Every time I see reference to, or get involved in contributing to an article or discussion called “a view from the top” it reminds me of the old adage that a company is like a tree full of monkeys – with those at the top looking down on smiling faces and those at the bottom looking up and seeing mostly a***holes.

I should imagine that is how many in the banking industry are feeling, particularly those in the retail sector as they look at investment bankers.  The public has tarred those working in retail with the same brush as their more highly rewarded and fêted investment banking colleagues despite the majority of them never having gone within a million miles of the exotic transactions which brought the global financial market to its knees.

Guilt by association is difficult to shake.  Unfortunately, it is something that the insurance industry faces in these turbulent times.  Insurers and brokers are part of the financial services industry, we have dealings with banks and we sell products that not are always readily understandable for profit, so Q.E.D. in the eyes of the public we must be guilty.  Sadly, that is a perception I encounter not only when meeting members of the public, but on occasion regulators and politicians too.

The insurance industry needs to put some clear water between itself and the banking sector. The problems besetting the global financial system are not of the insurance industry’s making. Getting policymakers and regulators to understand that we must not be lumped together with the banks would be a starting point in rebuilding trust in our industry.  The next is to divide our sector up even further and give recognition to the professional insurance broker, whose main business is general insurance intermediation and not a secondary ‘sale’ activity, as a distinct entity.

Dare I suggest that lending institutions should not be allowed to sell general insurance?  Extremely unlikely to happen I know, but that would be great.

Dare I also suggest that regulators and policymakers take a look at where the problems in the general insurance market have arisen?  The Financial Services Compensation Scheme’s rapidly burgeoning levy on general insurance intermediaries for the collapse of a number of firms selling payment protection insurance is a case in point.  Many of the intermediary firms having to meet this levy have never sold PPI – kept out from this market by the lending institutions.

We as an industry need to move into the space left by others and rebuild trust, integrity and professionalism.  It is important that there at the top of our industry, our leaders, demonstrate the correct values.  I hope that I am speaking to the converted on this, but I want these words turned into action.  Anyone can underwrite in a soft market, while in a hard market any broker can make good money.

I do not want the public to look at the insurance industry and think monkey business.  Rather, I want them to see a highly-respected, easily accessible source of trusted advice.  I want the insurance industry to be perceived as a profession that has raised and maintains high ethical standards.  Regulation should only be a small part of this; we should have our own broker standards. 

Change is in the air, however.  Government and regulators around the world are looking at financial reform and our sector needs to get its views known.  The CII’s professionalism taskforce will soon be publishing its proposals for the GI sector.  BIBA is at the table and you can guarantee that there will be no monkeying around – not while the stakes are so high.

The inspiration drawer – it was not a piece of furniture I’d come across before, but it had a certain je ne sais quoi made more alluring because BIBA’s 2010 Manifesto was going to take pride of place in it. 

Put simply, it is a drawer in which a recent visitor to our offices – a leading industry figure no less – keeps things that inspire and stimulate him.  The drawer keeps these objects and documents safe allowing their owner to dip in and look at them whenever creativity and motivation is lagging.

The drawer’s creator was in earnest and did not mean the title as a polite euphemism for the bin.  It got me thinking.  The practicalities and legalities aside of keeping large, living things in a small piece of office furniture what would I fill my drawer with?  I did a quick poll of the BIBA office out of interest.  My questioning revealed a mixed bag including a pair of Manolo Blahnick shoes, an Arsenal striker, a piece of Lalique glass, The Onion’s news archive and someone’s father.

I want to add Olympic oarsman Sir Matthew Pinsent’s formula for winning gold to that collective drawer.  Pinsent and his crew used the mantra “Does it make the boat go faster?” to help them very quickly focus on the important things which improved their performance and to discard those things that did not.  It’s something we’ve taken to heart at BIBA.

Out of the boat would go all television advertising campaigns (even those featuring cute, furry mammals) which ignore the importance of getting the right insurance protection with their continual focus on bargain basement prices.  Price comparison sites may have made the boat go faster for the consumer, but they do not always get you where you ought to be. 

And at what cost to the insurance industry? Speed has meant that fewer questions are asked of the customer, little is know about them and their life style.  Much of the business generated through these sites has been found to be poorer quality resulting in more claims and lost profits for insurers. Try to put up rates to compensate and the customer simply moves on to the next low cost provider and the cycle starts all over again.  Sadly, the industry seems content to accept this state of affairs. 

