Industry Collaboration with James Dalton, ABI

The ABI, like any good trade body, is all about collaboration - strength through association as we say. As the voice of the UK’s insurance and long-term savings industry, politicians, regulators and policymakers look to us for the industry’s perspective on key public policy issues

James Dalton, Director of General Insurance, discusses industry collaboration and the ABI’s priorities for 2020. James Dalton

At first glance, the scope for collaboration in the highly competitive insurance markets may seem very limited. Yet this is far from the case. Collaboration and competition are not mutually exclusive but are two sides of the same coin that help ensure an adaptable, innovative worldleading UK insurance industry that benefits customers, the UK economy, and wider society.

Despite the diverse nature of our industry, when we come together the customer benefits. In the London Market for example, firms that are in competition with each other one minute will come together the next to share in the insuring of a large, unusual risk.

The ABI, like any good trade body, is all about collaboration - strength through association as we say. As the voice of the UK’s insurance and long-term savings industry, politicians, regulators and policymakers look to us for the industry’s perspective on key public policy issues. During 2019, the ABI has been involved in nearly one hundred meetings with MPs, peers and other politicians, and held over twenty meetings with government Ministers.

There are many examples of how ABI-coordinated industry collaboration leads to the industry working more effectively for the end customer, and wider society. These include: Flood Re The result of intensive negotiations between the industry and the Government, Flood Re is a world first, an innovative solution to ensure that flood insurance remains accessible and affordable to thousands of homeowners who would otherwise struggle to access the market. Over 250,000 homeowners at flood risk are benefitting from the scheme since it was launched in 2016. The vast majority, 94%, of the UK home insurance market is using the scheme. This has created a competitive flood insurance market, which means that four out of five homeowners with previous flood claims are now able to find quotes that are more than 50% cheaper than before Flood Re began.

Building regulations Long before the tragedy of the Grenfell fire the ABI had been calling for an overhaul of building and fire safety regulations. We joined forces with the Fire Protection Association (FPA), who carried out a series of carefully controlled experiments recreating more realistic building conditions than those in which standard tests are done, in an effort to measure what difference these factors could make in the event of a fire. The results dramatically and worryingly exposed the utter inadequacy of the laboratory tests currently used to check the fire safety of building materials. So we are pleased to now see that a review of BD8414 is underway given that we need a testing framework that is closely aligned to the realities of construction in the built environment, not one that is divorced from that reality. At the same time we need fundamental reform of the building control process to ensure proper protection of property against the risk of fire.

Insurance Fraud Nowhere is the collaborative approach better illustrated than in the fight against insurance fraud. The industry has long recognised that the only way to tackle insurance fraud is to work together to detect and deter ever more organised and complex insurance scams. The industry’s conduct regulator, government and our customers expect the industry to co-operate to ensure fraud does not simply move from one insurance market to another, but the fraudsters are brought to justice.

The ABI and Lloyd’s jointly fund the Insurance Fraud Enforcement Department (IFED) a bespoke police unit hosted by the City of London Police. Working with the Insurance Fraud Bureau, since its formation in 2012, IFED has secured over 482 convictions, the equivalent of an 83% conviction rate, leading to over 285 years in custodial sentences, 128 years in suspended sentences and over 17,300 hours community service.

Personal injury compensation reform Seeking alliances outside of the industry always helps. Our campaigning for reforms to the personal injury compensation system has, at times, led to conflict with some in the claimant legal community. However, it is worth remembering that although we may disagree on the need for government policy interventions, there is a general desire and commitment from across the personal injury industry to ensure the reforms in the Civil Liability Act work in practice and are informed by the needs of our customers.

Improved outcomes for existing customers Working alongside the British Insurance Brokers’ Association (BIBA), insurance was the first industry to actively tackle the issue of excessive pricing differentials between new and existing customers. Our Guiding Principles and Action Points (GPAPs) initiative is addressing some of the issues in the market that can lead to excessive differences that unfairly penalise some longstanding customers.

This is not just a well-intentioned set of words. The ethos and approach to better outcomes for longstanding customers is being given Board or senior management level priority, and is being formally incorporated into firms’ procedures for determining the premium at renewal.

Working together, ABI and BIBA members are: • Making it clear in written, online, or verbal customer communications that the new customer premium only applies for that year and subsequent renewal premiums may be higher. • Reviewing their pricing approach for customers who have been with them for longer than five years and assessing whether this approach delivers a fair outcome.

The ABI will publish a report in Spring 2020 to demonstrate how our members have sought to tackle excessive differences between new customer premiums and those of existing customers.

Industrywide guidance and voluntarycodes Working collaboratively with our members and, where needed, other stakeholders, various voluntary codes. and guidance are helping customers. A recent example of this is the treatment of criminal convictions. We have worked with the ex-offenders charity Unlock on guidelines to help insurers treat people with criminal convictions fairly and in compliance with the law. The guidelines aim to ensure that insurers: • Only seek information relevant to the risk; asking clear, concise and explicit questions about unspent convictions; • Make clear to customers the consequences of not disclosing, or misrepresenting unspent convictions; • Ensure that staff are fully trained on relevant laws and regulations surrounding rehabilitation of offenders;

• Assist customers in finding insurance through signposting and referral arrangements where they are unable to provide cover themselves.

We have begun similar work to consider underwriting principals when it comes to mental ill health in health and travel insurance.

Into 2020… Collaboration will continue to play a key part of the ABI’s general insurance strategic priorities for 2020, including: • Exploring with the claimant legal community possible solutions to how best handle minor injury claims in the context of the Civil Liability Act. • Working with the Government and our members to ensure an effective regulatory and legal framework around the roll out of autonomous vehicles. • Further strengthening relationships with Lloyd’s and the wider London Market as it seeks to reduce costs and maintain London as the global specialist insurance and reinsurance marketplace. While there are many challenges ahead in the political and regulatory landscapes, insurers will continue to work together across the industry, as well as reaching out in a spirit of collaboration with other sectors, to help overcome those issues in the years ahead.

James Dalton is the Director of general insurance for the ABI.