Good afternoon everyone and thank you to Age UK for inviting me today.
I was struck by much of what Julia and Martin had to say. The creation of the Financial Conduct Authority marks a defining moment for British financial services. And it signals a time to rethink the way we do business with our customers.
In the new regulatory regime, what I call the „new normal‟ economy and in the face of demographic change; the insurance industry‟s two core roles remain unchanged.
First, to provide consumers with financial protection should something unexpected happen in their lives.
And second, to invest our client assets in companies, driving growth in the wider economy. And ensuring that money invested now can make a good return over the long term.
But what is clear is that the way we do business must evolve alongside global, cultural and economic shifts.
And the effects of an ageing population are amongst the most significant drivers of change. The UN forecasts that the over-60 age group will triple in
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size to 2 billion by 2050 – more than twice the rate of global population growth.
I have been at the ABI as Director General for almost a year now. In that time, I have done two things which are particularly relevant to today‟s debate.
The first, is to grow older and gain more grey hair. When preparing my speech for today‟s event I was struck by the various definitions of an older person – and realized how close to 60 I am……how did that happen?
But according to the latest SAGA Quarterly Report, being in the over 50 bracket places me firmly within the realms of our ageing population.
As some of you may agree, inclusion is a powerful way to focus the mind.
The second thing I have done, is restructure the ABI and our Business Plan. Placing the consumer firmly at the heart of what we do.
We now prioritize our work through Principal Issues, each of which has a specific consumer objective.
Whether it relates to our work in motor insurance, responding to new European insurance directives, investing in the economy, or the pricing of risk.
We have also stepped up our engagement with consumers and their representatives through the creation of a dedicated consumer team and a Financial Conduct department.
But so that we can get the most out of our engagement with older customers, we first need to increase our understanding of what concerns older people, when they use our products and why.
The latest SAGA Report, an effective barometer of the over 50s living standards, happiness and health, revealed that for the last Quarter in 2011...
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...across all the different age cohorts over 50, the biggest concern is the rising cost of living.
Concerns have also risen about savings income, interest rates, quality of healthcare and crime levels.
Those in the least wealthy groups are more concerned with the rising cost of living than they were twelve months ago.
While those in the most affluent groups are more worried about the effects of low interest rates.
It is with these findings in mind, that we see older people cannot be treated as one homogenous group.
They – we – are an extremely diverse group in society. We are living longer, healthier lives.
And we are powerful, both in spending ability, with an estimated £30billion in the grey pound, and, in numbers. As of mid-2010, 35% of the UK population was aged over 50. By 2050 almost half the population will be over 50. (46%).
At a recent meeting with the Age Action Alliance we discussed issues around access to information; helping people to manage through retirement; equity release; the effect of EU regulations on people with diabetes; volunteer driving; and the use of age in determining availability and price of insurance products.
And those are just a few of the diverse issues affecting older people.
With such a wide ranging and large market to cater to, the question today is of course, how can the Financial Services industry deliver for Older People?
Now, I know that a cause of frustration to many about insurers is the way in which we price risk on the grounds of age, health, gender and disability.
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Insurance is based on the principle of fairness. Where each person pays a price equal to the risk they bring to the pool.
This is the foundation upon which our industry works – indeed, it is the only way that we are able to reliably meet our liabilities. The regulator would have something to say about our business model if we didn‟t follow this approach.
It was Aristotle who said “the worst form of inequality is to try and make unequal things equal.”
However, while this is the underlying principle of our industry, it does not mean that we will not act to ensure that all our customers have access to a fair deal.
I am pleased to announce today that the ABI has led an agreement, signed by the British Insurance Brokers Association and the Government, which will improve access to motor and travel insurance for older customers.
This agreement goes beyond the requirements expected in the Equality Act and will come into force in April.
It will require all ABI members, who do not provide insurance because they apply age restrictions, to „signpost‟ customers to an alternative appropriate provider, who will offer a product regardless of age.
We will also be increasing transparency by publishing aggregated claims data each year, so that consumers can be confident that age is relevant to the assessment of risk, for both motor and travel insurance.
We are working closely with Chief Executives of our member companies on how the signposting agreement, to be launched next month, will work in practice.
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In particular we are aware of the diversity and different signposting preferences for people at different ages.
Our research shows that while 41% of drivers in their late 60s would prefer to use a website, this drops to 25% for those aged 75 and over, with the remaining 75% of over 75s preferring to use the phone.
We need to be able to communicate in a way which works for the consumer. For example, some people will have specific communication needs dictated by their levels of hearing or sight, and so the industry must find the best way to reach them.
Either way, the resounding finding is that everyone shops in different ways.
And so the Age Agreement, will reflect that.
The ABI will continue our consumer research, so that whatever the preference of our customers, we engage with people in a way that works best for them.
This shift comes back to Martin‟s point about embedding a culture that puts customers first – and that is why the industry is making significantly more effort to place ourselves in the customer‟s shoes.
ABI Priorities for Older People
Martin and Julia also both talked about the need to make sure people are getting the right advice, in the right way.
The ABI‟s ethos for consumers is „the right products, at the right price, to the right people, in the right way.‟
For older customers, some of the initiatives we are working on include a new Code of Conduct, announced on Monday, to help those at the point of retirement to shop around to get a better deal on their pension income
The Code of Conduct will require all ABI members to:
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-provide clear and consistent communications;
-highlight enhanced annuities and the higher income they can offer;
-signpost customers to advice and support from different, trusted sources like the Money Advice Service;
-establish transparency in the annuity market so customers have a clear picture of how individual providers‟ product offerings fit in with the wider market.
And we are working with our members to rethink the traditional, outdated approach to retirement.
Retirement will increasingly become a gradual process, not a sudden halt.
This will change the shape of our work and leisure patterns in later life.
So we must ensure that the provision of advice, information, social networks and the insurance products available to people, reflect these cultural and demographic changes.
We have worked closely with members to ensure that older people can get insurance on their volunteering activities, for example.
As Age UK and the Age Action Alliance have highlighted, volunteer activities are mostly carried out by older, retired people, which can have insurance implications.
Before I conclude and we begin our discussion, I will say a few words on long term care.
The partnership model proposed in the Dilnot report on funding for long term care is an important way of spreading care costs. And the ABI supports it.
However, it is important that a cross party consensus is sought to drive these proposals through and this solution is not kicked into the long grass.
Left to the dustbins of public policy history, like so many other long term care reports and proposals before it.
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The industry and Government‟s job on Andrew Dilnot‟s proposals, is to ensure that people are clear about what the State will provide, and what their own responsibilities are.
So that we can implement effective solutions with clarity and certainty.
Conclusion
Society is travelling into the unknown as the effects of ageing become more and more significant.
And so the ABI‟s priorities are to keep pace with these changes.
And to contribute to the debate, innovating and tailoring our products to meet the needs of our customers living in the changing world around us.
Like the Financial Conduct Authority and Joseph Rowntree Foundation , we want to understand more about the issues older people face.
To make sure that they are treated fairly. As all consumers should be.
And to ensure that they get the right advice, at the right point in their lives.
So that they can plan for the unpredictable, and have access to products to protect themselves against unexpected events.
As we look in the mirror at our greying hair, tomorrow‟s demographic changes are looking back at us.
Indeed, we have now reached the point where they are already here.
Let‟s make sure that we are taking the urgent and necessary action now, so that we can all take advantage of the positive aspects of living longer lives.
Thank you.