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ABI changes are all about saving money, not serving the market

October 25, 2013

Just what is the Association of British Insurers up to? We know the headlines – senior departures, 7% cut in spending, major departments merged – but what do we know of the reasons behind them? Very little.

The statement on the ABI’s website and which was issued to the press is cursory, almost to the point of being dismissive of anyone who might have the temerity to inquire further. Perhaps the ABI feels that only its board and a privileged few among its members need a proper explanation. It has never published a formal annual report of substance and does not reveal how much it raises from its members, so we shouldn’t be too surprised that the association feels it does not owe the world a fuller explanation of why it has so suddenly dispensed with the services of such high profile figures as Nick Starling, Maggie Craig and Stephen Gay.

There has long been a feeling that the ABI is tightly controlled by a small group of the largest insurers who bankroll the organisation. It only needs one of two of these to turn around and say they want to pay less to the ABI and the axe has to fall. With several of the key firms, Aviva in particular, experiencing their own management upheavals and cutting hundreds of jobs it isn’t too hard see why the ABI sprung its surprise announcement on the market on Wednesday afternoon.

Money has to be the rationale for the changes because they make precious little sense otherwise.

If it isn’t true that the ABI has to dance to the tune of just a couple companies then publish the figures to prove myself and many who believe likewise wrong. And shed the arrogance that says the wider insurance market isn’t owed an explanation of the reasons for and implications of these major changes at the top of the industry’s dominant trade body. The ABI does owe a duty to the market as a whole and when the market has lost confidence in the ABI or its predecessors before then the whole industry has suffered, especially in the public policy arena.

What, then, of the implications of the changes? Merging general insurance and pensions seems just bizarre. They have so little in common that it is hard to see how it makes sense in lobbying, representational or media terms. It probably means very little beyond how two disparate departments will be managed internally, although it will be almost inevitable that the manager – new deputy director general Huw Evans – will veer more towards one market than the other.

This has its dangers for the ABI, often criticised by people in the general insurance market as the Association of British Life Insurers. Despite the life assurance and financial services backgrounds of chairman Tidjane Thiam and director general Otto Thoresen, this criticism has been harder to sustain over the last few years with the ABI’s successes in lobbying on issues such as flooding, road safety, uninsured driving and fraud. There will, however, as other commentators have observed, be plenty of critical eyes watching the impact of these changes carefully, ready to resurrect proposals for a separate body to represent general insurance.

ImageIf the current weather forecasts for the next few days bring the severe winds and heavy rain predicted we might see sooner than anticipated just how well the slimmed-down ABI will manage without Mr Starling’s trusty Wellington boots. I expect it will fall to Otto Thoresen to be the face of the market if required as he has been closely involved in the flood insurance debates.

Some of the other changes make more sense, such as merging responsibility for financial conduct regulation into Hugh Saville’s current directorate covering prudential regulation.

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