Andrew Cave says that while the ABI provides the insurance industry with a good voice, it needs to consider its message
Common interest groups are by their very nature defensive and self-interested. When com-panies form a “common voice”, it is often to protect themselves against unwanted government interference or maybe to expand their collective turf.
In the case of the Association of British Insurers (ABI), the official mission is to “speak out on issues of common interest, inform and participate in debates on public policy issues and act as an advocate for high standards of customer service in the insurance industry.”
Nothing wrong with that. Especially when the ABI’s 400 members provide 94% of the domestic insurance services sold in the UK. But is the ABI overstretching itself?
Just look at the flurry of press releases from the organisation in the first 15 working days of this month.
Some understandably dealt with the floods that are predicted to cost the industry £1.5bn.
The ABI called for more government spend-ing on flood defences, told flood victims to think carefully before engaging a claims management company to submit a claim and lobbied the prime minister to “build homes to last, not to ?flood”.
It also instructed insurers on how they should use private investigators, urged the industry to raise its game to cope with the EU’s Solvency II directive and told the Law Commission that the insurance industry doesn’t need any more laws.
Somehow it also found time to tell the government that the Financial Assistance Scheme must be funded properly (but not through life and pension fund assets) and reminded it of the urgent need to reform Britain’s personal injury compensation system.
Oh, and Scottish Widows chief executive Archie Kane took up the association’s chair and proclaimed his keenness to “work closely with the new ministers and politicians of all parties to promote a better understanding of the role and value of insurance in the modern world”.
“In times of disaster the ABI runs the risk of simply joining the chorus calling for more government money rather than promoting what members are doing and underlining the very raison dâ€™etre of insurance
“This is a full agenda,” he added. He wasn’t joking.
Insurers play a vital part in Britain’s social safety net and they need a powerful, energetic body to represent them in doing this while they get on with issuing cover and making profits.
But, as the ABI continues to put its spokes-people on radio shows, lobby government and keep a close eye on the latest wheezes of the Financial Services Authority (FSA), it needs to consider whether it can cope with some of its inherent contradictions.
The organisation looked flat-footed back in 2003 when members such as Prudential and Royal & SunAlliance came under fire for hefty payments to failing bosses such as Jonathan Bloomer and Bob Mendelsohn, while the life industry struggled to cope with solvency limits amidst plunging stock markets.
In times of disaster like the recent floods, it runs the risk of simply joining the chorus calling for more government money rather than promoting what its members are doing and underlining the very raison d’etre of insurance.
And, while it accounts for almost 20 % of investments in the London stock market, the ABI hasn’t exactly been vocal about the increasing dominance of private equity and hedge funds – arguably the most pressing issue facing the London market.
Its more traditional members may recoil but there’s an argument for splitting the ABI into separate organisations to look after insurance and asset management operations.
Insurance needs a voice and a face in the UK but it needs to think carefully about what it should be saying and what it wants to look like. IT
‘ Andrew Cave is the former associate City editor of The Daily Telegraph