There are signs that insurers are looking to increase their terms, but I would argue there is more that we can be doing besides that to turn things around.  Getting the right data from our customers in order to be able underwrite risk correctly would be a start.  That is what being a broker is all about – asking the right questions, clarifying information when it is unclear and finding the right cover at the right price because they know their customer best.  Such involvement can also filter out bad business helping to reduce insurance fraud which the National Fraud Authority estimates is costing the industry £2bn a year.

This may come as a revelation to some insurers, but hopefully not intermediaries.  Perhaps now is the time for a reminder about the value a broker brings to the equation – that knowing the customer can and does result in higher quality business, improved retention and better service resulting in a faster boat not only for brokers, but for insurers and ultimately the consumer too.  Now there’s inspiration for a TV advertising campaign in the making.

 
Listening to a presentation from the Competition Commission on the insurance block exemption at a BIPAR meeting in Brussels earlier this month my resolve for our sector to be able to influence issues temporarily weakened.

The Competition Commission has already caused our sector to spend millions on its review of the business insurance sector.  Now it wants to take away or amend the block exemption, even though they admit it works as it is. 

While this is something that impacts insurers more than brokers it again seems to demonstrate that the Competition Commission has immunity from accountability and has, in my view, created an environment of fear – something that is contrary to a strong, competitive and innovative market place with commercial and legal certainty around competition issues. This position with the Competition Commission must not, however, make us disheartened, frustrating as it may appear.

At BIBA 2009 in Manchester one of the three key points in my address was about having a strong voice and while it is sometimes difficult to see tangible results we can and do make a difference when we work together.

The recent changes to the FSA’s proposed regulatory fees and levy for our sector was an example of BIBA, together with its members, highlighting a material inequality and being able to influence the final outcome. Contract certainty, the market solution on transparency, conflicts and disclosure, our work on aggregators and on travel agents, are other examples of positive influence. These examples helped restore my determination – persistence pays.

While on the subject of positive influences, our visit to Brussels also involved a meeting with the team which will be leading the review of the Insurance Mediation Directive (IMD), due to be finalised in 2010.  This allowed BIBA to explain early on in the review process what has been done in the UK on our market solution and to discuss a variety of other issues around any changes to the IMD.  We will continue this dialogue to protect and promote members’ interests.

Now, having run a variety of broking organisations, I fully appreciate that all these external challenges are often very far away from members’ every day pressures to maintain income and profit to survive in business.  I fully understand too that it is BIBA’s task to highlight, engage and lead on influencing such matters.

The future, however, will need greater involvement and, where necessary, the full engagement of the intermediary community.  This is made even more important by the political turmoil in the UK and the potential for the UK Government being, in the short and medium term, unable to effectively lobby on matters originating in the EU, which might have an adverse impact on UK plc.

So where can you help in making a difference?  First, a recognition of the need to get involved where needed and, second, an engagement with BIBA on issues that you feel need to be highlighted.

Take, for example, the Financial Services Compensation Scheme and its current structure on cross subsidy.  We, as a sector, support compensation for consumers in the event of an authorised firm failing but the cross subsidy with the rest of the financial services sector, which could result in some of the smallest general insurance intermediaries paying for the banks, is unjustifiable, inequitable, inappropriate and downright wrong.

The recent failures in the banking sector highlight the need for the current structure to be changed. It may seem like ‘mission impossible’ to influence change but the challenge, if you choose to accept it, is to raise this issue at every opportunity with MPs, government departments and the relevant authorities.

Don’t expect an immediate response.  It will take some time but I fully anticipate some movement to right this wrong.

Tomorrow’s challenge will be to engage with such matters and maintain the pressure for change. Let’s make sure that all those wishful tomorrows become today’s reality.

I have not seen much, if anything, in the press regarding recent developments in Ireland and New York, moves which could have costly implications for the insurance intermediary community if they go the full course. 

Ireland’s Financial Regulator has just published the findings of its review of the mortgage and insurance intermediary market and how it interacts with consumers looking at the kind of issues that our FSA’s review of transparency, conflicts and status disclosure covered, albeit that was in the commercial market.

