Ask your average man on the street what his perception is of the insurance industry and the response is likely to be an unflattering one. I would suggest that much of that tainted perception is due to a lack of trust in the industry.
Disconnected from the real world, only existing to squeeze more money out of the consumer, seemingly intent on not actually paying out in times of need; the complaints can be easily imagined.
I believe therefore that the time has come for the insurance industry to consider some form of social charter in an effort to repair the lost covenant with its disenfranchised stakeholder communities.
A charter which reminds us of the industry’s roots in protecting communities at their times of need and being a force for good.
Some will no doubt say that such thinking has no place in an age defined by straightforward market economics – woolly concepts underpinned by PR spin, they’ll claim - but I disagree.
A firmer line of defence
The banking sector currently finds itself under concerted pressure to define what its true purpose is. Witnessing such presure, insurers’ response has been to point out to regulators and goverment that “insurers are not bankers”.
Such an argument will not stand firm for long once the spotlight is shone more brightly on the insurance sector – and that time will inevitably come. This is hardly the barricade around which to mount an heroic resistance.
Without something in place to properly define what the industry’s purpose is - exactly what is it for? – I fear that a combination of media and citizen pressure, all facilitated by today’s digital and social media platforms, will take the decision out of the industry’s own hands.
A force for good or a money-making capitalist concern? In black and white terms, that’s what this debate boils down to. But do the two need to be mutually exclusive? I think not.
Consider the genesis of the modern day insurance sector. The investors and under-writers who gathered in the Lloyds coffee shop and effectively sanctioned the early trans-Atlantic trade voyages; Nicholas Barbon creating fire insurance for the Londoners emerging from the smoky ruins of the Great Fire; farmers creating the early mutuals designed to ease their communities through the vagaries of crop cultivation.
None of them were motivated by solely altruistic means. The desire to turn a profit was always present – but the insurance was provided, I would suggest, as a force for good.
So what happened? Well, market economics and competitive forces understandably took over, leaving us with an industry over-run with jargon and tied up in all sorts of contractual knots. Individual insurers now appear to determine their purpose solely by the range of products and services they offer and the manner in which they are offered.
True purpose should go deeper than that. It should be about a fundamental commitment to why insurers exist at all; a moral compass if you like, rather than a catalogue of products.
Moving away from contractual language to points of principles would be a good start. Saving for old age, worried about health problems, needing to release equity – this is the language of the consumer, not the legalese which the industry and regulators appears wedded to.
The latter is a key part of the problem because, when combined with lengthy, wordy contracts and T&Cs, it has made clarifying the purpose of the industry nigh on impossible.
A social charter might just help remind insurers what they are actually here to do and to provide guidance in those murky waters between turning a profit and protecting their communities’ best interests; a morally uncertain place which I think every insurer, if they are being brutally honest, has had cause to visit.
In terms of this social charter, let’s be clear that I am not talking about some sort of industry kite-mark. The last thing we need is something else tied up in regulation and standards!
Instead, I’m thinking of a social charter which draws inspiration from wholly altruistic bodies (the UN or Greenpeace for example) and other industry sectors which find themselves under near constant societal pressures (utility companies for example) or who operate in a morally difficult space (such as drug companies).
Some of the thinking for such a charter is already in place in terms of insurers’ corporate social responsibility activity and their interaction with current customers and the communities in which they are physically located.
But this thinking can go further, to come together under one single banner, underpinned by a healthy dose of, dare we say it, old-fashioned, traditional morality.
An insurance social charter should:
If a charter were to be created, I think that it would need to be principles-based and likely to focus on items such as corporate strategy, mission statements, ethical product creation and how the industry should contribute to society.
Issues which would then come under the spotlight would include how corporate ambition can be married to consumer expectation; those products which are never likely to be claimed against and create unreasonable profits; and the extent to which insurers’ large balance sheets can be used to fund infrastructure projects and thus stimulate economic growth.
Not for one minute do I think that such a charter would solve all of the industry's challenges in one fell swoop.
However, at a time when the concept of trust – in government, the media and our major corporate institutions – is under such heavy fire, I believe that a social charter may go some way towards rediscovering the trust which is so clearly missing in our industry.
Get this right and public perception of the industry should improve. Make that happen and more money will come through the door. Morality and commerciality need not be total strangers.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.