No more one size fits all

This weekend, the Conservatives meet in Birmingham for their annual party conference. Meanwhile, the insurance industry will be participating in the energetic behind-the-scenes lobbying taking place during the gathering, which brings to an end this year’s party conference season.

So it seems a perfect time to quiz key industry grandees on what they want the government to do for the sector. Their wishlists range from a call for insurance premium tax revenues to be earmarked for flood defences, to a push for the industry to have its own dedicated deputy governor at the Bank of England.

The list also includes safeguarding flood defence investment in next month’s comprehensive spending review and a shake-up of the Financial Services Compensation Scheme levy. While many observers agree that robust regulation is good for the industry, the government’s one-size-fits-all policy for banks and brokers is squeezing the industry in all the wrong places.

Ashwin Mistry, chairman, Brokerbility:

I don’t think the industry has been recognised sufficiently as one of the major contributors to the GDP with reference to invisible earnings. We have completely failed as a sector to impress upon government that we do this, or perhaps they have taken us for granted.

We also need a much more concerted effort on insurance being recognised for excellence in terms of careers.

I’d like government to be very wary of legislation through the back door. We should keep a view on what goes on with regards to Europe.

What we don’t want is for the government to cut back on environmental investment and rely on the insurance sector to pick it up. That will create no-go areas for insurance.

I’d couple this with the insurance premium tax. Let’s go to government with an option to say, ‘If this 1% creates, for example, £500m extra to the Treasury, we would like to see 50% of that put towards flood defence.” Be pragmatic and be positive, and let’s go to them with an option, but ask ministers to discuss with us how to settle the national debt.

Regarding the Financial Services Compensation Scheme (FSCS) levies, from a broking point of view, we think the banks responsible for this should be penalised, not the financial services sector as a whole.

Another issue is uninsured drivers, because of click-and-buy. When the event of a claim occurs, somebody has to pay for it from a centralised budget, which is costing the industry shedloads of bucks and leaving innocent third parties out of pocket.

My personal bugbear, though, is no-win, no-fee solicitors. I think all third-party claims cheques should go directly to the policyholder. We have been asked to disclose our commission. In the same way, I think these solicitors should be asked to expose their fees before they accept the cheque on behalf of the claimant.

Bronek Masojada, chief executive, Hiscox:

Instead of having a deputy governor at the Bank of England who is responsible for financial services and systemic risk, there should be two deputy governors – one to deal with banking and systemic risk, and one to deal with insurance.

We keep on being told the government understands that insurance is different to banking, but the reality is that it says: “This is what we thought of for the banks. Oh, and by the way, it will apply to everyone else.”

If they have someone in the Bank of England on the same level as the person doing banking and systemic risk, then that would be a practical representation of the policy they say they are going to pursue. It is cheap and easy to do. The FSA is going into the Bank of England, so there is no point in moaning about that.

This is about making sure that they [the new arrangements] are more effective and appropriate, and therefore ultimately beneficial for the government. This would also make sure the policies are adapted properly to the two different industries affected.

This idea would ensure that someone who is regulating the industry is also focusing on insurance as their main job.

I’m all for good regulation. But what I would like is informed and competent regulation. The benefits are very clear for both parties.

Phillip Hodson, chief executive, Oval:

Of immediate concern is the ludicrous, huge and disproportionate levy on all brokers by the FSA in order to gather funds for compensation as a result of PPI mis-selling. Who sold these policies? The banks, and some brokers. Let them pay.

At the very least, this should be classed as a one-off levy and never repeated. It is disproportionate because the levy is calculated on the volume of smaller clients, with larger corporates excluded. So firms like Marsh, Aon, Willis, JLT, Oval and so on pay proportionally much less than a small regional broker. How can this be fair?

This is an immediate job for the government as it gets to grip with regulation and the reconstitution of the FSA.

Howard Lickens, chief executive, Clear Group:

The single biggest thing that worries me, and others, is the wholesale change of the regulators. You won’t find a single broker out there who’ll say they love the FSA, but we have learnt how to cope with it and survive with it. The less the insurance industry is interrupted and the less change there is, the better.

