Everyone has seen the ABI-led consultation on critical illness TPD definitions as important. And rightly so, because it is vital that products pay meaningful benefits in appropriate situations, and that consumers can understand what they are buying and when they can claim.
But this process is just another example of unhealthy collaboration within the industry that has produced a profusion of ‘model definitions’ and ‘best practice’ guidelines.
The insurance industry must be unique. Can you imagine the ‘Association of British Supermarkets’ getting together Tesco, Sainsbury and the like to agree ways of laying out stores, describing the provenance of products and how to treat customers? No, I thought not. The supermarkets, and firms in virtually every other industry, live and die by their successes and their mistakes. They go out and compete, hard, with their rivals.
But in the world of life and disability insurance, things are a lot different. When there’s sign of a problem, firms get together at the ABI for some collective hand-wringing and to work out a joint solution. The result is effectively an ABI edict that firms dare not fail to comply with – even if they had a better approach. That would be ‘stepping out of line’ with the market, and being seen by distributors that rely on spoon-feeding as having an ‘inferior’ product.
But isn’t all this in consumers’ best interests? Well one would hope so. But let’s not forget that the ABI’s primary purpose is to look after the interests of its members, not those of consumers. If it really had consumers at heart it would let poorly performing companies stew in their own juices, and even blackball the few that bring the many into disrepute. But no, it presents problems as belonging to the industry, tainting the good performers along with the bad.
Why shouldn’t insurers stand or fall by their own actions? It’s what competition is all about. Very few in our industry seem truly to understand how to compete. What competition there is, revolves round price, which is senseless for the majority of players. Yet there are other bases of sustained competitive advantage.
Our industry is a cosy club, and it is time to wind it up. The model definitions and the best practice guidelines largely benefit intermediaries, with whom insurers are still overly preoccupied. Consumers’ interests are being poorly served. All this collaboration stifles innovation and competition, and makes companies lazy. Products are being designed by committee – to see how effective that is, consider the painful progress, and the dismal outcome, of the TPD consultation.
So, ABI, act as a facilitator and encourage innovation. Truly look out for consumers – tell your members to compete. Life companies, go and beat hell out of your rivals. It’s called healthy competition.
This tired old industry needs less protectionism and more natural selection.
Peter Maynard is director of SelectX Ltd.