Craig Tracey MP, Conservative Member of Parliament for North Warwickshire and Chair of the Insurance & Financial Services All-Party Parliamentary Group
The Future of Insurance - A view from Parliament
This connects with a broader challenge for attracting new diverse talent from across the UK. Insurance is a traditionally socially mobile profession with a significant proportion of its workforce outside the City of London, whilst also using it as a conduit for trade and influence. This means there is a real opportunity to tap into the policy priorities of the UK government: levelling up our communities and delivering economic growth across our regions, whilst simultaneously delivering on the London Market’s own recruitment and training goals. It is great to see the number of market initiatives looking to tackle the barriers to inclusion, but also looking to engage with the need for more accessible career routes for people of different ages and stages of their career.
The pandemic has impacted people from all walks of life and, despite the grave conditions we have all lived through and the tragic loss of life, there
is also an opportunity to change the way we bring people into the profession. Yes, we should be training and moulding younger people, and our apprenticeship framework for insurance is a fantastic way to do so. But we should also be looking at how we can reskill more experienced workers from different sectors. This will allow us to make the most of their behaviours, skills and experience to better enhance insurance firms and the products and services they offer.
This multi-level framework should also reflect the fantastic work being led by the sector to be open and inclusive, as the more inclusive our workplaces are, the better we will be able to serve the diverse needs and customer profiles of the public.
All of this intersects nicely with the developing Environment, Social and Governance (ESG) agenda, whereby the climate and environmental changes we need to make can run in parallel to the importance of regular CSR, such as the impact on people and the need for clear transparent governance. This is of particular importance in unlocking investment capital across the insurance market, capital that we will most certainly need if we are to reach our 2050 net zero targets, enshrined in domestic law.
The role of the insurance market is key in mitigating and insuring against the risks associated with climate change, the environmental, social, and societal impacts it will have, as well as the economic concerns that arise from it. With a strong commitment to sustainable finance across the value chains of insurance, consumers can be confident in supporting environmental and socially sound firms, and insurers can be confident they are serving the needs of the public as best they can.
The London Market houses unique expertise across a variety of specialised businesses and services. The expanding potential of new green and sustainable technologies – from energy to manufacturing, infrastructure, and a whole host of other sectors – will continue to see it as a vital tool in our ability to respond to our climate goals of today and tomorrow. Utilising the best characteristics of its expertise and its innovative response to the other challenges we can see on the horizon also means we can tackle the huge change we are likely to see across the world over the next 30 years. That is not to say anything about the domestic and global opportunities this will bring both to the market and to the UK, across all our regions and local economies by bringing in skilled jobs, investing in our local businesses and supporting our international trade agenda, thus demonstrating the reinvigorated global Britain we all want to see post-Brexit.
All this then ties in to precisely why I have long supported the industry’s call for a competitiveness duty to be applied to the regulator, who should be looking to the successes of other countries and sectors whose regulators promote the standards and the attractiveness of their markets as a place to do business. I wholly believe inward investment, greater market capacity and even new innovative products, services and business models can stem from this new approach.
Of course, this should come hand in hand with greater parliamentary scrutiny of the regulator, which is why I also support calls for greater accountability for the Financial Conduct Authority and Prudential Regulation Authority, which should certainly be taken in conjunction with any new duty imposed upon them. We are internationally known to have one of the most comprehensive regulatory frameworks in financial services, but our exit from the EU does lead us to a deficit over the accountability of regulators and this must be corrected if we are to reap the rewards of our new relationship with the world.
All of this can be achieved if we utilise the strategic role of the London Market and, if successful, we will demonstrate our sector is not just an important part of financial services, but as a fundamental part of the UK’s economic picture, helping our capital city preserve its status as a global financial powerhouse.
As Chair of the IFSAPPG, it is an absolute pleasure to work with so many different stakeholders both inside and outside of the insurance sector, confronting some of these challenges and celebrating victories won for consumers and the market alike. We may have covered a lot of ground in recent years, but there is plenty more for us to get involved in, so we look forward to continuing to support the excellent work of the sector as it transitions into a new stage in its constant evolution.
