We're not very good at running our finances as recent events show
We call our trade a profession but I'm not sure that we deserve such an auspicious title. Profession suggests a degree of foresightedness, probity and integrity which is evidently lacking in our business.
After all, recent events suggest that we are far from good at running our own finances, never mind being entrusted with looking after the financial affairs of others. Let's look at a few examples.
Broker Ward Evans reported a huge percentage increase in apparent revenues one year, an event shortly followed by the company's demise, and surprise, surprise, a significant shortfall in client monies was discovered.
Who's responsible for that then, and where were the auditors while all this was going on?
South Yorkshire police are apparently investigating brokers Preston Whiteside, who were implicated in NIG's investigations into the doctoring of proposal forms - and they didn't even have an NIG agency. A number of other brokers are also implicated, and it would seem that this one will run and run. It's interesting that other insurers are being remarkably quiet about the whole affair; surely it's inconceivable that others are not involved?
The Daily Telegraph late last month quoted one stock market trader as saying: "Royal & SunAlliance is a basket case, and a basket case that is falling out of the Footsie."
This was in response to a downgrading of its credit rating by Fitch to BBB- from A- which, in turn, was in response to analysts suggesting it had a very large hole in its staff pension scheme.
Its shares hit their lowest point for a decade, and concerns about its future persist.
Add to this the demise of Independent and massive price hikes for most classes of commercial insurance over the past 18 months, and you shouldn't be surprised if Joe Public got the impression that we didn't have much of a clue about how to run this industry. No wonder the government wants tighter statutory regulation across the board.
But who will benefit from such additional red tape? Because this is where the rub is in my view. The additional red tape is intended to protect the innocent from financial failure.
Statutory regulation of insurers has been with us for years, but it didn't prevent Independent's demise, and there was certainly an unpleasant smell to some of the claims cost estimates it was using.
Ward Evans' increased earnings appear to have been at the expense of its client account.
No amount of regulation will stop those intent on fraud.
Unquestionably, some tightening of who can deal with whom and on what basis will benefit the industry enormously, and will make it more difficult for the cowboys to surface.
The current unsatisfactory arrangements with layer after layer of sub broker and no indication of the actual risk carrier are simply not good enough.
But because of these high profile failures the rest of us are likely to face an increased regulatory burden, which the honest among us will struggle to comply with, while the dishonest pay it no heed whatsoever.
If only we'd paid more attention to putting our own house in order sooner...not very professional are we?
