The Friends Provident chief cut his business teeth in Australian general insurance. He tells Lauren MacGillivray why this makes him determined to use his tenure as CII president to introduce a minimum qualification for brokers.

If you’re not familiar with Trevor Matthews, you should be. The life insurance boss is a fervent supporter of the retail distribution review, which will increase qualification standards for financial advisers, something he also wants for general insurance brokers.

For now, the review covers only the life side. But at some point, its principles are expected to reach into health and then general insurance. Matthews, president of the Chartered Insurance Institute (CII) and chief executive of Friends Provident, wants to drive that transition.

“There are a lot of very good general insurance brokers, but it would give the public a lot more comfort if there were an underlying standard everyone had to meet. It’s out of balance [with financial advisers] now,” he says. “I think it’s a natural thing for us to do to ensure we’re looking after the customer in a proper way.”

An affable Australian – the 56-year-old still surfs when he goes back – Matthews has an easy smile that makes the interview feel more like a fireside chat. Last week he impressed the great and the good by keeping his cool when the CII dinner had to be hastily relocated because of a gas leak. His impromptu speech even raised a few smiles.

But make no mistake; he is fiercely determined. He admits the CII has historically snubbed general insurance in favour of the life side (which possibly makes sense when you consider the number of exams needed for the latter). But now, halfway through his one-year CII presidency,

he is pushing hard for his mantra of “bringing professionalism to life” in all areas of insurance.

The idea of introducing a minimum qualification for brokers is something Matthews and several fellow CII board members from the general insurance side are keen on. He has also gained bargaining power with his recent appointment to the ABI board.

A broker might wonder what a life company boss knows about general insurance. But Matthews cut his teeth on this side – and even played a part in Legal & General’s decision to pull out of general insurance in Australia.

“I qualified as an actuary. A lot of us had come through school without any idea of what we wanted to do. I thought I’d be a maths teacher but my maths master said, ‘No, you want to be an actuary’.’”

He couldn’t afford university without a cadetship, similar to an apprenticeship. L&G awarded him one and, after graduating as an actuary in 1975, he worked for the company on the general insurance side.

“The big issue [in GI at the time] was, ‘Are reserves for claims adequate or not, and how can you tell?’ We had all sorts of interesting techniques being developed around the world.

“L&G was a classic story of a company that grew very fast. You think, ‘Are they that clever, and how can they grow so fast?’ Sure enough, when you take the layers off the onion, you see there’s something in there going wrong. It wasn’t reserving enough for its claims.”

The shortfall in reserves, he says, was largely because the Australian insurance market had moved away from a tariff system for determining rates. “All [insurers] did was cut and cut the rate, so business grew rapidly as companies went into the broker market,” he says. “But in reality they were getting business by charging cheaper premiums. It looks good for a while, but then the claims start coming through.”

L&G had specialised in workers’ compensation. But once it realised it was short on reserves, it pulled out of general insurance in Australia altogether. That’s when Matthews “scrambled to the life ship” of L&G.

Matthews has not worked on the general side since but has kept a keen interest, having set up an annual conference for GI actuaries in Australia. However, this nostalgia doesn’t cloud his belief that general insurance needs to evolve.

“It was a long time ago, and I don’t believe it’s like this now, but I moved from the heart of a life company in Australia [during his cadetship] where everything was done very precisely, double and triple-checked. Under the GI side, in those days, it was much more easy-going. People were quoting premiums and not really checking them; there wasn’t nearly as much rigour in the system at that stage.

“It’s changed dramatically, but I think more can be done to increase the level of professionalism.”

Matthews has already established himself as a man who can deliver change. He’s been credited, for instance, with turning around Standard Life’s UK life and pensions business. He then sacrificed a probable appointment as chief executive of the company to join the then deeply troubled Friends Provident.

After six months of gardening leave, he joined Friends in July last year. At the time, the company was completing a strategic review, triggered by a failed merger with Resolution Life. It was also licking its wounds after fighting off a takeover bid from JC Flowers, a US private equity group, and losing its top two executives.

Walking into this turmoil would slash the survival chances for any chief executive. But Matthews persevered and, in January this year, Friends posted full-year life and pension sales

of £1bn. This was a fall of 11% on 2007 but ahead of forecasts. Sales were down just 4% in the final quarter, signalling a possible revival.

Matthews concedes that Friends might still be a takeover target, but says this is the same for any general or life insurer in the current climate.

“I don’t think anyone can guarantee today that their company won’t be taken over in the future, whereas you might have got away with that statement 12 months ago. It’s quite extraordinary to see the mighty AIG, a wonderful company in many ways, stumble – as well as HBOS and others. All of us have to be very vigilant.”

Matthews is no stranger to an economic crisis. Before joining Standard Life in 2004, he spent three years as president and chief executive of Manulife Japan.

“It was dire. Japan had been through a decade of low economic activity, and deflation had a grip. The government had taken interest rates down virtually to zero, and flooded the system with money, and still nothing was happening. You’d open the newspaper every day and see more and more bad news.”

Ever the optimist, he adds: “After a while you got immune to it. Sure enough, it did turn up.”

Matthews was also executive vice-president of Canadian operations and chairman of Manulife Bank from 1998 to 2001. Before this, he was general manager of personal finance services

for National Australia Bank for two years and managing director of Legal and General Assurance Holdings Australia for seven years.

Considering his wide experience, his desire to bring change and his positions with the CII and ABI, it’s possible that Matthews could become a familiar face in general insurance. Who knows, he might even turn his attention to commission disclosure.

“I think regulators are interested in the GI side. I don’t know whether that necessarily means you need commission disclosure but it should be something that’s talked about.” IT