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Thank you for the kind welcome.
It’s great to be here in London today and I would like to welcome all our participants and speakers, especially the Exchequer Secretary, Robert Jenrick, who will be speaking shortly and our friends at KPMG for partnering with us today.
In my role at Zurich I spend a lot of time travelling. I’ve been in the job for about four months now and I have had the opportunity to visit many of our businesses in EMEA (and spent more hours in airports than I care to think about!). Whilst the languages and cultures might be different, it will come as no surprise to many of us here today that the core of what this industry does in different markets is the same. A customer in Germany wants to save for their retirement, a small business in the UK wants to provide life insurance for their employees or a large multinational based in France needs to protect their properties all around the world. That’s what we do.
We allow people and businesses to get on with their lives safe in the knowledge that they have a trusted partner who is standing with them, helping them manage the risk. In short we play a vital role in society and help economies thrive. It’s why I continue to be proud to work in this industry, proud of the role we play and immensely proud to be giving the opening keynote speech at our conference today.
When I had the privilege of taking over from Andy Briggs as Chair of the ABI last year, one of the first things I did was have one on one discussions with the members of the Board – industry leaders representing firms right across retail and commercial general insurance, health, protection and long-term savings. And I asked them what was keeping them awake at night, what they thought about the future challenges facing the industry and what the ABI should be doing to help us chart those waters.
What struck me was that despite how different those businesses can feel at times, there was a reassuring consistency in the challenges that we discussed. Why reassuring, you might ask? Certainly not because the challenges themselves are straightforward, or because there is nothing to worry about over the coming years. No, reassuring because it reinforced to me the importance of the ABI, which uses Strength through Association as its strapline. The ABI helps us, its members, lean in to shared challenges, giving us collective strength through one voice.
So what were the topics that came up again and again in my discussions? In general, they fit in to five themes: continuing digital transformation, healthy ageing and care, innovative but responsible use of data and Artificial Intelligence, structural shifts in the market, and finally talent, diversity and inclusion. I’ll briefly touch on each of these.
First, continuing digital transformation. We have been talking about this area for a long time now, and there’s no doubt in my mind that the industry is in a much better place than we were even just a few years ago.
However, firms still have significant legacy systems challenges, and many outside the sector look at us and observe that not much seems to have changed. In overcoming legacy challenges, the narrative has shifted hugely on InsurTech over the last two years, as firms have come to appreciate that while trendy new tech start-ups could threaten our businesses, they also present opportunities for partnership such as Zurich’s partnership with Laka. Such partnerships may offer solutions that better suit the needs of our customers and provide a necessary wake-up call to get our own legacy systems up to scratch.
Second, healthy ageing and care. We know that western societies are ageing significantly, which will create greater health and long-term care challenges over the coming years. The implications for insurers are significant. How can long-term savings firms help to ensure that customers who spend almost as long in retirement as they do working have the funds for a comfortable retirement, particularly in a world of low investment yields and flexible retirement options? Ageing is relevant for general insurers too though, when we think about the needs of older people in accessing products and services.
How do we ensure that the way we engage with our customers when we sell insurance, offer renewal or handle claims is appropriate to any potential vulnerabilities they may have?
Third, innovative but responsible use of data and AI. We cannot overestimate how important it is to get the balance right on how we use data if we are to build trust in our industry, whichever lines we write. Insurers have always been in the “data business”, and in a world with 50bn connected devices in the not too distant future we have an opportunity to understand our customers better than ever before, tailor products, customise claims experiences and help customers manage risks before claims occur. But the world of big data and AI, and the arms race to be more sophisticated users of data than anyone else, present significant risks.
The current FCA market study into GI pricing is a very current example of the level of scrutiny that our use of data is under, and as AI develops further we must ensure that we remain on top of what our algorithms are doing, and that we are comfortable with that. Mixed in to all of this we have to keep an eye on the tech giants, to understand how they, and the way they operate, will come to influence insurance.
Fourth, structural shifts in the market. The environment that UK insurers are operating in today is undoubtedly a challenging one.
Solvency II, poor investment yields, a soft reinsurance market and the increased level of competition created by alternative capital have created an arena where we are seeing continued consolidation and innovative business structures. In the first six months of 2018 alone we saw around £33bn in deals for global insurance M&A.
These structural shifts are equally true in the London market - where firms are increasingly deciding whether they lean towards scale or specialisation, in retail GI – where the relationships and partnerships with MGAs are changing, to life and pensions – where we have seen a lot of back book consolidation in recent times (I’m sure Clive Bannister will talk more about this on the panel in a few minutes).
Finally, talent, diversity and inclusion. This is something we as an industry must do better at.
As the first woman in over 100 years to open this conference as Chair, I am also personally committed to it. So it is encouraging that data published today shows progress is being made at nearly all levels. A 5% increase in the number of women in Executive level positions is particularly heartening to hear. But as an industry we still have a long way to go and the lack of progress at Board level, where only 1 in 5 are women, remains a significant concern. It isn’t just about gender diversity either. We want insurance to be a welcoming place no matter what your ethnic background, your sexuality or if you have a disability.
Progress in this isn’t ‘a nice to have’. The world is changing and people’s expectations on what happens the workplace are changing too. For all that the issues I’ve set out above are important, if we can get this right there is a huge opportunity to change the way people think about our industry.
So five big themes and I managed to do it all without talking about Brexit. Well almost! Yet with one month to go, this remains a cloud of uncertainty.
We have long said that a transitional deal is essential for the industry and will give us time to agree the all-important future trading arrangements. As one of the UKs biggest net exporters, a creator of 300,000 jobs and the largest insurance sector in the EU it is critical that any future arrangement avoids the UK insurance industry becoming a rule taker. Should a positive agreement be reached I think there are huge causes for optimism in the UK insurance industry?
So, I hope you enjoy our conference. I look forward to participating in and listening to many interesting discussions and debates today. I certainly believe that the expertise we have in the UK market, and our proven ability to innovate, put us in good stead to respond to the challenges I have outlined this morning and come out stronger as a result. Thank you.