UK insurance ‘dissected’

I felt compelled to respond to some comments that were prompted by a previous article:

IBM Insurance:: does the industry really care what customers want? I wonder…

The following comments come from a, highly experienced and senior, former insurance executive, who now works for one of the major Global Consulting firms. Obviously I wouldn’t name names without first gaining the approval of the individual in question but I really wanted to share my thoughts. After all that’s why I blog.

For many years I have eagerly anticipated some meaningful debate with thought leaders, passionate or concerned people from within the insurance industry. But I have been, consistently disappointed. I wish I was more confident that these views might spark some meaningful discussion…but I won’t hold my breath!

The comments:

I think David Wilson is making the point that despite the results of the IBM survey, he’s seeing little action from the UK insurance industry. I think at the moment UK and Western European insurers have their hands full with Regulation – Solvency II, RDR – and this is diverting their attention.

Even so, in terms of innovation, UK insurers (or at least Northern European insurers) are seen as leading the global pack in terms of capital effectiveness and optimisation, with the North American market looking to UK as an example of best practice especially in the area of risk management.

My response:

What are the key issues identified:

  1. Compliance with additional Regulation – brought about by cultural, operational and regulatory failures
  2. UK & Europe seen as innovation leaders – based upon the above, should this be the case? And,
  3. capital effectiveness and optimisation – are these correct metrics for innovation and compliance?
  4. risk management – where is the evidence of “best practice”? – I see plenty of evidence of “bad practice” that has become ‘accepted practice’ across the industry. What are current practices in relation to complexity, business resilience and systemic risk?
    Insurance and banking have convinced themselves that they have been/are innovative but, if this is true, why are they the least trusted and most complained about industries according to their customers? Does that not explain the perceived need for more regulation?

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Insurance:: “Future risk” and technology [CII report]


image30 yeas ago (and for much of the intervening period!) I never thought I would utter the words, “what a great report from CII” but there you are, I’ve done it now. I’m the “sad” insurance man I never wanted to be.

Well, not quite, because I am very much an outsider as far as the insurance industry stands right now. The main reason being that too many people on the inside don’t want to hear, like or understand what I have to say about the massive problems that the industry is adding to day, after day, after…

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Damning verdict on City: ‘No longer fit for purpose’ – The Independent

The Liberal Democrat Treasury spokesman on a v...

The Liberal Democrat Treasury spokesman on a visit to Cambridge today. (Photo credit: Wikipedia)

A report commissioned by business secretary Vince Cable was made public earlier this week and finds a financial sector that is no longer fit for purpose. Professor John Kay, a leading economist, has made his recommendations after scores of submissions and interviews with top business and investment people.

In particular, Prof Kay says that regulation needs an overhaul and that traders seeking short-term profits are not acting in the wider interests of the public and should be marginalised.

His review comes when the stock of the banking sector has never been lower, given a seemingly constant run of scandals involving rogue trading, interest rate fixing and global money laundering.

The report finds that short-termism is an underlying problem in UK equity markets, principally caused by a misalignment of incentives within the investment chain and the displacement of trust relationships by a culture based on transactions and trading.

 His recommendations, which are aimed at key players in UK equity markets, as well as Government and regulators, look to:

  • Improve the incentives and quality of engagement, including by establishing an Investor Forum to foster more effective collective engagement by investors with UK companies
  • Restore relationships of trust and confidence in the investment chain, including by applying fiduciary standards more widely within the investment chain
  • Change the culture of market participants, including by adoption of ‘good practice statements’ by company directors, asset managers and asset holders that promote a more expansive form of stewardship and long-term decision-making throughout the investment chain
  • Realign incentives by better relating directors’ remuneration to long-term sustainable business performance and better aligning asset managers’ remuneration to the interests of their clients

Damning verdict on City: ‘No longer fit for purpose’ – Business News – Business – The Independent.

Insurance & Professional services

Are we so vain or focussed upon short term results that we can’t see the big picture?
How much easier would it be to attract prospective clients, convert new business and retain existing customers if the product(s) from your direct competitors only offer a one dimensional solution whilst yours provide a host of features and services?
I DO understand that terms like Blue Ocean strategy, Disruptive innovation, etc. can sound like phrases from a superfluous business language but that doesn’t mean to say that the best course of action is to cover your ears…a particularly unwise move in a tough trading climate. Instead try listening and interpretting the feedback from your customers and start to look beyond short term results to new opportunities to create a sustainable strategy for the future of your business.
What is your “Unit of Business”? Should your business be “limited” by the current range of products and services with increased pressure for sales (less scope to deliver service) activity and/or reduce pricing to maintain market share (refer to “Dual Pricing” blog item)?
You know what you do, as do your customers. If they already value what you do for them at the moment and you provide them with the opportunity to contribute to what you can deliver to them (and others) in the future they are less likely to be tempted by the “pile ’em high sell ’em cheap merchants.” In tough times these sales-orientated organisations get even busier trying to win your customers with mere promises! Why? Because the feed off the financial pressures that are impacting businesses on a daily basis
If you care about your ‘customers’ and the survival of your business get proactive. It may not be “attack” but it is a better form of defence than waiting until it is too late when you find out that, like many businesses in the current climate, your customers have reviewed current supplier arrangements.
Many are, understandably, coy about having believed someone else’s sales pitch. Even when their first instinct is to remain loyal and/or question whether the salesman can deliver what they need. Too many solid, longstanding, relationships are damaged (often permanently) by a lack of clear strategy based upon what you already do sufficiently well to have secured your existing clients and position in your marketplace.