Across the Atlantic, the New York State Insurance Department has proposed to change the current market to mandatory disclosure by publishing for consultation what they refer to as draft producer compensation transparency regulation. The scope of this legislation may stretch just to the state of New York but given the influence of that particular market, other state regulators elsewhere in the US will no doubt be monitoring developments.

And talking about costly moves, BIBA has been moving office during the last few days.  Moving office is no fun and it’s expensive, but we have sought to keep costs and disruption to a minimum for our membership. A new office takes to time adapt to and no amount of forward planning can cover everything. Our removers don’t seem to be able to get one large item of furniture out of our old office building (no it wasn’t my desk) and this is now wedged firmly on the stairs between floors causing much scratching of heads. Certain familiar items still have to emerge from crates. However, I’m pleased to say we have held our first meeting with outside partners in our new conference facilities and all the telephones and computer systems were up and running when they were supposed to be.

Developments in Ireland and New York provide two different approaches to the same issues. They also serve to highlight how jurisdictions around the world are at different stages in the journey towards improved disclosure on intermediary remuneration.

BIBA will be keeping a close eye on what is happening in both jurisdictions and will be providing input about our own experiences on these issues to both the Irish and US regulators.

In the meantime, back home the insurance industry solution relating to commission disclosure in the commercial market, which BIBA has been leading, has now entered the formal FSA process that it has to undergo in order to be confirmed as Industry Guidance.

We hope to see the solution successfully complete that process during the next few weeks.

Given the moves to review the Insurance Mediation Directive in Brussels and the wider changes and discussions throughout the world the intermediary sector needs to ensure clarity about transparency, conflicts and status. If we don’t we could see enforced changes in our law and regulations – a move which could, absurdly, result in only advice being regulated.

Still on the subject of expensive moves, brokers will have had time to digest the FSA’s consultation paper (CP09/7) on regulatory fees and levies for 2009/10, although I suspect that their blood pressure may not yet have returned to normal if their reaction to this document is anything like mine. The increases proposed in that consultation paper are truly staggering (between 30 and 70% for general insurance intermediaries and they got off comparatively lightly!) and could not come at a worse time for the financial services industry. You can rest assured that BIBA will not be keeping quiet on the matter.

Well that’s it, I’m off. I have had my fill of expensive moves for the time being.

Trudging to the office this week through the snow and ice reminded me of my first job in “insurance” many decades ago. Why? Well, it was because no-one had attempted to clear the pavements outside their places of business. In those days, my elevated position as “junior in the mailing department” meant that it often fell to me to clear the steps and pavement of ice and snow from the front of our office. 

Obviously no-one cares about this now. Perhaps it is because the buildings are rented or the task is not written into anyone’s job description. At the time, my job description was just to do as I was told or else. How times have changed.

Thankfully, I did not encounter any snow on my recent visit to Hungary for the latest BIPAR meeting where I presented on BIBA’s current position on the market solution around transparency, conflicts and status disclosure. The meeting highlighted a number of issues including review of the IMD and BIBA will be working with BIPAR on these over the coming months.

On getting back to the office I was met with members’ wrath about a couple of frustrating marketing issues. 

From my discussions with senior insurance company people on the subject of hardening rates, it is clear that there is a strong desire to put underwriting back on track and, where appropriate, increase rates.  Recent feedback from brokers, however, seems to confirm that, at best, commercial rates are stabilising with a few specialist classes increasing.  On personal lines, however, there seems to be a disconnect between what the marketing teams of some insurers desire and their chief executive wishes with a proliferation of cut throat offers for free insurance, 25% off, 10 months for 12 months or cash back etc, etc. All this suggests a slashing of rates.

Are the insurers’ CEOs content to see the industry tarnished by these cheap (but not always so cheerful when the claims materialise) ‘buy one get one free’ offers of insurance where there is little, if any, focus on what cover is provided?  Do they believe that this is the only way to sell insurance?  Perhaps instead the marketing teams can be given the challenge to change and improve both their firm’s image/service and the overall sector’s image, with particular emphasis on cover at the right price, or perhaps even focus on existing customers.

It will not work, I hear many personal lines experts saying. I am all too aware of how consumers have been programmed to respond to price offers, but I believe this is a vicious circle which needs to be broken.

