Otto Thoresen’s decision to leave his position as director general of the Association of British Insurers in February to take up the chair of the trustee board of Nest represents the closing of a chapter at the trade body that could be seen by some as one of its most tumultuous.
In July 2013, healthcare insurer Bupa left the ABI, and just over a year later in August 2014, the departure of one of the ABI’s biggest members, Legal & General, was described as a “disappointment” by Mr Thoresen.
That two big hitters left within such a short time could not have been seen as good news for a trade body representing the insurance industry, and insiders are now questioning where the ABI goes from here.
ABI spokesman Malcolm Tarling said events over the past few years – which have included a number of redundancies at the trade body as part of cuts in running costs – have only reflected what has been happening in the industry. He added that L&G’s departure came as a “surprise”, but the insurer had taken its decision on its “view of the world”.
He added: “The ABI reflects the industry it serves. We do not operate in a vacuum, so the changes you see at the ABI reflect the changes in the environment we work in. Insurers emerged relatively unscathed from the financial meltdown, but we have seen some regulatory and profession changes – it is a challenging time.”
L&G’s decision to leave was largely precipitated by the ABI’s move to transfer its investment business to the Investment Management Associations, according to an open letter from group chief executive of L&G Group Nigel Wilson to Mr Thoresen in August.
Mr Wilson said this transfer resulted in changes which meant “a large proportion of our business lines will fall outside of the remit of the ABI given that the business of Legal & General has significantly evolved, and in 2014 our business is now as much investment management as insurance”.
He added: “There is also a recognition that even within the insurance sector, the ABI often concentrates, for understandable reasons, on the general insurance sector, where, as you are aware, we have only limited business lines.
“Additionally, our public policy work increasingly involves sharing commercial aspects of our business with government which, for very obvious reasons, not least competition law, we cannot share with competitors. We believe that, increasingly, engagement with government, regulators, quangos and other external bodies will be on a case-by-case basis in future and will have to be more individually tailored to individual company situations as business models of sector participants become more diverse and less suited to uniform representation through one trade body.”
Though the ABI has been at the forefront in its work with government on the safeguarding of flooding insurance through Flood Re, Mr Tarling did not think it was “fair” to say that the trade body focused too heavily on general insurance issues, as it was “acutely aware of representing a wide range of members’ interests”.
He added: “What we have been dealing with in the last six months is all the work we have been doing on pensions, from the annuity window to the guidance guarantee.”
Huw Evans – who will succeed Mr Thoresen from February – has been covering a wide remit during his tenure as number two at the ABI, something which Mr Tarling described as “succession planning”.
Mr Evans said of his appointment: “In the current environment of high levels of regulatory and legislative change across the insurance sector, the need for an effective trade body is greater than ever – there is huge value to be gained from collaborative efforts on key policy issues. My experience of working with ABI members on issues as varied as Flood Re, pension reform and the ageing society has shown me the power and potential of what we can achieve as an industry when we work together.
“Otto and I have worked very closely over the last few years and I am looking forward to accelerating the momentum we have established.”
However, concerns have been voiced about changes to the industry that appear to have come as something of a surprise to the ABI, such as the pension changes announced in the last Budget that have all but killed the annuity market, and the Care Act. These are the kind of seismic issues, sources feel, that the ABI should have had some prior knowledge about.
A source said of the annuity issue: “To have that sprung on insurers at the Budget has to be seen as a colossal failure. What were the representatives doing? That has got to be a major failure.”
Mr Tarling agreed that the ABI had no advance notice of the chancellor’s plans, but added: “I do not think we took our eye off the ball.
“We have been working on a pensions’ modernisation agenda for a long time to help people get better information and more beneficial information. We have been doing a lot of work on pensions and at the same time making sure pensions offer better value for money.”
However, the idea that all insurers need a single trade body to represent their interests certainly appears to be eroding in some quarters. Smaller insurers can benefit handsomely from having their collective voice heard, but when it comes to the big players, many already have the financial and political clout to make their own representations directly. In many cases, the politicians are even coming to them – for example, Mr Thoresen himself, while head of Aegon, was asked to do a review into generic financial advice, which launched plans for the Money Advice Service.
Yet while L&G has decided it does not need to be a member of the ABI any longer, its rival Prudential still sees real benefits in remaining on board.
A spokesman for Prudential, said: “Prudential believes it is important for insurers to have a forum for discussion about issues affecting the entire industry and a strong collective voice, especially at a time of change both in the UK market and evolving domestic and international regulation.”
Sources also question whether a trade body lacking two of the UK’s biggest insurers as members can really claim it is still representing the industry effectively. One of the biggest issues seems to be that it is trying to be representative of both very small insurers and the largest ones at the same time.
A source said: “It is difficult, there is no doubt about it. When they represent companies right from the smaller end of the scale to the major multinational businesses, it is a difficult thing to constructively have a way forward.”
Mr Tarling agreed that there was a challenge in representing the interests of all members effectively, especially as the organisation is funded based on the premium income of its constituent members – with bigger players paying more and vice versa – but that it was something the ABI constantly worked on.
He said: “We have a very representative committee system where smaller members are able to have their voice heard and get their message over. We have got to look after all of the interests – if you look at the flooding insurance, we would not have got that through if it had not been for the ABI being a conduit for that to develop.
“We have got a challenging future, but challenges bring opportunities.”
Alison Steed is a freelance journalist
Key Points
L&G’s decision to move away from the ABI was largely precipitated by the trade body’s move to transfer its investment business to the Investment Management Association.
Some feel the ABI should have had prior warning of some issues that will have profound changes for the industry.
The idea that all insurers need a single trade body to represent their interests certainly appears to be fading in some quarters.
