11 May 2016
AFM’s conference for Non-Executive Directors took place on 10 May. A theme that emerged from the start and which pervaded through the day was ‘disruptive influences’. My thanks in particular to John Rowland of Cicero Consulting, who introduced the theme as part of a presentation which drew on his influential report on the subject, published alongside the CII in January. Inevitably, much of those disruptive influences are technological, and include everything from the use of big data to cyber crime, from DNA screening to driverless cars, and from the automation of much of the service industry to the potential for wearable technology. The degree to which new advances will affect our lives and businesses may be immeasurable, but that should not prevent our sector from beginning to assess the opportunities and risks to their business. As John explained, it took a long time for policymakers to respond to the advent of Uber, by which time they had brought about a sea change in the taxi industry, and regulation was forced to respond to the reality of the business model, rather than the ethics of it. Could peer-to-peer insurance create the same level of disruption in insurance? In banking, the revolution in Fintech, is leading to suggestions of four models of banks in the future: existing players that invest heavily in technology to piece together legacy systems; new start challenger banks, with technology at their heart; the distributed bank, where a number of service providers come together under one platform; and the disintermediated bank, where consumers can draw on the best service providers available in a very flexible way1. In our sector, the possibility of small mutuals working together, to create a shared platform, may be one obvious opportunity to leap-frog the traditional larger insurers, constrained by large legacy systems…
1
credited to Alessandro Hatami, Lloyds Banking Group
Collaboration and partnership driving growth in the UK financial mutuals sector Last year, AFM and the Building Societies Association, agreed to sponsor a new piece of strategic research by Kellogg College Oxford. An overview of the work was presented at the AFM conference in 2015, and the full academic report is published today (11 May). The report explores the notion that closer collaboration between members of the mutual sector has the potential to offer a core source of growth for the future. This may take many forms, from shared development of the back office, to selling each other’s products, to greater levels of interdependence. (Naturally any form of collective work should recognise the risks of acting anti-competitively.) The report goes on to explore examples of effective collaboration in other parts of the world, including in countries where the mutual sector remains much more prominent. At the start of the year AFM members agreed a new set of priorities for the trade body. This included a greater focus on working together. So we will spend time this year exploring how to make practical use of this report, as well as a range of projects already in development that recognise the benefit of closer co-operation between members. A copy of the Oxford University press release is available to view on the AFM website, along with a copy of the full report. Engaging with your members Back in 2014 AFM ran a series of roundtables and conference presentations on member engagement. Members were keen to share good practice and to explore ways to encourage more members to participate in the running of the organisation. This after all is a large part of the legitimacy of a mutual organisation: that it is run in the best interests of its members, and that its members are involved in key decisions affecting their ownership rights and the future direction of the business. We published an overview of our member engagement work in time for the 2014 conference: http:// w w w. fi n a n c i a l m u t u a l s . o r g / fi l e s / fi l e s / 2 7 1 7 % 2 0 A F M %20Member%20engagement%20leaflet.pdf Unlike other aspects of corporate governance, there is very little published at present in the way of principles for member engagement. We have begun to explore how our
sector can work with building societies and cooperatives to establish a common agreement on what good member engagement looks like. This promises to be very fruitful work. As part of their recent roadshow meetings with AFM members, the PRA has shown a good deal of interest in how the sector reaches out to and involves members, and as a result the degree of accountability of the board. New ways of working As I’ve reported in recent newsletters, AFM has been going through an interesting change process in recent months. A new operating structure and a revised set of priorities give clarity to our work. A key theme for AFM in the future is on ‘working together’, given the clearer common purpose and shared interests of our members. Many of our current and planned projects reflect that sense of shared destiny. It is pleasing also that the sense of greater collaboration has extended to AFM’s work. In recent weeks a number of members have come forward to help the secretariat with some of our back office activities, from managing the finances, to revising our online services. As a result we have been able to move a range of our services from external suppliers to in-house, with a significant reduction in costs, and hopefully no loss in standards- you can be the judge of that: for example, this month’s new-look newsletter was entirely produced by me! Such gains in efficiency are all the more crucial in our new operating environment, where delivering value for money to members remains just as important. New ideas and support are always welcome. Other news in brief: • Solvency 2 and rating agencies: I wrote to CEOs of AFM members last month, with a summary of the success we had achieved in negotiating fairer pricing for the use of ratings data by our members. We first raised concern on this with the PRA 18 months ago, and it is pleasing to see that, with prompting by EIOPA, they are now surveying firms on the costs of obtaining licenses. This is a welcome development and will help achieve greater proportionality within Solvency 2, and which also reinforces the value of the early, collective approach AFM and its members have taken on this issue.
• Leadership Development: the new AFM Development and Conference Committee recently approved a new Leadership Development programme for senior staff in AFM members. There are still places available on this year’s course: please contact me for more details. • Cash plans and IPT: as I reported in the March newsletter, AFM wrote to the Chancellor ahead of this year’s Budget, seeking the opportunity to set out our concerns about the impact the tax is having on small health cash plan providers. We recently met with HM Treasury and HMRC, who provided constructive views on the grounds for seeking an exemption, and also suggested an approach to FCA about the elements of the design of the product that require it to be treated as insurance. Treasury encouraged the sector to co-ordinate a response to the issue, and to raise concerns via MPs; we are exploring how best to respond. • ICMIF’s Global Mutual Market Share 2014 report has once again demonstrated that mutual and cooperative insurers – which collectively insure more than a billion lives - are the fastest growing part of the global insurance market; creating jobs; keeping prices fair; and extending coverage all over the world. But with one notable exception: China, and even there ICMIF has found a new interest in the model, with laws passed in 2015 that should see a number of new mutuals established. •Plans for the weekend? I’m pleased to announce AFM members can now enjoy special weekend rates across the Hilton group of hotels in the UK and Europe. To obtain 30% off the best available rate for bed and breakfast, visit hiltonpublicsector.co.uk/leisure or contact me for more details (proof of membership is needed on arrival).
Thanks for reading this month’s newsletter: please read the other articles in this month’s edition.
There’s more to AFM… For more information on the work of AFM, visit our websites: • www.financialmutuals.org for members and all professional contacts • www.funtosave.org
for the youngest children, their parents and teachers
• www.savingsquad.org
for 7 to 11 year olds, their parents and teachers
• www.AFMgovernance.co.uk
for corporate governance compliance
You can contact us by: • • •
Phone: 01472 852800, E-mail:
[email protected], and In writing: 7 Castle Hill, Caistor, Lincolnshire, LN7 6QL.
