But brokers feel left out. “Remember to include us in the future,” says Biba boss Eric Galbraith
The Insurance Industry Working Group (IIWG) believes that insurers should reduce dependency on state provision and provide more welfare products.
In a new report, the IIWG – co-chaired by the Chancellor, Alistair Darling and Andrew Moss, group chief executive of Aviva – also sets out its determination that the UK become the leading global insurance centre by 2020. The report was largely welcomed by insurers, regulators and industry bodies. However, Biba’s chief executive, Eric Galbraith, criticised its lack of reference to the role of brokers (see comment, below).
The report, ‘Vision 2020’,?found that the government currently provided 65% of insurance in Britain through state pension and other welfare initiatives, with insurers underwriting the other 35%. It called for insurers to play a greater role to help reduce dependency on the state.
It pointed to the strength of the industry and its robustness during the credit crisis. It employed about 313,000 people and was responsible for investments of about 25% of the UK’s total net worth.
The report acknowledged that the sector had been affected by the financial crisis, but any difficulties were very different to those experienced by the banks, said the Chancellor. “This is in part because issuing insurance policies presents different risks to accepting deposits, but also because the prudential regulation regime for insurers has so far borne up well.”
The report recommended:
- A greater role for insurers in the provision of long-term healthcare and planning for old age and risks, such as unemployment.
- The government and the FSA increase customer confidence and trust through improving financial education and considering further steps to improve transparency, simplicity and access.
- A partnership between insurers and the government to better manage risk and to explore options to increase savings and protection provision. The industry also should share data and research findings to help to reduce the impact of different risks, such as floods and crime.
- Work to help consumers manage financial distress, building on the government’s financial capability initiatives. The insurance industry should assess the scope for a greater role, such as in providing retirement income and help with long-term care.
- Encouraging capital flows into the industry by ensuring that its competitive position in the global marketplace is maintained and enhanced.
“The insurance industry is a vital part of the UK economy, employing around a third of all people who work in financial services and managing almost £1.5 trillion in assets,” Darling said. “While the industry has fared well relative to other financial sectors in the face of the global financial crisis, it is facing the challenge of an increasingly competitive global market.
“I welcome its commitment to work in partnership with government to improve confidence in insurance products, enhance financial capability and further build the competitiveness of this key British industry.”
An FSA spokesman said it welcomed the report. He said the association would continue to help to sustain a strong insurance industry that delivered positive outcomes for the consumer.
The IIWG was created in October 2008. Members include L&G, RSA, Standard Life, Lloyds Banking Group, Willis, Prudential, Towers Perrin and Lloyd’s of London.
The report’s findings will be presented to the Chancellor’s High-Level Group on City Competitiveness later this year.
Adrian Brown, UK chief executive, RSA: “The report demonstrates the importance of insurance to the wider economy. Those of us in the industry should be proud of the role we play in making the UK insurance market the envy of many. The vision for 2020 lays out the key areas where government and the industry need to work together to maintain this leadership position and ensure the best long-term outcome for customers.”
Eric Galbraith, chief executive of BIBA: “We very much support the group and look forward to working with it and continuing our discussions. We are a little surprised at the lack of reference to the broking and intermediary involvement … but hope that moving forward we will be included in the debate. The UK has one of, if not the most, innovative and competitive general insurance markets in the world – and one of the strongest broker/intermediary markets. It is essential to ensure the broking and intermediary sector is involved, supported fully by the government to achieve the best outcome for the sector and consumers in particular.”
Andrew Moss, group chief executive, Aviva: “The insurance industry makes a great contribution to the UK economy. Taking forward the recommendations in this report will create a stronger partnership between government and the industry, which is essential to help people manage the risks of everyday life. There is a real desire for better customer engagement through greater financial education and awareness, improved accessibility and transparency of products, and a need to attract capital to the UK insurance industry. Taking steps now will build customer confidence and deliver our vision to become the world’s leading insurance centre.”