The insurance industry has a key role to play in helping UK consumers – be they individuals or businesses – manage their financial commitments, but first it needs to improve its reputation.
That was the central message from Association of British Insurers (ABI) director general Otto Thoresen as he delivered a speech at the industry’s most important gathering of the year: the ABI Conference.
Thoresen’s call was heard on the very same day that the ABI and KPMG published the results of a survey of 57 insurance leaders, the findings duly highlighting concerns about new regulatory structures and the influence of the EU and the fact that reputation is seen as the industry’s biggest weakness.
“The reputation of UK financial services firms was undoubtedly harmed by the banking crisis,” explained Thoresen. “Insurers are not banks. Despite this, we have to tackle our reputation head on, and we have a pretty good platform from which to do so.”
Thoresen continued: “Consumers recognise the importance of insurance, and every day insurers pay out GB pound 173 million in pensions and life insurance as well as GB pound 58 million in general insurance claims, for motors and households, etc. Yet, despite the valuable role insurance plays in millions of lives, the public perception of our industry is not high. We need to do something about this.”
The joint ABI-KPMG survey pinpoints what executives think about the strengths of the industry and the impact of regulatory and economic pressures.
The study was conducted alongside the ABI’s quarterly consumer survey of over 2,500 UK adults. Key findings are as follows:
Looking to the future… and focusing on regulation
“Unprecedented reforms in how we sell to our customers and how people save present real opportunities for raising our reputation and improving peoples’ understanding of insurance,” urged Thoresen.
“We need to grasp these opportunities with both hands, and make sure that we create an environment where our reputation reflects our value to society and the economy as a whole.”
On regulation, the survey data shows that almost half of industry leaders surveyed say that the new UK ‘Twin Peaks’ regulatory structure will do nothing to improve customer trust. Over half of consumers believe that they are responsible for the products they buy, and only 4% think that this is the job of the Regulator.
The growing impact of Europe and EU regulation is being felt by firms. 98% of industry leaders are somewhat or very worried about the impact of the EU on the UK market. Nearly a half are worried about ensuring a coherent regime, with a third very concerned that the EU does not understand the need for a cost benefit analysis when proposing new regulation.
Consumers are also sceptical: only one in ten thinks EU intervention is appropriate, while 57% think that the EU intervenes too much in Britain’s financial services.
It’s also very clear that the insurance industry needs a lot more convincing that Government is serious about making the UK the most competitive location in the G20 ahead of the Treasury’s consultation on controlled foreign companies.
Over half of industry executives are neutral on whether recent tax changes make it more likely they will stay in the UK. Similarly, over half of the executives surveyed did not put the UK in their top three locations to site their business based on the tax and regulatory regime.
Period of unparalleled change
The UK’s insurance industry is the third largest in the world and the largest in Europe. It’s a vital part of the UK economy, managing investments amounting to 24% of the UK’s net worth and contributing the fourth highest corporation tax of any sector.
Employing over 275,000 people, the UK insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.
Drew Fellowes, the UK head of insurance at KPMG, commented: “The insurance sector is undoubtedly facing a period of unparalleled change. It’s highly likely that the industry we will see over the next three-to-five years will be structurally very different to what we have today.”
Fellowes continued: “However, with this change comes a unique opportunity for the insurance sector to strengthen itself and become more competitive. The survey highlights the need for the industry to reinvigorate its relationship with customers and reinvent its reputation.”
From a strategic point of view, the big question remains around where future growth will come from – a feat which Fellowes suggested is not to be underestimated in these challenging times.
“Regulation has clearly risen to the forefront of the agenda, andcomes at a time when many insurers face significant market pressures,” he outlined. “As insurers battle through the waves of regulatory change, their challenge is to manage this in line with their strategic priorities and duties to shareholders and customers.”
Further information on the latest survey
The ABI survey of industry leaders is based on the private views of 57 individuals in positions of industry leadership (including CEOs) from some of the biggest insurers operating in the UK. They were not putting a company view, but their personal thoughts. Nearly half are from the larger insurance companies with gross written premium income of over GB pound 1 billion a year. All types of insurer represented.
The ABI Quarterly Consumer Survey for Q2 2011 was carried out by YouGov among 2,613 adults between 31 May and 2 June.
For its part, he ABI is the voice of the UK’s insurance, investment and long-term savings industry. It numbers over 300 members, who together account for around 90% of premiums in the UK domestic market.
The ABI’s role is to:
For further information access the ABI’s website (a dedicated link is provided at the foot of this page)
