This is especially true in life insurance, where policies bought represent a long-term commitment. The industry needs to quickly comprehend changing customers’ preferences and shoulder the responsibility of inculcating responsible consumer behaviour by expanding and deepening the scope of customers’ education and awareness. Through greater understanding of the respective responsibilities, disputes and potential conflicts could be minimised. Balancing profitability with serving the needs of customers for long-term sustainability Industry players that focus on short-term gains will not achieve long-term sustainability. The traditional view that the sole purpose of business is to make money the more the better is no longer a tenable view today. Institutional logic now dictates that companies are more than instruments for generating money; the value that a company creates should be measured not just in terms of short-term profits but also in terms of how it sustains the conditions that allow it to flourish over time. What this means is that industry players today should not be fixated solely on generating profits but rather investing in relationships with their customers. If the industry can meet the needs of its customers, then that relationship will sustain the insurance company or takaful operator even during distressing periods. Regularly benchmark against the best to measure your performance Benchmarking exercises have proven to drive performance improvement by facilitating comparison and performance measurement amongst industry players. It is a yard stick that measures how your company faired in delivering its mandates to its shareholders and customers.

For those peripheral European economies that experienced a credit boom, it is plausible to think a tighter macro-prudential stance would have helped reduce the severity of the global crisis of 2008 and the euro-area crisis of 2010. Tighter capital standards would have slowed pre-crisis credit growth, tempering the boom. And the extra capital built up in the European banking system would have helped contain some of the collateral damage from the resulting credit bust. In short, as in the US, the boom-bust cycles in credit and GDP in the euro-area would plausibly have been much less severe had policy been ambidextrous. The current conjuncture The third example is from the present. In response to the crisis, short-term interest rates in major advanced economies fell rapidly to their floor and have remained there (Chart 9). Aided and abetted by programmes of quantitative easing, real long-term rates have followed suit, falling to historically unprecedentedly low levels (Chart 10). These responses from monetary policy were a natural reaction to the opening-up of sizable output gaps in many advanced economies. Extraordinary times called for extraordinary measures. Whether by coincide or causality, what has happened since in financial markets has been striking. The risk-taking cycle in some advanced economies has decisively turned. For example, issuance in the US high-yield market reached a record high in 2013, with half coming in a “covenant-lite” form (Chart 11). This is evidence of a renewed “hunt for yield” among investors [Stein, 2013].