The Association of British Insurers was dealt a hammer blow earlier this week when Legal & General, one of its largest and most recognisable brands, announced plans to quit the trade body.
In a letter to ABI director general Otto Thoreson, L&G chief executive Nigel Wilson cited the decision to merge the investment affairs division with the Investment Management Association as a key driver behind the move.
He also suggested engagement with policymakers is increasingly tailored to individual company situations and “less suited to uniform representation through one trade body”.
The decision was a surprise both to the sector and senior employees within the company, who learnt of the plans via Sky News.
“It was a bit like Budget day,” one says. “It came completely out of the blue.”
L&G’s decision immediately led to speculation that other major insurers could follow suit.
Prudential and Standard Life – two of the ABI’s most influential members – were the most forthright in backing the trade body.
Standard Life managing director, adviser and workplace Barry O’Dwyer says: “We believe our industry achieves a great deal by working together and the ABI plays an important role in helping to deliver the right outcomes for UK consumers. We have no plans to change our membership of the ABI.”
A Prudential spokesman says: “Prudential believes it is important for insurers to have a forum for discussion about issues affecting the entire industry and a strong collective voice, especially at a time of change both in the UK market and evolving domestic and international regulation.”
Scottish Widows also confirmed its ongoing commitment to ABI membership. Aviva, however, issued a terse six-word statement saying: “We remain members of the ABI.”
The provider refused an offer to back the trade body or commit to continuing as a member.
L&G’s exit and Aviva’s reluctance to back the ABI crystallise a problem that has been creeping up on the industry for some time. Providers are increasingly keen to differentiate themselves from “brand insurance” – both in terms of public image and in the way they interact with policymakers.
In just the past year the charge cap, the Budget reforms and proposals for the introduction of free guidance at retirement have exposed the variety of views (often driven by vested interests) that exist in the market. Some suggest the decision of a cornerstone member to leave the ABI represents a realisation that herding the cats of the insurance industry simply cannot work.
Why pay for the privilege of membership to an organisation that does not represent your views? This is a sentiment many advisers I speak to have echoed in their dealings with Apfa.
A more prosaic explanation is that, rather than precipitating the collapse of the ABI, L&G’s exit has been masterminded by one man – Nigel Wilson.
In an excellent blog published yesterday, Fairer Finance founder James Daley suggests Wilson has simply “thrown his toys out of the pram”.
A senior industry source says: “I’ve spoken to two senior people at L&G who knew nothing about this. L&G will carry on working with the ABI up until the end of the year and they will continue to engage on major policy matters afterwards.
“There have been no major disagreements involving L&G and the ABI on policy. They don’t have a huge public affairs team at the moment, so unless Nigel Wilson is going to do all of this himself it is not clear how they will effectively engage with Government.”
Despite their public pronouncements to the contrary, every major insurer will be considering their future relationship with the ABI in light of L&G’s decision.
But with the general election on the horizon and a fundamental overhaul of pensions rules due to come into force next year, quitting the industry trade body – and in the process giving up any say in sector-wide discussions on pensions policy – is undoubtedly a huge gamble.
Tom Selby is head of news at Money Marketing