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ABI warns crisis response could kill UK insurance industry

Association of British Insurers chairman Archie Kane has warned that the regulatory response to the financial crisis could “squeeze the life” out of the UK insurance industry.

In a speech at the ABI Holyrood Reception last night, Kane said insurance firms were not at the centre of the crisis and are not as risky as banks.

He said: “There is a danger that the response to the financial crisis could unintentionally squeeze the life out of the UK insurance industry. We recognise scrutiny will increase, regulation will intensify and we will face closer, more intrusive, supervision. 

“But we seek two things. First, any new regulation should not be broad brush and needs to be targeted at risk in the financial system. Second, we must remain in step with other countries. If we don’t, we risk undermining the competitiveness of the insurance sector here in the UK.”

Kane raised concerns about the effect recent tax changes have had on the insurance industry’s ability to remain globally competitive.

He said: “In the current economic scenario we are not naïve enough to begin asking for unaffordable changes to the tax system. But we do need to highlight the corrosive effect recent tax changes have had. This is a real issue. Some insurers have already decided to move their operations overseas.

“Regulation and tax are fundamental to the future competitiveness of the industry. Capital is more mobile than ever before and investors need confidence that they will get a decent and predictable return on their investment. Changes to the regulatory and fiscal environment can and will deter investors from the UK.”

But Kane also recognised the part the insurance industry must play in regaining the trust of consumers.

He said: “Our road to salvation requires us to focus relentlessly on our customers’ needs. We must design simple and transparent products, we need to communicate clearly and we need to deliver excellent service. We have come a long way in recent years, but we need to do more.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. AIG?

    I’m sure the banks would argue that they aren’t as risky as insurers, but can we tell the difference these days? Banks insure this risk and that instrument but how sound is the insurer? Is it one of their own subsidiaries or some offshore ‘name’?

    Have insurers ever made money out of simple and tranasparent products? Can they ever?

    Does the UK regulatory regime levae too many gaps where the unscrupulous from these shores and overseas can ply their trade?

    Society is in dire need of a complete overhaul of regulation, and regulators.. Will we see it in our lifetimes? From what I have seen and heard we have little hope of anything as radical as is needed most deperately, too many vested interests scrabbling for a slice of the political cake.

  2. Well . . . The financial disasters resulting from poor government and mis-targetted regulatory costs and burdens have already, effectivley, tolled the dealth-knell for affordable Independent Financial Advice for many Working and Middle Class people in the UK – so why not just kill off the UK insurance industry as well.

    Much of the UK insurance industry is, of course, no longer owned by UK companies, so those international organisations may just pull back from the UK – perhaps taking advantage of cross-border selling and English-speaking tele-centres.

    Alternatively – we may get a change of heart in Government and a change in regulator who wants to help both the UK public and finance sector, not to smother the industry which keeps the money rolling in and provides the protection for millions of UK residents.

  3. Thought they had thought (but hadn't) tank 19th March 2010 at 2:46 pm

    AIG wasn’t a British failure and AIG UK maintains it’s financially sound.

    Some years ago I warned a senior person at the FSA that they were in danger of destroying the UK’s family silver if they over-regulated the financial sector here and they have clearly taken no notice.

    I am sure the French and Germans would love to step in after we’ve screwed up the financial services industry here. It was my opinion the the EU levelling the playing field was about bringing us down to the level of the other EU nations.

    What I am sad to have witnessed is the FSA doing their job for them.

  4. Mr Kane is right to be worried, but where was he and his like pre 1986, when regulation was proposed. Were they all convinced that their wherry would survive the storm and never sink.

    Probably sitting in a conference room telling one another what a bright future existed for them and they could leave regulation for other as they were too big to be damaged, or any damage could be hidden and passed to the policyholder.

    Since then the industry had raced for profit at the expense of policyholders, now large numbers of over priced useless policies exist, that generate low or negative investment return.

    To be honest a blind man could have read this writing on the wall.

    That stated everyone looked at the financial miracale called Building Societies who grow rich by overcharging its customer, with the full support of the Government, infact the insurance industry only woke up, when Building Societies started to take over long established insurance facilities.

    To date the situation is that all and sundry charge forward to ripe off the retail consummer and as could be predicted have come close to killing the Golden Goose.

  5. AIG?

    I’m sure the banks would argue that they aren’t as risky as insurers, but can we tell the difference these days? Banks insure this risk and that instrument but how sound is the insurer? Is it one of their own subsidiaries or some offshore ‘name’?

    Have insurers ever made money out of simple and tranasparent products? Can they ever?

    Does the UK regulatory regime levae too many gaps where the unscrupulous from these shores and overseas can ply their trade?

    Society is in dire need of a complete overhaul of regulation, and regulators.. Will we see it in our lifetimes? From what I have seen and heard we have little hope of anything as radical as is needed most deperately, too many vested interests scrabbling for a slice of the political cake.

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