OpinionAug 13 2014

Is the ABI’s influence on the wane?

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We could be witnessing another seismic shift in the life and pensions sector.

This morning (13 August), Legal and General, one of the oldest and largest names in the sector, which according to the ABI itself was by some margin the largest insurer by funds managed in 2012 with £260bn, has quit the Association of British Insurers.

Formed as a result of a merger in 1985 between a number of smaller organisations, the ABI is a powerhouse: it is the one voice representing the interests of the largest insurance sector in Europe, and the third largest in the world.

That power may now be on the wane.

The rot started with Skandia in 2008, and now L&G, which focuses on investment management as much as life and pensions these days, has in the wake of Budget announcements and its own repositioning in recent years decided that the ABI no longer speaks for it, either.

Not only is it the largest member firm, it was also once one of the association’s most trenchant supporters. Current chief executive Nigel Wilson’s predecessor, Tim Breedon, chaired the board of the body until just two years ago.

A cynic might argue that the failure of the ABI to be well informed about, let alone to prevent, the huge upheaval of the Budget reforms, the shockwaves of which sent life company shares into a tailspin, is the defining factor in the decision.

The key issue for you is whether a decline of the ABI’s influence could be good or bad for your clients

Others might more reasonably contest that the major changes in the sector in recent years as a result of the RDR, scrutiny of legacy life and pension funds and now the most substantial rethink of pension rules in several generations, has reduced the resonance of a single trade body.

Whatever, the key issue for you is whether a decline of the ABI’s influence could be good or bad for your clients. I suggest it might be a very good thing indeed.

The ABI’s power is concentrated. Those in the know suggest a board dominated by large firms speaks for their interests rather than those of customers or the wider sector, and thus is unlikely to champion ideas that involve real innovation or disruptive change.

We’ve seen it once or twice in the past, such as when the Pensions Income Choice Association accused it of undermining their ultimately futile efforts to improve the open market option for annuities.

As an example of the concentration, take a look at the members list. After L&G and its entities are taken out, more than 40, or close to 20 per cent, of the near 240-strong members list are affiliated or subsidiary to the largest eight insurers by funds under management.

L&G has said this morning it feels it can lobby more effectively as an individual entity; one might argue that life companies having generally less success with lobbying is best for their customers.

I’d be interested to hear your views.