Insurance is one of the UK’s real success stories, so to force it through a change for no obvious, regulatory reason is potentially going to be very damaging. It takes months, if not years, to embed the way we have to communicate with our clients.

If all that happens is that the existing rulebook gets given to a new authority with a different set of initials, then we won’t be too worried. But if that’s a reason for the whole regulatory structure to be reinvented, that can cost a shocking amount of money and paralyse businesses.

It’s ironic that a government that is talking about reducing bureaucracy is inevitably about to increase it.

Andy Homer, group chief executive, Towergate:

My wish would be for the government to keep well out of the way. If we run our sector in a competitive and ethical manner, we don't need the dead hand of government anywhere near.

Richard Ward, chief executive, Lloyd’s:

As an industry we are at a critical point. Regulators are in the process of considering significant changes and we need to continue to engage with them constructively. That is the only way we can seek to influence the outcomes so they are appropriate for our business.

The insurance industry has navigated the global crisis well. We are not the banking sector, and we need to continue to show leadership in reminding governments of the positive role we play. These are points that we have been making throughout the post-crisis period, and will keep making them to ensure they are heard.

I’m sure many are glad to see UK corporation tax being lowered from 28% to 24%, but for me it was what the move represented rather than just the figures. The willingness of the government to bring tax on to the agenda represents a step in the right direction.

We need to ensure that the importance of London as a leading financial hub, and the London market as a centre of excellence for risk management, is kept front of mind.

Grant Ellis, chairman, Broker Network:

From a broker’s perspective, the key requirement is for the government to acknowledge in the regulatory framework that we are extremely low risk as far as consumers are concerned, and to reflect that in a light touch and proportionate set of regulations. A well-regulated industry is a better industry – I don’t have any qualms about that – but the number of cases where substantial damage has been done to the consumer by miscreant brokers is just not reality. It’s a complete myth, and that’s what I want recognised in the regulation.

I also think flood defences are key. Either invest in flood defences so that we can continue, as an industry, to insure against flood in a commercial way, or have some sort of pooling for flood risks, because some places are going to become uninsurable.

I would like building on floods plains to be banned, period. The current government is saying ‘Let’s go back to a few basics’, but surely one of those basics is a complete ban on any building on flood plains. That would at least keep the problem at the same level, rather than exacerbating it.

Barry Smith, chief executive, Fortis UK:

The government faces some tough choices when the spending review is announced in October, but there are some critical commitments it could make that would benefit both customers and the industry.

There is a compelling case for continued investment in flood defences. More funding is needed but it will be money well spent, with the ABI estimating that for every £1 spent on bolstering flood defences, £6 is saved for the economy. The recent Flood Summit underlined the commitment of all, including government and insurers, to work together to manage risk more effectively for people who live with the uncertainty of when the next flood will strike.

Tackling the impact of uninsured driving should remain a priority. Raising public awareness and educating drivers through the Continuous Insurance Enforcement (CIE) scheme will help reduce the number of uninsured drivers on the road and deserves continued support and commitment.

Finally, implementing the Jackson Review recommendations as a package will ensure the reforms are both effective and balanced.

In all areas, I believe the insurance industry is willing to play an active and positive role to work with government and other stakeholders to reach better outcomes for customers.

Eric Galbraith, chief executive, Biba:

The changes to the FSA and the move to the Consumer Protection and Markets Authority are important issues. But perhaps more important is for the government, MPs, Treasury and others to make sure that any changes to the FSCS are implemented to take account of and deal with the current inappropriate arrangements.

I want to see an acknowledgment that insurance is definitely being treated differently from banking. They say they know it’s separate, but the influence of what goes on in different sectors seems to say, ‘That’s fine, we’ll keep doing it this way’, and we will be affected by the issues that are going on in the banking sector.

Last but not least, the costs involved in insurance with Solvency II and the changes to the regulation are another key issue for us. IT