth • Ⅱ. Corporate Social Responsibility • Ⅲ. Consumer Trust • Ⅳ. Moving Forward Together

5. I. Sustainable Growth 1. New Global Reality Growing Consumer Activism Global Economic Distress New Global Regulatory Regime • Online social networks • Strong resistance against excessive pursuit of profit • Shift in perception of markets (Occupy Wall Street) • IT & easier access to investment products • Euro-zone fiscal crisis • Global economic slowdown • Prolonged low interest rates and fewer investment opportunities • Post-crisis emphasis on stability over profit • Sound inward growth, not outward size

6. Sustainable Growth 2. Slowing Growth of Insurance Industry Insurance Industry Growth Rate: 2009–2011 (%) Korea • Developed:negative growth 11.0% 0.6% • Developing: slowing growth Developing 1.4% Total Developed • Korea: sustained growth -1.8% Source: Swiss Re, Global Insurance Review, 2009–2011 • Global insurance markets: sluggish growth since 2010

7. Sustainable Growth 3. Concept of Sustainable Growth • “… the integration of the three components of sustainable development–economic development, social development, and environmental protection–as interdependent and mutually reinforcing pillars.” • 2005 U.N. World Summit Outcome Economy Society Environment Sustainable Growth • “Sustaining growth into the future together with people and their communities”

8. Sustainable Growth Human Resources Managerial Transparency • Transparent governance & management accountability • Effective risk management • Pool of well-educated professionals & highly-trained experts • Culture of mutual trust, respect for the rights of others Environment-Friendly Business Business Profitability 4. Key Factors for Sustainable Growth • Efficient & renewable energy • Environment-friendly products • Innovative work process • New products & markets • R&D investment • Risk management Public Good Corporate Social Responsibility Consumer Trust

9. II. Corporate Social Responsibility “Sharing with Society” • “CSR is the commitment of business to behave ethicallyand to contribute to sustainable economic developmentby working with all relevant stakeholders to improve their lives in ways that are good for a business, the sustainable development agenda, and societyat large.” (World Bank)

10. Corporate Social Responsibility 1. Why Should Companies Heed CSR? • ISO Guidance on CSR • ISO 26000 Guidance for Social Responsibility (Nov. 2010) • CSR Likely to Affect Business Bottom Line • A key factor for brand power (Fortune Magazine) • Developed Countries Actively Promote CSR • CSR increasingly seen as policy mandate across Europe • Global Companies Heeding CSR

11. Corporate Social Responsibility 2. Social Responsibility Categories (Carroll*) Economic To produce goods and services that society wants and sell them at a profit (Korea) • With growing health awareness and aging population, more customer-tailored policies (e.g., cancer insurance, pension) are being developed and sold Legal Responsibility to fulfill its economic mission within the framework of legal requirements (Korea) • Disclosure and advertising requirements should be met by law * Professor, University of Georgia

12. Corporate Social Responsibility Ethical Additional activities that are not necessarily codified into law but are expected by society’s members (Korea) • Some auto insurers refused coverage to drivers with no accident history, and regulators told them not to do so Discretionary Making philanthropic contributions, providing day-care centers for working mothers, etc. (Korea) • Funding for scholarship, financial education, and research • Use of industry CSR funds to support low-income households with Alzheimer’s, rare diseases, premature birth

13. Corporate Social Responsibility 3. What are the Challenges?

14. III. Consumer Trust 1. Does Consumer Trust Matter? • Consumer trust: key contributing factor for sustainability Consumer Complaints: 2009–2011 • Korea: • Insurance complaints account for 50% of the total (%) • The loss of consumer trust could trigger “insurance run”

15. Consumer Trust 2. What are the Challenges? • “Top Class Variable Universal • CI Whole Life Insurance”

16. Consumer Trust 3. Pro-Consumer Measures (Korea) Consumer Protection Infrastructure Reduction of Consumer Complaints • Independent consumer protection authority • Suitability requirements (Insurance Business Act) • Legal and regulatory reform • One of the assessment items of CAMEL • FSS Consumer Report • Public disclosure (“Name & Shame”) • Mobile consumer service centers

17. Consumer Trust Business Practices Stepped-up Protection of Disadvantaged • Restricted ads on elderly and other vulnerable groups, legal recourse • Improving the terms and conditions of insurance contracts • More effective oversight of mis-selling and insurance solicitation • Expanded insurance coverage for physically disabled, low-income households

18. IV. Moving Forward Together No Sustainable Business without CSR & Consumer Trust • CSR and consumer trust definitely merit our consideration • Long-term investment, not short-term cost • “License” for sustained business growth Future Challenges for Sustainable Insurance • Management recognition of CSR and consumer trust • Development of CSR reporting standards for insurance companies • CSR assessment and public disclosure • Micro-insurance • Socially responsible investing

19. Korea welcomes you to Seoul for • 2013 IIS Seminar • June 16–19 • Korea welcomes you to Seoul for • 2013 IIS Seminar • June 16 to 19, 2013 - - 18

20. Thank You