ABI chief says insurers must work harder to boost reputation and trust

The insurance market has work to do to improve its reputation and build trust among customers, ensure cover responds as expected, and improve its diversity and inclusion, Huw Evans, director general at the Association of British Insurers (ABI), told the Airmic conference this afternoon. Mr Evans, who is standing down from his post at the end of this year, said his successor will need to keep pushing to improve the insurance industry’s reputation and trust. This has been damaged of late by business interruption (BI) policies not responding to the pandemic, as well behaviour by P&C insurers in the hard market that has left many risk managers feeling disappointed. “There aren't easy answers and reputation is definitely a case where your job is never done if working for an organisation like mine. But we do need to continue to make progress… With reputation and trust you have to continue to work away at the issues and remove things that are getting in the way of customers. I am confident if we put our best foot forward we can drive up trust and confidence in our profession, and in the products and services that we provide,” said Mr Evans. He added that the whole UK insurance industry needs a “good dose of humility” when it comes to BI policies not responding to Covid-19 risk. This was a particular issue for SME customers who had claims denied despite believing they were covered for the risk. The Financial Conduct Authority held an expediated court case on this issue that ultimately found in favour of buyers on the majority of disputed issues, leaving many insurers with egg on their face. “I don’t think there are saints and sinners in this as far as this sector is concerned,” said Evans. “There are definitely lessons to learn about how products are labelled and what they actually cover. There are definitely lessons about exclusions. If we mean to exclude something, we need to make that explicitly clear,” he added. Diversity and inclusion is another area where UK insurance industry can improve, said Evans. He added that the sector is simply not tapping the talent pool it needs to meet challenges going forward. “There is an ethical and moral question about why it is our sector is so overwhelming white, male and middle-class. But we are very clearly not drawing on the best of our talent pool. Some 58% of entries to the profession are women but only 24% of executives are women. We lose some along the way because we are inflexible in how we work as a sector. In addition, 10% of entrants belong to black and minority ethnic groups, but there are only 2% at executive level. So we have some very clear structural problems we need to fix if we want to be the best sector we can be,” he told the audience. Evans also said British insurers face a watershed moment when it comes to regulation, following the Treasury’s consultation on the Future Regulatory Framework review prompted by Brexit. He said this will include potential changes to Solvency II that could free up capital for green investments. A big question is whether politicians or regulators will set the regulatory agenda in the post-Brexit world, he added. “The crucial decision about who gets to make regulatory policy when it affects wider policy has not been established in this country yet; we are in a bit of a test-and-learn phase at the moment. I think that is going to be critically important,” said Evans. “What levers can be pulled by politicians and what levers can be pulled by regulators? That has got to be established by the Future Regulatory Framework review and is really important for our sector. It is critical that lands in a way that doesn’t leave us caught between politicians insisting on one thing and regulators on the other, leaving us in a permanent no-man’s land,” he added. Specifically on Solvency, he reiterated ABI calls for changes to how insurers’ investments and capital are treated under the regime. “At the moment the system incentivises, in some cases, investing in corporate bonds in mining companies that run the risk of being stranded assets. It certainly doesn’t encourage investment in productive finance and green infrastructure. It is far easier to invest in a mining company than it is in a windfarm under Solvency II,” he explained, describing what he sees as some of the regulation’s shortcomings.

ABI chief says insurers must work harder to boost reputation and trust

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