Spring announces itself in many different ways. In the London Market, as my millions of social media followers know, it is not until I have posted a photograph of the #LIIBAMagnolia in full bloom that winter can be formally called to a close.
In wider society I always work on the basis that you need to get through the Boat Race, the Masters and the Grand National. But in the heady world of the insurance intermediary trade association community, the key event is the annual meeting of the World Federation of Insurance Intermediaries (WFII). This took place at the beginning of March in Singapore. And so it is with a spring in my step that I can bring you news of the global issues facing our industry.
The key measure of the value of organisations, such as WFII, is their influence. And that in turn is reflected by who turns up to meet with us. So I am pleased to report that WFII is in rude health. In Singapore, we were joined by Yoshihiro Kawai, chair of the OECD-Insurance and Private Pensions Committee (IPPC); and by senior policy people for the International Association of Insurance Supervisors who dialled in on a Saturday morning as they were preparing for their own annual meeting starting on the Monday.
So, the two most influential supra-national bodies overseeing our industry made a special effort to hear what we have to say. And, as I have said before (see rants passim in this column), as these regulatory bodies exist some distance from any day-to-day accountability, it is important to have this dialogue so that potentially damaging ideas might be stopped at source – before they begin their inexorable drift through regional regulatory forums, such as EIOPA, into national regulatory handbooks.
WFII is also a chance to observe common themes across global markets. Most obvious at the moment is a renewed regulatory focus on broker remuneration. From a Royal Commission in Australia, to the EU’s Retail Investment Strategy, to some of the discussion around multi-occupancy buildings in the UK, regulators are questioning commission as a method of payment. Indeed they can use quite incendiary language when mentioning it; EU Commissioner Mairead McGuiness, for example, has a tendency to talk about “biased advice” and “inducements”, sometimes even “kick-backs”. Which is, arguably, not helpful. Our counter is that what is important is the best outcome for clients.
Look at countries in which commission bans have been implemented – such as the UK or Netherlands – and the lesson is such bans create an advice gap. And that means consumers make less informed decisions and sub-optimal purchases. Absolutely let us ensure that the end-customer understands how their broker is being paid and is comfortable with that and can assess the value. But don’t deliver damage to the very consumer you are there to protect through some populist regulatory zeal. And, while the focus is currently on the provision of advice around insurance-based investment products, and thus a little bit away from LIIBA members’ main territory, it has the potential to spread to non-life insurance if we do not effectively stand our ground now.
Intriguingly, when regulators are not dabbling with the creation of an advice gap, they are concerned about potentially emerging protection gaps – particularly in the areas of cyber and extreme weather-related products. These are huge challenges, but also significant opportunities, for our industry. There may well be a role for public-private partnerships to deliver the right solutions. And they are certainly areas in which the focus should be as much on building resilience into the front end of operations to mitigate risk as it is on providing insurance capacity when things go wrong. So conversations with OECD and IAIS will be hugely valuable to ensure that regulatory attention is helpful in allowing the industry to come up with the right answer and does not seek to create that answer itself.
Elsewhere we looked at the potential for artificial intelligence (AI) to have a major impact on the insurance industry. As you know, I demonstrated my complete mastery of Chat GPT last time in these pages so I was well positioned to contribute. Our main conclusion was that, for now, AI lacks contextual thinking which limits its ability to take over the world. But it is getting cleverer every day.
Insurance is a global market and exhibits global themes. So it is vital that we have institutions like WFII to ensure a co-ordinated industry input into the global debate. Working at this level we can ensure that there is a level playing field across the world that allows insurance brokers to thrive and their clients to find the right risk management solutions at the right time and cost. It is important work. And, just as much, the discovery that others around the world suffer from the same regulatory irritations as you do sometimes is hugely cathartic. It puts you in the right mood for the onset of summer.