Otto Thoresen, director general of the Association of British Insurers, is one of the great and good of the insurance industry.
He ran Aegon in the UK for six years and was tasked by the government to look at financial capability, and why people get themselves into money problems.
Many of his recommendations were accepted by the government, which led to the creation of the Money Advice Service and, to a lesser extent, the introduction to compulsory financial education in schools.
He is still talking to the government, but also dealing with issues ranging from flood defences to EU directives.
He said: “It was my belief in the role of insurance that brought me to the job [and] the need for more and more people to make private provisions. The bulk of the issues that we deal with affect every aspect of the way people live their lives.”
Of his previous role at Aegon UK, he said: “For a chief executive operating in the current environment with the strong regulatory regime and very demanding environment on shareholder returns, [that’s] not an easy job and there are significant pressures.
“The ABI can be demanding in a different way. There’s a constant stream of issues where the industry view and voice needs to be made clear, and it’s getting up to speed with such a range of issues.”
One of Mr Thoresen’s big issues is still financial capability, a subject he did not abandon after completing the Thoresen Review of generic finance five years ago.
He thinks the authorities are still missing a trick, especially when it comes to handling debt. “When you get people into a policy discussion with the regulator, the tendency is to have these discussions on pensions and protection, without any discussion on debt, but it’s obvious that they are very strongly linked,” he said. “Your ability to save and make provision is strongly linked to discretionary income servicing debt – they don’t tend to be linked up [by the authorities].”
A large problem is that people in the UK and the West generally do not have a very sensible attitude to their finances when things go wrong.
He said: “There’s a lot said about the culture of saving in Asian markets and it’s very well known that the state doesn’t provide.” Therefore, he added, families in Asia save and buy insurance products to protect themselves.
“The view we have in Western society… is that when all else fails the state will provide. But the level of state provision is far less than what people think. We need honesty and clarity from politicians about what people can expect from the state.”
In the past, politicians have certainly listened to Mr Thoresen, who is also chairman of Pfeg, the personal finance education charity. One of his recommendations was to set up a ‘guidance’ service for people who needed to take their first steps along the path of financial enlightenment.
The result was the Money Advice Service, which had a shaky start, not least because of its large budget and supposed lack of direction. And it quickly became unpopular with financial advisers because it appeared to encroach on their territory. He said: “I believe it’s something that can fulfil an important role and I still believe that. When you get a letter from a financial provider, do you understand it? What should you do, rather than put it in the bottom drawer and hope it will go away.”
In terms of its relationship with other parts of financial services, he said: “I think there was less emphasis in the partnership side of the agenda. Some of the problems with advisers was a misunderstanding about what the MAS was there to do. When we did the report we described it as ‘money guidance’ rather than ‘money advice’, because we were very conscious of the difference between guidance and advice.
“It’s about budgets and understanding your debts better. What would happen if the unexpected happens? These types of discussions are an important first step towards engaging with the commercial advice sector. The thinking was that this would lead to more people stepping towards IFAs in order to invest in financial products.”
It’s Mr Thoresen’s belief in financial products that drives him in his mission to promote the ABI.
He said we need some “fresh thinking about how the package of products and services that people need through their lifetimes are presented together. At the moment the focus is on what are you going to do when you retire? Pension reform has been around that, but what do you do in the years between now and when you retire?
“There are a series of risks that you are subject to during your working years, and those risks are being unable to work normally and earn normally. How can you explain to people what things they can do to better prepare themselves to deal with these unexpected events?”
The problem, he said, is getting through to people. “What the Man from the Pru did was persuade people… to defer their gratification – not to spend the money but put it aside so they had peace of mind – but where it’s going to come from now is not obvious.” The nearest possibility, he said, is using the workplace and auto-enrolment to engage people in other areas of personal finance.
As head of the ABI, a lot of his work involves persuasion as well, not least in trying to encourage people to come on board with a change in policy.
He said: “The bigger challenge is to be realistic about how much you take on at any particular time; you have to have perspective. There’s a series of steps that get you to the ultimate goal and you have to make sure you really engage with people, and be very clear about what the positives are. You have to listen very openly to the opposing views. If you can do that and are sensible and realistic about the objectives, the chief executives will respond.”
Melanie Tringham is features editor of Financial Adviser
Otto Thoresen’s career ladder
2011 ABI director general
2005 – 2011 Aegon UK, chief executive
2001 Aegon UK, finance director
1999 Aegon UK, group development director
1997 Aegon UK, corporate development director
1994 Scottish Equitable, director of international business
1992 Royal Life International, managing director
1990 Royal Insurance, general manager of strategic marketing
1988 Abbey Life, executive director of marketing
1978 – 1988 Scottish Equitable, eventually becoming marketing director
