This is my final column as deputy director general of the Association of British Insurers. At the end of February my new working life begins. It will comprise a portfolio of interests to include consultancy, non-executive responsibilities and an internet project. All quite a change after 15 years with the ABI, 14 with the British Insurance Association and one with an insurance company.
A brief indulgence reminiscing on my 30 years in insurance will either make you take seriously, or indeed ignore, my thoughts on the future.
Like most other people working in the insurance industry, I did not choose it as a career. It either found me or else I could be said to have drifted in and remained.
My final degree examination at the London School of Economics was on a Friday afternoon. I remember little of Friday night to Monday morning, but more sober friends told me that I managed a few pints of bitter in the intervening period.
Monday morning was very different. Broke, I turned to the local paper for inspiration. An advertisement glared out, not really because of the job, but because it quoted a weekly salary of £14.2s.6d plus commission. A weekly salary must mean that you are paid just that, I concluded. My time at the LSE had not been wasted!
I immediately telephoned for an appointment and within an hour was facing the local area manager. Why do you want to be an industrial life agent, he enquired? I assured him it was because of my interest in people and serving the community, but the money didn't sound too bad either.
He was nervous about recruiting a graduate. He was not sure that London & Manchester had taken on a graduate as an agent of the company. I reassured him there would be no problem as I had not yet had my finals results and so I was not really a graduate. He offered me the position on the spot and I started work that day.
I was to be trained to sell all types of life and pension products, as well as general insurances such as motor and household. I read the company manual and their literature and had a pleasant afternoon and two evenings walking my area, collecting premiums, with the manager. Thursday saw my first pay packet and riches beyond belief. I was now trained, and on my own in charge of the large, mixed area of Kilburn, Maida Vale and towards Paddington.
It was a good time being an industrial life agent. You really got to know the local community and provided them with valued help and guidance. I am convinced my fellow agents and I were largely responsible for training most of Britain's households in how decimalisation worked.
The company was good to its workers. What a career I could have had if I had stayed in sales. Instead, the warmth of office life and air conditioning drew me to a job where I could use my economics degree to some effect. I applied to become a research assistant in the Research and Development section of the British Insurance Association. I recall a very civilised interview with Tom Wilmot followed by a less formal one with the late Roger Bardell. I suspected I had the job when he invited me for a pint to discuss employment terms and conditions.
I thought my career in BIA would be very short-lived, as I arrived at a time of crisis. One of our members was in difficulty and seemed likely to go bust within a day or two. In fact, it was three days before Vehicle & General went bust with hundreds of thousands of policyholders needing to buy replacement motor insurance.
V&G's failure had a profound effect on the industry and the BIA. It considerably weakened the image of the industry and led to a tightening up of legislation in the insurance industry, including a new Insurance Companies Act and the Policyholders Protection Act. For BIA, it meant the death of "Fred" and the late 60s advertising campaign "Get the strength of insurance around you".
The 70s proved to be difficult years for the insurance industry because of the work on new legislation, the threats to nationalise the industry and/or direct its investments and greater media interest in its
activities. I was fortunate in having a fascinating and interesting time in the BIA. I had meant to leave after two or three years, but each time it came to move on, BIA moved me on to a new job with extra money and more challenging work.
It was fascinating to help draw up the code of practice for the selling of general insurance, to work on the industry's advertising and PR campaigns against nationalisation and direction of investments, to help set up an economic intelligence service and to work on creating a political liaison programme.
The 1970s saw a considerable expansion in the insurance industry. Motor premium income in 1970 was just £215 million, but by 1980 it was £1.5 billion, still quite small compared to today's £7bn. Indeed, the total general business premium income in 1970 was just £604m, and that grew six-fold in the 70s and today stands at around £30bn.
I did pick up a good deal of information about insurance, which was put into good effect in passing my ACII. I thought an insurance qualification would be useful if the rumoured coming together of trade associations became a reality. With three competing regional insurance public relation organisations, I suspected members would think rationalisation could produce a more effective representative body and with savings to be made. The Association of British Insurers became a reality in 1985. Well handled by senior figures in the industry there was a smooth transition.
The next 15 years have flown by. The insurance industry has faced an unprecedented series of issues and challenges - including the problems faced by Lloyd's; the worsening underwriting cycle; mergers and acquisitions; significant inflation in claims settlements particularly for personal injury awards; terrorism cover; the introduction of Insurance Premium Tax and the challenges of new legislation and regulation.
In ABI, I began as manager of International Affairs, and after two years was asked to merge my department with our General Insurance Department; part of a phased approach to retire many of the leading personalities from the old trade associations. In 1989, I moved over to Public Affairs, and had real job satisfaction working with the media, politicians, consumerists and regulators. After five years in the job, I thought it was time for a change. That came with the appointment of Mark Boleat as director general and him appointing me as his deputy in 1994.
Now it is definitely time to move on, as ABI has a new director general in Mary Francis. She brings her own expertise, contacts and vision which should drive ABI forward.
The industry had a difficult 90s, with general insurers facing enormous underwriting losses on occasions, great pressure to be more competitive, to be consumer focused and to change with the advent of direct writing and new technology.
For some life and pension insurers, the 90s will want to be forgotten because of mis-selling of pensions. This is a great pity as the industry has very successfully modernised and adapted to new consumer needs over the last decade. Companies are more customer focused, expenses have fallen, products have become more flexible and service standards have improved remarkably. The industry has made a positive start in embracing new technology, although everyone would recognise there is still a long way to go.
I believe the next decade will be a period of unprecedented growth for financial service providers, especially those involved in pensions and savings products. People are living longer and are required to make more and more provision for the future. For the successful companies, growth will be dramatic and even more mergers and acquisitions are likely.
For general insurers, I am slightly apprehensive. There are big challenges from increased Insurance Premium Tax, rapidly rising liability awards and the removal of risks from the traditional insurance market. The industry remains vulnerable to new entrants and new developments in risk sharing and loss prevention. Both life and general insurance premiums have tended to increase at a slightly faster rate than national income. My suspicion is that life and pension business will increase considerably faster, but general insurance will struggle to grow faster than national income.
I hope I will be moving at the right time because insurers, intermediaries and all involved will need help to adapt to a rapidly changing environment, not least the challenges the internet will bring. A danger for the insurance industry is too much concentration on the year ahead or two years ahead, without sufficient attention to three or five years ahead.
In three years time, what will people be writing about on issues such as monetary union, the internet, regulation of the industry and competitiveness? Will you be helping to set the agenda or following others?
- Tony Baker can be contacted at e-mail: email@example.com