I take immense pleasure in the general insurance market having behaved so well during the financial maelstrom. However, the reputation of the industry remains relatively poor. In the minds of some it is an industry that it is keen to take money off people but sometimes reluctant to pay up when called upon.
This totally erroneous image problem and the failure to be clearly distinguished from the banks contributes to the biggest threat currently facing our business – over-regulation.
Brussels bureaucrats have decided to inflict their accounting and corporate governance ideas on us, and our own regulators have sought to gold plate these new diktats and add a few of their own too. There is a misconception that massive regulation will draw business to our markets, when the truth is that the distraction and cost created by them is making us uncompetitive.
I firmly believe we need good regulation. My early experiences of the Lloyd’s market in the 1960's, where illicit practices and irresponsible underwriting were rife, taught me that markets needed to be supervised. But the rules that govern us must enhance, rather than detract. So we should assist in making the rules fit for purpose.
First, we should continue to behave with utmost integrity to each other and to our clients, and continue to trade sensibly, making intrusive regulation less necessary.
Second, our best and brightest staff could be seconded to work for the regulator for a period. They would get valuable understanding of the challenges regulators face. The supervisors, in turn, would also acquire much-needed ‘street smarts’. It should become a prerequisite in future for anyone looking to perform a senior management position in an insurance business to have served such a secondment.
Third, we should perform a measure of self-regulation. We know who in our marketplace is trading irresponsibly; we know who doesn't pay claims and who is cutting rates suicidally; we know which brokers are being a bit ‘hot’. We are seldom if ever surprised by an insolvency.
I am frequently told that self-regulation does not work because senior market figures are unwilling to sit in judgement on their peers. As one of the first supervisors drawn from the market when Lloyd’s introduced self-regulation in the 1980s, I appreciate that it can be uncomfortable to censure those among whom you have worked for years. What Lloyd’s has done is to employ its own professionals to regulate the market.
I would like the General Insurance section of the ABI, the Chartered Insurance Institute, the IIL, Lloyd’s, BIBA and the LIBC and all involved in the general insurance industry, to get together to form a Standards Board to give the Chartered Insurance Status wider jurisdiction and teeth to their code of ethics. This status would be withdrawn if standards were not being upheld which would be a first line of regulation and a warning to the official regulators.
And when the General Insurance Group is formed, it can lead to the formation of a powerful combined lobby to make the case for our great industry, and command the respect of politicians and regulators.