As many of you know, BIBA has already taken issue with and succeeded in changing the way comparison websites operate.  Perhaps I am just being pedantic but I do not believe you can compare an insurance price without mentioning cover.  That seems fair and not misleading.  Banks are also part of this ‘marketing’ bonanza on insurance products and perhaps they, more than any other sector of financial services, need to think about change.

Talking about banks, some members have also raised the issue of banks “offering” to take over the handling of the commercial insurance arrangements for companies to avoid or reduce increases in bank charges, the inference being that bank charges would increase unless the bank was appointed to handle the insurance arrangements. If what I am hearing is correct, particularly in this hard pressed financial environment, perhaps conduct of business is being pushed to, and possibly over, its limits.

We need to care more about standards if they are not to go slip, sliding further away from us.

It has been a while since my last blog. No, I haven’t been away on an extended holiday somewhere hot, just pre-occupied by market events some of which I consider to be unnecessary, time wasting, expensive and factious.

But let’s get back to the business in hand. It seems to me that in the current economic environment, which is likely to be with us for quite some time to come, we will experience a renewed appreciation of values. We will see a greater appreciation of the simpler things in life, for example shelter, heat, food and light, all of which are growing ever more expensive in relation to incomes. These commodities will also be deserving of (and receive) a greater degree of respect i.e. there will be more efforts to avoid waste with emphasis placed on recycling, reducing consumption and conservation of resources.

Eating out when I was younger was a treat with the restaurant diligently researched before hand and the meal paid for in cash. Central heating was a luxury and food wastage abhorrent. I remember my first mortgage – it needed input from my employer, a face-to-face visit with the building society and a wait of what might have been two months before we could access the funds. Prudence and affordability were watchwords. Getting a mortgage then was a major achievement; today that rare breed of consumer, the property purchaser, will no doubt empathise with that feeling.

When times are tough people look for greater value for money and will happily buy when they believe they are receiving it, think of M&S and its £10 meal deal for two or the growth in sales of ‘gently used’ clothing the new euphemism for charity shop purchases. People also want to see quality; that what they spend their hard earned cash on is actually worth the outlay.

I believe that brokers will gain ground in these challenging times by providing that value through offering sound and trusted advice to their customers. They can explain the dangers to their customers of reducing their levels of risk management or insurance cover and help them find quality cover that is right for them. That was why I was so pleased to see Dan Waters, the FSA’s director of retail policy and conduct risk, comments this week at the conclusion of the regulator’s insurance comparison site review where he urged people to compare what is covered by a policy, to ensure that it meets their requirements, and not just focus on the price. This is something that BIBA has been saying for a long time and will continue to do so.

That’s enough of my nostalgia. I don’t want to return to what some might regard as the ‘good old days’. We must set today’s standards even higher than they were in the past by addressing ethics, professionalism and qualifications from within our sector. That, the insurance industry must do itself and not rely on the regulator to do it for us.

This blog was published on the Insurance Times website on14/11/08

I have just been doing some catch up on correspondence around what is happening with age discrimination and the Equality Bill. As a person who now qualifies for a senior discount on Eurostar, I should be all for something that purports to help me, but I am very concerned.

I feel I should welcome the idea of a fairer society, but have concerns that equality is being confused with fair. General insurance forms a part of the DNA of that “fairer society”. General insurance is also risk based and must remain that way. The idea that by not being risk based and not focused on a customer’s demands and needs (all of which we know are as different for the over 50s as they are for the under 25s) society can be fairer seems like a serious misconception to me.

The European Commission’s proposal for a Council directive implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation and the UK’s interpretation of it raises two issues. Firstly, that the insurance industry retains its exemption to be able to use age/disability related data to calculate risk premium is something that BIBA and the ABI are very much focused on and secondly, why is the government trying to rush this through our legislative process?

One of the challenges around insurance cover for specific age groups, particularly older members of society, is a perception that cover is not available. Unfortunately, technology and commoditisation have clouded many peoples’ views of the general insurance market and they seem to believe that the ‘standard offering’ available in the mass market is all that is available. Access to insurance is of course two-way and perhaps we all need to do more to promote the fact that cover is available from many specialist brokers. Believe me BIBA does raise this at every opportunity and our other message to government is that as cover is available for older members of society there is not a market failure.

But back to that EU discussion paper, I’m beginning to believe this is part of some malaise notwithstanding the words and the good intentions. Perhaps it’s just a UK problem. On a recent visit to our colleagues in mainland Europe I got the distinct impression that they were getting just a little frustrated at the UK’s constant pushing to put everyone in their own standard box.

