The insurer boss adds that the industry’s reputational damage arising from the business interruption test case has left her feeling ‘very sad’ and that the industry needs to ‘not shoot ourselves in the foot as much as we do’

The biggest risk that insurers will need to combat in 2021 is reputation, according to Aviva chief executive Amanda Blanc.

Speaking at S&P Global’s virtual European Insurance Conference 2020 on 19 November, Blanc said that the reputational slur arising from the FCA’s business interruption test case has left her feeling “very sad” and has only cemented the “problem with trust in our sector”.

Addressing around 400 online delegates in an opening ‘fireside chat’, she said: “If I reflect on 2020, the biggest risk for insurers is reputation.

“If I look back at this last year, it makes me very sad to [see] how insurers have potentially come out of this from a reputational perspective. The business interruption issue, the really negative publicity that we got from that – I think we already had a problem with trust in our sector and I’m not sure that we’ve really helped ourselves this year.

“For us, I think that is a real key priority that we need to tackle.”

Blanc also identified the economy as a risk that insurers need to be wary of, especially in terms of providing cover for the SME market.

She said: “Clearly the second risk is around the economy. What actually will happen with the economy?

“Of course, we’ve seen the vaccine raise hopes in the last couple of weeks, but we all know there are some significant headwinds and we need to really think very carefully about that.

“We insure a lot of SMEs – what is going to be the impact on SMEs? How are they going to come out of this? These are things that are constantly on our mind.”

Other risks, according to Blanc, are regulations – such as around Solvency II and general insurance pricing – Brexit and climate change.

It is not all bad news however. Blanc explained that there are opportunities for insurers here of they “take these things head on and actually have a proactive approach to them and say we are going to turn the risks into opportunities”.

“The biggest risk really is if you don’t adapt, then you just become irrelevant,” she added.

Blanc also spoke on the FCA’s recent report into general insurance pricing practices, which discussed the practice of price walking and how to combat it – this is where long-standing customers receive less competitive premium prices than new customers.

“We have to put the mirror up to our face and ask ourselves why didn’t we deal with that?” Blanc said. “As an industry, we didn’t deal with that and therefore now we’ve got the regulator telling us what to do and that is not a good place to be. It’s going to take some time to rebuild.”

Head in the sand

In terms of trends that are shaping the insurance industry at the moment, Blanc said there are a number of existing mega trends that are already having an impact – the onset of coronavirus has simply accelerated their trajectory. This includes the use of data, artificial intelligence, wellbeing, sustainability and risk management.

“We have two options – we actually respond to that or we put our head in the sand and pretend it’s not happening,” she said.

She added that the industry would never go back to how it was pre-Covid, so insurers need to look at how to manage this transition – for example, attending the office will potentially be purely for collaboration, while all other work is completed away from traditional office venues.

The way staff work moving forward will certainly need some thought, she said.

Blanc has also noted a “counterintuitive” rise in M&A activity, which she believes is driven by low interest rates, cheap debt and interest from private equity firms. She continued that M&A is now less about obtaining “flag post” businesses in particular regions and is instead focused on partnering with technology or digital businesses that can make a difference to an insurer’s proposition or help to improve efficiency.

Digital transformation

When asked about digital transformation strategies, Blanc responded that digital needs to be integrated into a business’s core operations as it has a key role to play – not just in terms of improving the front-end customer journey, but also in streamlining back office functionality by automating processes and making tasks easier for staff.

However, Blanc added that digital methods need to form part of an omnichannel approach as digital “isn’t an option” for all customers.

Blanc further commended insurtechs, telling delegates that they bring agility to the insurance sector and a different way of doing things.

Acting as a force for good

Blanc concluded her discussion with chair Simon Ashworth, S&P Global Rating’s head of insurance analytics and research, by explaining that insurance has a “massive role” to play as a “force for good”.

She said: “Why are we here? What is the role of an insurer and asset manager? And I think that we have a massive role to play if we look at the mega trends that shape our society, whether its ageing, health and wellbeing, sustainability, the adoption of data and digital, protecting our cities [in a] climate change environment.

“These are all things where insurers and asset managers are a force for good and therefore my call to action really is how do we ensure that we use that force for good? As we come out of this crisis, to make sure that our reputation is what it should be, because we play a fundamental role in society and whether it’s the assets we invest, the protection that we give – the whole of the world doesn’t operate without the insurance supporting it.

“I think that we really need to emphasise that role and not shoot ourselves in the foot as much as we do. Let’s really work hard on rebuilding our reputation.”