“Ireland set fair ... but what does the future hold for the Broker?"

The Industry Leaders conference of The Insurance Institute of Ireland on Thursday 4th October 2007 saw Sean Fitzpatrick, former captain of the All Blacks rugby team, lead off the day's proceedings by illustrating the power of "the brand" and the need to focus on being the best.

The Tanaiste and Finance Minister, Brian Cowen T.D. gave a realistic appraisal of the current state of the economy. Whilst GNP grew by a commendable 6.5% last year, it had slowed to a 5.7% increase in the first half of this year. The medium-to-short term prospect has deteriorated somewhat, predicated by a moderation in the number of new housing starts.  However, the Government will continue its prudent fiscal policy by prioritising investment in infrastructure, education, science and innovation so as to equip Ireland to meet the challenge of a rapidly changing global economy.

The Minister recognised the important part that the insurance industry plays in the Irish economy, both as an employer and as a facilitator of risk transfer, thus allowing the economy and Society to move forward with confidence. He highlighted the pivotal role of the insurance sector in linking up the needs of savers with those of firms who require capital to grow their businesses.

Adoption of the Solvency II Directive, currently being reviewed by the European Council, should incentivise risk management and provide the platform for a more efficient marketplace. This should benefit the insurance industry and the consumer alike. Finally, the Minister was confident that the insurance sector would make a significant and productive contribution to the debate arising from the forthcoming publication of the Government's Green Paper on Pensions.

Dermot O'Brien, Chief Economist at NCB Stockbrokers, confirmed that the optimistic views expressed in "2020 Vision" had been fully justified. In the last 10 years, the Irish economy had doubled with living standards increasing by 80%. No other economy in the EU had achieved such growth, which had been employment intensive. The economic future looks to have hugely positive potential with demand growth fuelled by the dynamic of the population.

Good news for the insurance sector was revealed in the spending pattern of consumers, taken from the Government's Household Survey. Annual growth in Pension savings was forecast at 20% compound, as the "baby boomers" of the 1960s and 70s reached their forties. In addition, non-residential property construction is running at 5 times that of the 1990s. However, Mr O'Brien warned of huge problems in future supporting the pension requirements of an ageing population, combined with an increase in expenditure on Health. He suggested that only 2 out of 6 of the population might be working in 20 years time!

However, Ireland's immediate economic outlook looked good with productivity growth remaining steady and higher than the rest of Europe. This would be supplemented by the proposed substantial increase in Public spending on roads and housing.

Stuart Purdy, Group Chief Executive of Aviva, outlined the experience of the Aviva Group in the international markets and the various distribution channels used. Bancassurance, distribution in partnership with banks, had been particularly successful in Ireland as a result of Aviva's association with Allied Irish Bank. This had resulted in an increase in sales of Life and related products of 60% in the first year!

The resilience of the Broker community in coping with increased commoditisation of insurance products was admired by Mr Purdy, who saw Brokers as the bedrock for business in the commercial market where greater professional expertise in advising clients was required.

Grant Ellis, Chief Executive Officer of Broker Network in the UK, forecast the demise of the High Street Broker as their traditional business is being absorbed by the likes of Tesco and other "branded" consumer organisations. The day of the big fish in the local pond was no longer a factor, as regional firms were losing out to Consolidators. In the UK, some 500 out of a total of 4,500 brokers were now part of a network. In addition, the age profile of smaller Brokers and a lack of succession was accelerating consolidation.

The increasing trend for Brokers to accept interest from insurers, looking to "guarantee" their distribution channels, was largely due to the credit crunch elsewhere. However, Mr Ellis forecast that new broking operations would be created as they fell out with the Consolidator. He also expected to see greater use of the internet in the sales of Personal Lines through Aggregators but warned that lapse rates could be very high. Ultimately, the balance of power lay in the distribution system. Ironically, Broker Network has since been approached by AXA and its competitors, Towergate!

Mr Purdy acknowledged that the challenge was to manage competing systems of distribution but, in his experience, consumers wanted to buy through different channels depending on the product required. Both Mr Purdy and Mr Ellis agreed that the high profile floods would make it easier to justify increasing rates in the UK, but that it would harder to convince clients in the Irish market even though there had been a significant deterioration in results.

Professor Ragnar Lofstedt gave striking examples of the imbalance between Public perception and reality regarding various elements of risk. He suspected that the improved decline in road deaths would sadly not be sustained, as young drivers thought they were invincible. Aidan Cassells, President of The Insurance Institute of Ireland, said that the industry cared about Society and everything should be done to ensure that lives were not lost unnecessarily.

The underlying theme of the conference was how to build the industry's reputation and regain the trust of consumers. There should be a partnership between the industry and the various regulatory bodies to enhance the image of insurance. The consensus was that greater professionalism would go a long way to achieving this and it was encouraging to see the increasing number of folk attending CPD courses. The Brokers have an important role to play!