In April, the Independent Governance Committee’s (IGCs) set up by insurance companies to keep an independent eye on their (the insurance company’s) behaviour, will report. There has been some confusion about who they are reporting to, to me there is no confusion, they are reporting to the people who have bought and maintain pension policies.
There is also some confusion among the IGC Chairs that I have met, about why the IGCs were set up. The Association of British Insurers (ABI) would like to think they were set up because of the percipience of the ABI who saw a need for independent oversight of their membership coming. Those not in the ABI see things differently. They see the IGCs as a last ditch concession from the insurers to avoid a referral to the Competition Commission, following a damning indictment of their behaviour by the Office of Fair Trading.
As with do the Banks, the insurers see time as their friend, the pressure for change has subsided since the OFT report in 2014 and much of the pressure on them has been relaxed.
When I talk to the IGC chairs, the conversation is usually prefaced by
“whatever I say, you are not to blog about it”.
I get the same warning from regulators. Social media appears to be something that the pension establishment appears to regard as under their control. I value the “I” in the IGC and I value the Henry Tapper in Henrytapper.com . If we don’t have individuals expressing their opinions, then social media will have been castrated. So for any IGC Chairs or regulators who think that I can be bought with lunches, bought out with threats or shut up by the powers of big Government, bog off!
My suspicion is that many IGCs see themselves as part of the marketing departments of the insurers that set them up, recruited them, pay their wages and buy their lunches. The temptation to promote the interests of the shareholder ahead of the policyholder is evident in many of the conversations I have had (or overheard).
It is important that the regulators do not allow the IGC to become part of the marketing strategy of the insurer as they are allowing the Mastertrust Assurance Framework to become a part of the marketing strategy of occupational workplace pension providers.
I even have even been accused of being disloyal to an insurer for criticising it – by the Chair of an IGC! I don’t think this IGC chair is corrupt, but when you have spent your lifetime living with these conflicts, it is hard to extricate yourself from the mire.
Fellow consultants, many of whom appear to see it as possible to advise the insurer and distribute its products, are also silent on IGCs. There are clear conflicts of interests here, I suspect that the numbers of former consultants sitting on IGCs is an unhealthy state of affairs.
Which is not to say that IGCs are corrupt…
Talking with IGC chairs , I get the impression that they feel so much part of the furniture that they cannot tell what the room looks like!
One IGC Chair (in fact a multiple IGC Chair) asked me this month what I thought the measure of the IGC’s success would be. I think this is very easy; an IGC must act for its policyholders to ensure VFM is being given.
Whether the IGC gives its insurer a clean bill of health or criticises it, it must make clear to the people for whom it is for – its policyholders – what it is up to , how it has gone about its business and how it has come to its conclusions.
The IGC should not be grandstanding to the Regulator , or the press or even to people like me. It should be focussed on its customers, the policyholders, for whom it was set up.
But it should not expect for its policyholders to be an easy audience. They will not expect to read the reports of the IGCs directly, they will come to the reports through attention brought to them by Government, the Press and even by commentators by me. And it is right that these people, who have the time and interest to read the IGC reports, amplify the messaging of the reports or – where the reports are obviously a load of flannel- point this out.
If we leave it to the ABI or the Investment Association or the PLSA or any of the other bodies who depend on the membership levies or the advertising of the insurers, we will hear little or nothing of these reports – other than the Old MR Grace’s message of governmental oversight..
“You’re all doing very well”
It is precisely because of the glacial weight of the lobby to protect insurance companies , that the IGCs are so important. If they become an extension of the insurance lobby, not only do they lose their capacity for good, they add to the capacity for bad.
The IGCs are our eyes and ears ensuring that we are getting value for money. They claim it is hard to define value for money – it is not; you have to establish what money is being spent on delivering pension outcomes (by the policyholder) and then you have to work out what value is being delivered for that money. And then you have to deliver a value for money verdict.
If the IGCs had a proper sense of social purpose , they would by now have agreed a common framework between themselves and with the wider public, for delivering their verdict. This would have included the measures for determining what the policyholder is paying, what he or she is getting and a system for expressing what is being delivered as a score.
This is possible, it is what is done by schools (the Ofsted report), by stockbrokers (the buy, sell or hold notice), even by Pension PlayPen (our output report). To do it, you need the courage of your own convictions.
But we have seen no framework emerging, nor even engagement with the public about what such a framework might be. Instead we have had silence, as the IGCs prepare for April. Silence can be golden, but I worry…
So be aware IGC chair, the IGC reports you produce will be under intense scrutiny from the Regulator, from the press and from bloggers like me. I don’t suppose that all in Government, the Press or even all the bloggers will approach the IGC reports- delivered in April with the avidity that I will. I expect that the noise from the budget and the EU referendum and all kinds of other things will render commentary on IGC reports relatively un-newsworthy. But that should only make those who bother -try louder- shout louder.
Ultimately, the policyholders need to engage, if they cannot or will not engage, they cannot get savvy and without being savvy , they (we) have no hope in changing the way things work.
UK insurers own much of our pension wealth, they are our stewards. The OFT report – and much that has happened since, suggests that they have been bad stewards for all kinds of reasons and in all kinds of ways. People like me know where the bodies are buried. We want a proper exhumation (of the legacy) a rigorous assessment of the value for money on all pensions managed by the insurer and a decent action plan to ensure that if matters cannot be addressed today, they are addressed tomorrow.
Anything less will not do.