I like the idea that we are a leading participant in the EU (even first among equals given our haul of medals at the Olympics), but as with anything we must be careful how we put forward our views and seek to influence discussions remembering that across Europe we are not all the same legally or culturally.

I’m now back firmly in the saddle following a few days R&R. You go away for a few glorious days only to come back to yet another conflict, more depressing statistics from the government about the economy and atrocious weather that supports the global warming theories. But, at least the UK seems to be doing rather well at the Olympics especially if it involves wheels or water – which gives us all something to feel good about.

It was great not having access to newspapers or television while I was away and I certainly had no intention keeping up with what was happening in the media on my BlackBerry.

September is fast approaching and it’s time to get the crystal ball out and look ahead and plan for 2009.

Defending and promoting our sector’s issues remains a pressing need. BIBA is firmly at the centre of issues both current as well as those bubbling under and we intend to stay there.  Undoubtedly, members will voice their opinions too about where BIBA should be focusing its efforts in the coming months during my travels round the UK.

Access to advice and broker services is also something that I believe commercial clients and individuals find difficult. How to find a broker and what a broker does is clouded by technology and commoditisation. The media tends to be focused on personal lines issues and raising the status of commercial business is one of the many challenges that BIBA will be embracing in the coming months.

Regulation is a subject that will continue to perplex and perhaps one day we can look into that crystal ball and see principles based regulation working as it should be for our sector with a subsequent reduction in FSA staff numbers and costs. This should not be an area of increasing costs: now that would be an interesting target.

Now, while I’ve got my crystal ball warmed up I must plan my next holiday.

Having not long ago attended the British Insurance Awards at the Albert Hall (I was one of the judges – so my apologies to those of you that entered and didn’t win) I found myself on the other, not so pleasant end of the judging process recently.

The BIBA team was entered in the Trade Association Forum, or TAF awards for short, for various membership projects during the last year. The forum has a diverse membership (including industry peers such as the ABI and AIFA) and is designed to encourage the development and sharing of best practice among trade associations.

The BIBA team had done a great job in putting together their entries and were very pleased to be shortlisted for five awards. Last Thursday night was when the awards were made. We approached the evening with trepidation – would we be elated or depressed come Friday morning? It reminded me of the tensions around tendering for new business when I had to undergo this process as a broker.

I know now how entrants feel – the uncertainty, the nerves, the anticipation and finally jubilation. BIBA won what I believe to be the most important award and that was for sector representation – which is what BIBA is all about. It was a great team effort and it was fantastic to have that hard work recognised once in a while, especially by one’s peers. Now back to work – we’ve got a trophy to polish and a display cabinet to find.

Cake or pie? It’s your choice as to how you imagine the insurance market. I’ll go for pie as it suits my more Presbyterian upbringing. The way I see it, we’re heading towards some fairly important changes in the market, sorry the pie. The growth in MGAs, the continuing soft market, insurers dipping into reserves, access to capital, claims levels, consolidation and pressure on commission levels are all pointing towards a challenging time particularly on costs. 

At the moment it’s a debate between insurers and brokers looking at how the pie is divided, i.e. the cost of providing insurance. The battle is over who gets what part of the pie and increasingly who gets the bigger piece. Added to that is the Financial Services Authority’s apparent belief that more transparency in the intermediary sector will bring greater competition and therefore result in cheaper prices for the client (something which I believe is misconceived). Pressure is coming to a head or as one speaker at a recent industry forum put it: “We’re reaching the end of the runway.”

The debate as to whether MGAs are the future and capital as a commodity is forcing the industry to look more widely and externally at how all the costs and expenses, not just of distribution, can be reduced.

We should all be focused on a strong but competitive market and the right regulation, but we should not forget the client in all of this. This internal market debate does seem to be too focused on the cost of distribution, on how we process, package and deliver that pie to the client if you will. We’ve got to provide service and maintain focus on value all the while improving its taste to the client – no-one wants all crust and no filling after all.

Perhaps it will all become academic when the market hardens and many of these issues are promptly shelved. Whichever way it goes, it will as usual be up to the broker community to ensure that client service in all areas is maintained – and that as we all know is not as easy as pie.