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Social security

In the public&#39s eyes, the financial services industry is up there with car manufacturers and oil companies for the level of social accountability and is mistrusted accordingly.

As the public increases its demands for greater transparency, so social reporting will grow in importance as businesses are forced to respond to these demands.

Increasing transparency in financial services brings up many similar issues to the introduction of ingredient labelling to the food retail industry in the 70s and 80s. Customers are much more inquisitive and discerning nowadays and want to know the composition and content of a product before they arewilling to buy it.

The need for businesses to be more transparent and accountable, both to their customers and to wider society, is a particular challenge for the financial services industry, which has come under substantial criticism from the media and consumers.

A CIS survey of public opinion last year found that financial services was felt to be one of the poorest sectors for social accountability, after car manufacturers and oil companies. This level of mistrust, fuelled by memory of the problems with endowment mortgages and pension misselling, is one of the key factors why many households do not have the level of cover from financial services that they need.

Recent times have seen a number of promotion and confidence-building measures across the financial services industry.

Ranging from the Government&#39s plans for league tables and the ABI-led Saltr scheme to the various education initiatives launched by the FSA, the ABI and individual providers themselves.

Tackling image issues is not sufficient onits own, the real changes need to come from the inside out with transparency at every stage of the process, from the advice and servicethat a customer first encounters to the support and performance they receive across the life of a product.

The modern business environment is placing increasing importance on factors beyond the basic economics of the service or product that a company provides.

A look through any day&#39s news shows the strength of public resentment of poor business practice – from complaints about the excessive pay of business executives and the closure of services in local communities to the outcry when companies pollute or destroy the environment.

The survey highlighted the desire for greater social accountability across business as a whole. More than nine out of 10 people felt companies have a duty towards society, three-quarters felt companies should not just concentrate on profit, while three-quarters felt companies should be required to account publicly for their actions. This feeling is increasingly being translated into action not only with high-profile consumer boycotts and protests but, less conspicuously and far more significantly, the many consumers who choose to take their business to companies which behave in a way much more in line with what they feel is “good business”.

Building sustainable business practice is a two-level process for any financial services provider. A provider must be seen as a well-run and responsible organisation if it is to retain and develop the custom of policyholders and new customers.

Second, it is crucial that an organisation whose core business relies on successful investment returns identifies and promotes social accountability among the companies in which it invests. We firmly believe there is a correlation between good business ethics and long-term financial gain and reward.

CIS has introduced a responsible investor programme to obtain more detailed and extensive information about how the companies we invest in are run. Such a process encourages best practice among company management and is reinforced by our intention to use and exercise our voting rights at every available opportunity.

The CIS social report provides an assessment of the first year of the programme and contains information such as the number of claims paid and the number of complaints received from customers, which were traditionally not disclosed, in respect of the environment, social exclusion and local com- munities. We also took the step of having the programme independently audited.

In an era where we are facing increased challenges and operating constantly under the public eye of a more discerning consumer base, it is only a matter of time before this programme becomes commonplace within our industry.

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