As we dust ourselves down from the recession, we must adapt to the changed needs of the customer. A stable capital base is key.

As it is increasingly being suggested that the recession is coming to an end, I wonder if it’s time to poke our heads up above the parapet and ask questions about our future.

Okay, we may still need to work through the effects of the financial crisis and we might have debts that will take many years to pay off. But we need to be asking ourselves about the main challenges for the industry, over the next five, 10 and even 15 years. What will we, as an industry, be grappling with and what are the skills and capabilities we’re going to need to succeed in this new era.

There are two areas of importance that stand out to me. We must ask ourselves: how do we reach out and touch our customers? And how do we recover the trust, confidence and professionalism in our industry?

The customer has undergone changes.

While many have gone under, others have survived fundamental challenges and changes in this economic downturn, yet have perhaps lost confidence in both our politicians and our bankers.

Many commercial customers have had to downsize and many personal clients have had to adjust to tighter budgets. As a result, they will certainly have different needs. We need to ensure that we understand these needs and adapt accordingly. Spend more time to find out exactly what they want. Adapting our products and services is key in the journey towards our new horizons.

We need to ensure that we’re serving our customers to the best of our ability and paramount to that is ensuring we are profitable so that we protect our capital base and are there to meet their claims long into the future. Strengthening our capital base under Solvency II will be important in this.

Increased capital, better products and a return to sufficient levels of profit are usually paid for by the customer. But not all of the return to profit has to come out of increases in premium rates.

Recent years have seen an explosion in the cost of distribution, with many commissions rising just in order to cover the cost of financing some of the consolidation we have seen. This cannot be a good use of our customers’ money.

Rates need to be lowered and we can work towards this by cutting out duplication, realising the synergies of consolidation and moving to e-trading. It will also a long-term job to wean our customers away from a mindset that views price as dominant to one that looks for the value in a product. This is not going to be easy, when every advert break on the television is packed with adverts promising to find you the cheapest car insurance around.

There will surely be a rough ride ahead before the economic climate improves and there are many more challenges in addition to those already mentioned – not least the way fire losses are increasing.

The year 2009 looks to beat records for fire losses and, on the basis of past recessions, we are only just seeing the beginning; we can expect both fire and fraud losses to be significantly higher next year.

As chairman of the Risk Insight, Strategy and Control Authority (RISCAuthority), I am keen to get more insurers actively working to reduce fire losses. Research, new tools and expert advice have all been funded by insurers but we need to do more.

One of our most recent releases has been the launch of a free disaster recovery service aimed at the SME sector. This is vital advice and support to this sector has long been neglected. The initial reaction is very encouraging, with a number of fire authorities planning to join us in distributing to SME businesses, free of charge.

So what can we do to face these challenges?

I believe the recovery of trust, confidence and professionalism in our industry will be vital.

This will only happen if we again take seriously the training and development of our people, the insistence of minimum levels of professional qualifications and the strict adherence to the standards and ethics which underpin our profession.

This is the principal focus of the task force recently established by the Chartered Insurance Institute under president Barry Smith. We are seeing record numbers of people coming out of university without jobs to go to. Other financial sectors are struggling or damaged. Insurance, therefore, has the opportunity to recruit the top graduates, and getting the right people is fundamental to reaching our new goals.

If we can bring together a return to profitability with an increased focus on our customers’ needs, and if we can achieve the recruitment and development of the best people into an industry dedicated to the highest professional standards, everywhere, then our future looks very bright. This will not happen without a great deal of effort and focus and it won’t happen if we leave it to others.

We have an opportunity to grasp the future.

I wonder what we will do with it? IT