on 3 November that it is ending its membership of the Association
of British Insurers (ABI), an industry body with some 400 members
that between them provide 94 percent of domestic insurance services
in the UK.
A unit of UK-domiciled life insurer Old Mutual, Skandia UK had
total assets under management of £39.5 billion ($62 billion) at the
end of June 2008.
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Rationale for Skandia UK’s decision is based on its view that
the position adopted by the ABI and many of its members on the
issue of financial advice is wrong and will undermine the role of
independent financial advisers (IFA).
“For some time now we have viewed ourselves as different from
more traditional life insurers and have felt a lack of alignment
with the broader membership of the ABI,” said Skandia UK’s CEO Nick
Poyntz-Wright . “We offer our investment solutions only through
financial advisers because we believe passionately in the
importance of quality advice to guide and support customers’
financial decisions. Unfortunately fewer and fewer of our peers
among the ABI membership share our focus on the advice sector.”
A key feature of the ABI’s approach is a proposal it put forward
in response to the Retail Distribution Review (RDR) launched by the
Financial Services Authority (FSA) in June 2006 that a new
distribution channel termed assisted purchase be introduced. This
would be in addition to the existing advised and non-advised sales
channels.
Skandia UK believes the assisted purchase channel would cause
consumer confusion and undermine the value of IFAs. The insurer
noted that the ABI’s research during an assisted purchase trial
found that 66 percent of consumers incorrectly thought they had
received advice.
Underscoring its belief in the role of IFAs, Skandia UK will
align itself with the Association of Independent Financial Advisers
(AIFA) and provide the body with financial support.
Commenting AIFA’s director general Chris Cummings said: “We have
worked closely with Skandia on previous projects and member events.
In a post-RDR world, there will be many pressures on IFAs, such as
the need to review their remuneration model and perhaps gain
further qualifications. This additional support will enable AIFA to
roll-out a much more comprehensive programme of member support than
we would have otherwise been able to conduct.”
Responding to Skandia UK’s announcement the ABI’s director
general Stephen Haddrill said: “We do not recognise Skandia’s
description of the ABI’s member companies. ABI membership is made
up of a wide range of excellent financial services, asset
management, advice and protection companies.
“Our members have consistently been in favour of increased
professionalism and have advocated reform to eliminate commission
bias and increase consumer trust in financial advice.”
The FSA will make public its final proposals on the RDR on 28
November this year. The FSA will also release initial responses
from industry and consumer groups.
