At a key time for state and insurance sector relations, Owain Thomas meets the All Party Parliamentary Group on Insurance and Financial Services' new chairman, Jonathan Evans MP
There may never have been a more important time for the protection and health insurance industry to have the ear of government and a favourable view point from those working in Parliament.
For those in the market keen to make a good impression in the halls of power, one of the first doors to be knocked on should be that of Jonathan Evans MP, chairman of the All Party Parliamentary Group on Insurance and Financial Services.
Evans, who has more than a decade of experience working in the financial services sector, replaces John Greenway in the role, who after 23 years as an MP and 18 as chair of the group, stood down at the last election in May.
With the first six months of the coalition government being fragmented due to summer and conference season breaks, the group has yet to formalise its plans for the present Parliament, but, Evans explains, there is significant interest from both Houses and he is particularly conscious of the need to inform ministers of what the private sector is capable of.
“Obviously we already know who the people are with their hands on the leavers in terms of financial services, particularly ministers in the Treasury and, to a lesser extent, the Department of Business,” he said.
“Is it likely government ministers are always getting all the best advice in relation to insurance matters? I’m not absolutely sure they are, and this is now a role for the all party group.”
The coalition government’s much anticipated Spending Review has dominated discussions throughout the protection and health insurance markets and indeed, the nation as a whole over recent months, and Evans spoke to COVER just before Chancellor George Osborne delivered it to Parliament, revealing £7bn of additional welfare benefit cuts (taking the total to £18bn).
The scale of benefit withdrawal and the opportunity it presents to insurance markets is apparent to the Conservative MP for Cardiff North and he believes now is the time for the sector as a whole to step up to the plate and show it is ready to take on the added responsibility. However, he also warns that the shadow of the payment protection insurance (PPI) scandal, although largely a general insurance issue, is still hanging over the protection sector.
“I would argue there’s a major commercial opportunity for those who are engaged in offering protection products,” he said.
“What we are seeing are ways in which universal benefits are under significant pressure. Putting aside the political debate, faced with that background, is there more that the insurance industry can do in terms of producing innovative products?
And is there more that the public can do in terms of protecting themselves with insurance cover of one form or another?
“But let’s not get this wrong, the industry in relation to one aspect, PPI, has got an abysmal and rotten record,” he added.
Unfortunately, the concerns are not solely limited to PPI. As Evans acknowledged, despite coming through the credit crisis unscathed, the entire financial services sector, including insurance, has been tarred with the same brush thanks to the banks’ actions.
“Number one, it is unfair that we have all been lumped in together and it is a job for the industry to shout out the fact that its record is much better than people would believe,” he said.
“The government’s mindset is that all financial services need to be much more heavily regulated, but the insurance industry needs to use a bit of a megaphone to annouce that it came through this crisis well. We have got to do a little bit more to demonstrate that this lack of confidence that people have in the financial services sector should not be applied to our industry.
“We need to get the Conservatives to a better place, feeling they can have more confidence in the industry,” he added.
Should the industry succeed in clearing its name and making a case for involvement in delivering state services, Evans believes there are ample opportunities available and a near-necessity for state and private sector cooperation.
Open to innovation
“The financial constraints the country is under mean the government is open to any innovative suggestions to the way things can be done better than now,” he said.
“But still, there is a mindset block within the public sector which I have seen face to face, that the initial approach from civil servants in public bodies or advising ministers is ‘no we don’t need to do this and it would be hideously expensive if we did’.”
Evans pours scorn on this claim, suggesting that research conducted during Tony Blair’s time in power revealed private sector involvement in NHS medical negligence operations would have saved between £2bn and £3bn a year.
“I believe this is worth exploring more, and it’s only one example of ways in which previously, we have said ‘we have to do things this way, it is the way it has always been’,” he said.
“Well, we are beyond those days now. For example the costs of long-term care. There is a big agenda coming up and I think the industry is bound to be working very closely with consumers and with government in trying to see if there is more of a role for it in that sector.”
One of the most pressing issues affecting the income protection (IP) market is the impending removal of the default state retirement age. Combining with the introduction of age-discrimination legislation, it could mean employers and providers are left liable for claims continuing until death, rather than retirement, as products can no longer be underwritten to a certain age.
This could result in either a significant increase in premiums, or in the worst case scenario, a collapse of the market altogether.
It is clear though, that Evans will need more persuading by the industry if he is to back its concerns and relay calls for some form of exception on to the government.
“I’m certainly prepared to look at that, and maybe there is something that needs to be addressed in this, but the concept of scrapping a forced retirement age is absolutely right,” he said.
“B&Q is an object lesson in involving older workers. We are all living older and the longer we can continue to make a constructive contribution the better.”
With his previous experience as a director of NFU Mutual, Evans already has first hand knowledge about the problems the Retail Distribution Review (RDR) is having on many IFAs. However, he believes the answer is for more dialogue between parties rather than dropping it altogether.
“I’ve sat on a board dealing with the RDR and some of its outcomes can, it seems to me, look perverse,” he said.
“But I’m not going to say ‘and therefore this is something that needs to be scrapped’. There are issues that are thrown up by the review that need to be addressed. But I understand the reason for the RDR. I think issues in relation to conflict need to be addressed, and people need to feel that they get the best advice.
“I view these as things that we have got to iron out at the margins, rather than reasons for a big review.”
The message that comes across loud and clear from Evans is that, while he considers himself to be part of the insurance community, he is not in his present position there to simply promote and explain the potential services and benefits it can provide to the government and British public.
“It should not be me, as a politician or chairman of the group to be shouting this, it should be the industry,” he concluded.
If the industry ever needed a rallying cry from government to work together and speak with one voice, this is it.
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