Primarily our role is both to engage and promote good practice, challenge issues of concern for all parties, to bring different stakeholders together to find solutions to complex problems and promote opportunities that benefit consumers and industry alike.
Over the last year alone we have held over 30 roundtable, public sessions and stakeholder meetings across over 13 policy areas involving insurance and pensions. These involve engaging with government ministers, regulators and consumer bodies alongside industry, as well as the public at large. Just some of the issues we have looked at are:
• Financial inclusion and access
• Post-Brexit priorities
• Travel disruption and the effect on insurance,
• Insurance implications of e-scooters and autonomous vehicles
• Professional Indemnity Insurance concerns across financial advicae and other professions
• The impact of the Grenfell Tower disaster and unsafe cladding (as well as wider fire safety issues) on building and personal injury insurance.
So, it’s a wide-ranging brief, but the IFSAPPG’s work has given me a unique insight into the market both domestically and opportunities internationally. We also analyse what are the triumphs, the challenges and the developing risks. I am therefore delighted to contribute to this collaborative piece on the future of insurance and thank both Aon and the City of London Corporation for the opportunity to share my insight.
There have been far too many reports to quote in recent years on the challenges faced by the insurance and wider financial services market. Anything from threats of cyberwarfare to climate change and pandemics (yes, they really were discussed pre-2020!) as well as the digital skills revolution, automation and AI. If anything, COIVD-19 has established at the forefront of our minds the need to respond to all these challenges, as well as the often- underrepresented issues around financial inclusion and a decline in access to financial services, but most importantly, to professional advice, particularly for vulnerable customers.
As a high street broker for 25 years, I saw first-hand the importance of being open and available for clients to access professional advice, and to build trusting relationships to ensure they got the best possible consumer outcomes. The underlying issue we have seen in the last year is that people need better financial support and protection. They need better access to financial advice to ensure they get the right protection for their needs and can understand what is insured and where they have uninsured risks, if any. Financial inclusion and the growing protection gap have been fundamental challenges for years, but COVID-19 has only served to exacerbate these issues and push those in most need into even harsher circumstances.
As an industry and a profession, we need to be able to look at the uninsured risks of our customers and determine if there is more we can do to engage them with them and to fill protection gaps. Yes, we need to establish where social policy ends and private sector services begin, but we also need to look at our risk appetite and determine how we can face the challenges of the present and the future.
Too often people discuss the need for government-backed reinsurance schemes, without fully exploring whether or not the market has existing capacity or ability to take another look – I like to remind people there is a long list of what are often termed as “REs”, there is “pandemic re”; “cladding re” and even the suggestion for a comprehensive “uninsured re”, but our duty first and foremost is to do all we can to meet these needs where we can ourselves.
Of course, that is not to underestimate either the opportunities or challenges we all need to be ready to engage with.
Digital transformation has changed the face of our society and pretty much all our ways of life, and the insurance sector is no different. Data sits at the heart of this revolution, and particularly in a sector like insurance, access to and innovative use of data and analytics can transform products, consumer access and the overall economic performance of the market, bringing in greater investment into communities up and down the country. There are opportunities through open data protocols such as Open Finance, learning the lessons from Open Banking and ensuring consumer protection sits at the heart of any new system. There are also opportunities in automation or better algorithmic processes and how this can deliver more tailored products and services to better match up with individual customer needs and expectations.
We also face the challenge of developing a different style of workforce – one that is fluent in data and digital technology in addition to financial products and services. But there is a concern I sometimes share that, if we are not careful, we will lose the human element of advice and insurance and our customers inevitably lose out on the benefits of professional support. These are extremely important relationships that can support people in vulnerable circumstances. Furnishing them with enough professional knowledge so they have confidence that the policy they have is right for them – is often the difference between whether they buy it or not.
Automation itself also stands to threaten jobs across our entire society, as is common with any technological innovation, and therefore an honest discussion on how we can innovate and automate, while futureproofing the profession and retaining our employees, is vital if we are to continue to attract talent and build a sustainable workforce.
On top of my role of representing the constituents of North Warwickshire, I have the pleasure of chairing the Insurance & Financial Services All-Party Parliamentary Group (IFSAPPG), which exists to act as a forum of engagement between Parliament, the insurance industry, wider financial services sector and the public.