LEGAL & GENERAL, one of Britain’s biggest insurers, threw the future of the industry’s trade body into doubt yesterday after announcing it was resigning its membership.
L&G said it will quit the Association of British Insurers (ABI) by the end of the year as a large part of its business falls outside the body’s remit.
The company’s decision follows changes in the mandate of the ABI as a result of the merger of its investment affairs division with the Investment Management Association earlier this year.
In a statement, chief executive Nigel Wilson, said: “A large proportion of our business lines will fall outside of the remit of the ABI, given that the business of Legal & General has significantly evolved and in 2014 our business is now as much investment management as insurance.”
The ABI tends to concentrate on the general insurance sector, where Legal & General has only limited business, he said.
The body has almost 300 members, accounting for 90 per cent of the UK insurance market but sources told The Scotsman that there have been grumblings about its effectiveness and relevance for some time.
“The ABI is seen by many as a wet blanket and seen as very expensive, cumbersome, lightweight and consistently ineffectual,” said one source. “If you have a big company and want to influence government, you will want to do it quickly and effectively and to your company’s benefit. You have to ask where was the ABI on the Budget annuity announcement?”
Insiders have questioned why Chancellor George Osborne took advice directly from chief executives in the industry rather than from the ABI, which is supposed to represent its views.
L&G’s decision prompted speculation that other bodies would follow suit, but none said they had any immediate plans to do so. However, the loss of one of Britain’s biggest insurance companies was seen as a huge blow to the ABI, led by former Edinburgh-based Aegon UK boss Otto Thoresen.
It was rumoured that Standard Life was reassessing its membership, but in a statement Barry O’Dwyer, a divisional managing director at the company, said: “We believe our industry achieves a great deal by working together and the ABI plays an important role in helping to deliver the right outcomes for UK consumers. We have no plans to change our membership of the ABI.
“Through agreed codes of conduct and by influencing reform, membership brings real value for our customers. Pensions reform has been ongoing and, following this year’s Budget, our industry is readying itself for another watershed change next year when people will have increased flexibility around access to their pension savings.
“The ABI and its members have been working with the government and the regulators to help achieve the best and most practical outcome around these changes for customers.”
Prudential, another company thought to be considering its position, has made it clear that it is dependent on international markets and has a thriving sizeable fund management business in M&G.
In a tersely-worded statement, it said: “Prudential believes it is important for insurers to have a forum for discussion about issues affecting the entire industry and a strong collective voice, especially at a time of change both in the UK market and evolving domestic and international regulation.”
Thoresen, director-general of the ABI, said: “As a trade association, of course we are disappointed by the resignation of a member. However, the ABI’s continuing strong membership represents over 90 per cent of the insurance sector.
“The great advantage of the ABI is that our members work together across the usual corporate boundaries to tackle issues that are important to consumers and to deliver an agenda for reform.
“The board of the ABI believes the industry is at its most effective when working together to respond to legislative and regulatory change.”