U.K. Insurance and Financial Services Conference Focused on Industry Image

October 4, 2004

The U.K.’s annual Insurance and Financial Services Conference, sponsored by the Chartered Insurance Institute (CII) and the Chartered Institute of Loss Adjusters (CILA), got underway Wednesday, Sept. 29. The Conference, which ended Friday, was held at the International Convention Centre in Birmingham. This year’s theme was “A brave new world” and focused on the key issues of capital adequacy, competent people, compliance, technology, consumer protection and confidence.

“Our industry is entering a new era,” CII marketing director Steve Wellard told delegates. “While the run up to FSA [Financial Service Administration] regulation in 2005 is crucial, we must look further ahead and help to define the future of our industry. This year’s conference is geared up to cover the needs of practitioners and business at all levels to help them be a key part of this brave new world.”

Keynote speakers and panelists included Henri de Castries, president of the management board and CEO of AXA, Sarah Wilson, director high street firms division of the FSA, Julian James, director worldwide markets Lloyd’s, Dr Sandy Scott director general CII, Eric Galbraith, chief executive BIBA and the CII and CILA Presidents Rick Hudson and Andy King.

In his keynote address de Castries, the first non-UK speaker to open the conference, focused on the impact of tough economic conditions on the insurance industry’s fortunes. He called on the industry “to cast off pessimistic and unrealistic attitudes and seize the many opportunities available to them.

Addressing the challenge of improving relationships with customers, he stated: “We as an industry have tended to reward people for winning new business, but not to place the same emphasis on servicing existing clients. We estimate that it costs 600 euros [$738] to win a new client but less than 100 euros [$123] to sell an additional policy to an existing client. We have to concentrate on developing customer intimacy and providing quality advice.”

Among the many breakout sessions held during the conference two focused on the special situations and problems U.K. brokers are facing from new conditions and the impending regulations change. “We want brokers to come away from these sessions with a renewed confidence in their future. We hope to show how perceived burdens, such as regulation and increased competition, are actually great opportunities for the broking community,” Wellard commented. “Brokers who attend can expect to gain an incredible amount of insight which will help them keep their businesses strong.”

Some of the questions addressed during the sessions included how the broking community can survive threats such as harsh regulation, declining industry reputation and the forgotten value of independent advice. Leading and successful figures from the industry provided their own personal insights and advice to delegates to arm them with the vision to succeed.

The CII is offering brokers more than breakout sessions, however. On Friday, October 1, it announced the launch of the Faculty of Insurance Broking, described as “the latest in a range of CII faculties that already include Claims, the London Market, Mortgage Professionals and Society of Financial Advisers.” The CII introduced the faculties as part of its strategy to make the Institute more “market facing,” each one acts as a “centre of technical excellence and good practice for its specific market sector.”

A ten member board was appointed to “provide guidance to the CII executive team, particularly in the areas of defining what good practice is, and the professional standards that brokers should adopt in the new 2005 regulatory framework.” Faculty chairman David Slade commented: “Retail and commercial brokers, insurance intermediaries and those in support roles need their own professional faculty. Our core aim is to develop and raise standards of professional conduct for all those working in insurance broking.”

Brokers will be able to register their interest in the new faculty immediately via the CII’s website at www.cii.co.uk/faculties. In addition to the services currently provided by the Faculty, it will be taking to the road over the next few months, to consult with individual practitioners on their specific needs.

Julian James, Lloyd’s Director of Worldwide Markets, told delegates that the insurance industry must act to reverse the industry’s “pretty appalling” public image or face serious financial consequences. He noted that the industry had progressively lost the confidence of capital providers, regulators and customers through poor returns, high profile collapses, and shoddy service.

James pointed to Lloyd’s experience as an example of how a change in perception could be achieved by a combination of “fixing the fundamentals,” and restoring reputation. He also noted – as an example of what needs to be changed – a recent research survey, which showed two thirds of UK customers thought insurers tried to avoid paying valid claims, and only 14 per cent felt any loyalty to their brokers.

“If a brand is what people say about you when you are not there, then the insurance industry is currently in trouble,” James continued. “You might ask what does it matter if we are all tarred with the same brush anyway? Well, I would argue it matters a whole lot to the bottom line, the way we are allowed to do business and the health of this sector,” he stressed. Capital providers could well look for other homes for their funds unless the industry fixed its financial performance, which had been poor even in the “so called hard market” of 2003 and 2004. “A combination of 9/11, investment losses and prior year reserve developments has cost the non-life industry a staggering $250-275 billion,” he noted.

James pointed to the steps Lloyd’s has undertaken to create the framework for a strong financial future after the set backs of the 1990’s had shown “a strong umbilical link” between improving the way it did business, and restoring the power of its reputation and brand. Lloyd’s has put in place a four point plan for earning and retaining the confidence of capital providers, regulators and customers, based on:
— delivering consistently good financial results;
— delivering improved business processes;
— introducing surveillance systems and other measures to improve risk management; and
— protecting and exploiting the essence of Lloyd’s strong brand.

He warned that insurers who thought “brand” was simply about “logos and marketing wheezes” were in danger of missing a trick. “A brand is more than your logo. It’s about the business you do, how you do it and how your stakeholders experience you. If you are clear about your brand, it will help shape your business strategy,” he concluded.

CII Director General Dr. Sandy Scott picked up on another aspect of James’ theme, warning that insurance companies must take collective responsibility for repairing their tarnished reputation or face major problems with the recruitment of graduates and skilled staff. He noted that unless insurers develop a cohesive strategy to improve the perception of consumers, potential recruits will shun the industry as dull and lacking in prestige.

The CII hopes to change that impression. Dr. Scott announced that the organization has forged an alliance with the Cass Business School to analyze the industry’s poor reputation and to construct mechanisms to improve matters. Initial research carried out by the joint venture over the summer found the following:
– Almost 90 percent of students said they would never consider insurance as a career.
— Students also said that if the industry’s reputation remains unchanged, then the recruitment situation will not improve.
— Industry recruiters report an exodus of professionals from insurance.
— insurance ranks the lowest in terms of literature in university careers libraries and other campus information sources.

“The clear message I want to leave you with is one of encouragement,” Dr. Scott continued. “A poor reputation constrains market growth. Professional standards, professionals in whom the public can trust and in whom they can have confidence, will grow our reputation and that will be good for business.” As part of the solution he proposed the creation of an “Insurance Reputation Index ” that would monitor perceptions of the industry based on a range of values including service quality, innovation and fairplay.

Dr. Scott reminded delegates that the UK insurance industry is the largest in Europe and the third largest in the world. It accounts for almost £30 billion [$54.3 billion] in premiums per annum and over 5 percent of the UK’s GDP: “We have serious clout, but not a lot of people know about it,” he said. “We need to say more about the good work that we do. There is no room for fragmentation and duplication. The industry must act as one in order to move it in the right direction.”

Dr. Scott also outlined a comprehensive range of measures designed to drive up standards of professionalism and improve the standing of the industry in the eyes of consumers, providers of capital, law-makers and regulators. The CII is working closely with organizations such as the Association of British Insurers, the British Insurance Brokers Association and Lloyd’s to develop a common approach to shared problems.

He ended the proceedings on an upbeat note with the announcement that “the seeds of regrowth were apparent.” The CII achieved a record membership total of 72,000 in 2004.

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