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Insurance and Pensions Report
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Insurance & Pensions SectorMarket intelligence report prepared by Guidant Group DECEMBER 2014
This report is designed to provide an in-depth look at the current and expected trends of the insurance and pensions sector. It will provide an overview of the current state of the market, including activity within some of the major names in the industry, as well as recent market insights.
The report then moves on to focus on employment trends and the latest strategies for attracting the best talent within the sector.
Introduction
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The UK insurance industry as a whole, the largest in Europe, currently manages investments of £1.8trillion, or 25% of the total net worth of the UK.
The number of workers employed in the Financial and Professional services sectors in London, has surpassed its peak prior to the 2007 financial crisis to reach a level not previously seen; there were 691,700 workers in these industries in 2007, and this figure now stands at 703,900. 70,200 (10%) of these are in the insurance sector.
The pension market is experiencing substantial growth in itself, with the number of pension policies sold in the past year rising 30% year-on-year, largely due to the regulation of automatic enrolment of those not already on a pension scheme.
The recent growth in the number of pension mandates being led by LDI (Liability driven investment), also suggests growth in the UK pensions market, with liabilities reaching £517bn, up 17% on 2013 (KPMG).
However, big changes have been observed in the format of pensions taken out; the scrapping of laws requiring annuities to be taken out has triggered a 30% fall in annuity sales over the last 12 months.
Market Overview
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Employment – Financial & Professional Services
Analysts’ fundamental outlook on the insurance industry, particularly the life and health sub-industry is positive. Experts predict a stronger economy, accompanied by better job growth and eventually higher interest rates, helping to drive stocks higher.
Industry experts also predict that efforts by various companies to rationalise their businesses by revamping products, raising prices, and exiting high risk or non-strategic businesses to bear fruit.
Willis Group reported 2nd quarter revenue grew 5.1%, with commissions and fees up 4.5%.
Financial Services Group IFG, which reported an 8% year-on-year growth in first half revenues, to £34.1m, agreed to sell its main pension administration and advisory business IRG Ireland, to the Irish arm of global Insurance Group, Willis Group.
IFG is also in advanced discussions regarding the disposal of its smaller businesses, ARB and Insure4Less, which will allow the organisation to focus solely on its UK business, chiefly its James Hay specialist pensions business and its independent financial advisory arm, Saunderson House.
Competitive Landscape & Analyst Commentary
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Friends Life & Aviva Friends Life and Aviva have this
week announced that discussions are underway regarding a potential £5.6bn merger. Aviva now have until 19th December to submit a formal offer.
Although opinions have been split, it is suggested that the deal would be
beneficial for both parties; it would drive Aviva to ‘a leading position in corporate and individual pensions’ while Bernstein Research suggest that Friends Life would struggle to find a more attractive buyer than Aviva, in terms of the significant synergies on offer’.
The potential deal also heralds strong prospects of growth following the recent annuity reforms, according to analysts.
The news triggered a sharp rise in Friends Life shares of 6%.
Possible Friends Life and Aviva Merger
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According to industry experts, large insurers have announced plans to follow the banking industry and grow their footprint in direct-to-consumer investment; the removal of intermediaries in their business. Banks are already said to be reaping the rewards of a lack of intermediated business, with a reduction in the level of multi-channel conflict.
Direct-to-Consumer Investment
Industry StatusRegulation
The pension industry is facing three times as much regulation than it was just six years ago; 108 regulatory releases were observed during 2013/14 compared to just 30 in 2008/09 (out-law).
There is the potential that by enforcing such a volume of regulatory practices, the best outcome will not be delivered to savers or workers.
Such regulation is largely focused around automatic enrolment onto workplace pension schemes, which came into effect for large employers in 2012.
It is also believed that two further pieces of legislation will be enforced before the UK General Election in 2015.
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Accountability Governor of the Bank of England,
Mark Carney, plans to ensure that senior insurance executives are scrutinised in the same manner as senior bankers, in order to retain the strength of the industry and avoid a repeat of the incidents in the banking industry that contributed to the 2007 financial crisis.
Carney has implied that the correlation between seniority and accountability has become ‘blurred’, and senior individuals should prove their suitability in greater depth before being appointed into such roles.
Carney has also set out a three stage plan to deal with risk in the industry; to ensure that future financial shockwaves can be weathered, Carney believes it is essential that capital standards are “tailored and consistent”.
Mark Carney has also outlined plans to introduce a Basel II-type directive into the insurance industry: Solvency II. This will ensure that regulation within the industry is consistent, and reduce the risk of insolvency by maintaining strong capital buffers.
EmploymentNew Appointments
Robert Wildbore, Managing Director and Executive Vice President of Willis Re Canada, is returning to the UK to take up a new senior position at Willis.
Friends Life have appointed former Aviva director Andy Curran as interim chief executive, with John Van Der Wielen set to be named executive chairman of the international business.
The Bank of England said its top insurance regulator, Julian Adams, left to take on a role at Prudential Plc.
Aviva named Adrian Montague as non-executive chairman, replacing John McFarlane, who is taking up the same job at Barclays.
Charlie Diebel has been hired by Aviva’s asset management arm as Head of Rates Strategy.
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Salary Despite generally attractive salaries
on offer in the insurance industry as a whole, pension professionals have seen salaries fall below market rate, often accompanied by an increase in workload as a greater number of employees look for new career moves.
Nearly two thirds of employees in the industry did not believe their salary met the industry average, suggesting a detachment between candidate expectations and employer pay levels.
This is despite a continuing shortage of suitable candidates for the large capacity of roles available.
It is, however, suggested, that 2015 could see wages increase at a faster rate than inflation, largely due to the continuing trend of low inflation at comfortably below 2%.
Candidate Perspective
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Employer PerspectiveSkill Base
The UK insurance industry is built on a highly advanced skills base, with a high comparative advantage over overseas growing economies, with regards to insurance skills and talent.
However, due to the breadth of roles available in the sector, there is frequent difficulty recruiting suitable individuals across all skill levels, particularly those at entry level.
Demand for highly skilled workers in the industry has also risen over the previous 12 months, both interim and permanent.
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A rise in salaries above industry averages should be investigated, as well as alternative approaches in order to secure the best talent, including:
Greater promotion of the industry, and its attractive features.
Greater visibility of roles, schemes and initiatives available in the industry.
Greater networking and guidance opportunities to individuals considering – or even not considering – a career within the insurance industry.
Invest in entry level candidates, including aiding attainment of professional qualifications (graduates, apprentices).
Securing the Best Talent
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Prime Minister David Cameron has urged FTSE 100 employers, several of which operate within the insurance industry, to do more to employ apprentices.
Roughly two thirds of these organisations already have such a procedure in place, and the PM has given the remaining firms until 2020 to follow suit.
Around £1bn will be invested in order to create the planned £3m new apprenticeship roles, which will be created to reduce the ratio of applications per place, which currently stands at 11.
www.gov.uk/government/uploads/system/uploads/attachment_data/file/263148/the_UK_insurance_growth_action_plan.pdf
www.professionalpensions.com/professional-pensions/news/2341134/pension-salaries-out-of-line-with-the-market
www.abi.org.uk/Insurance-and-savings/Industry-data/Free-industry-data-downloads
www.professionalpensions.com/professional-pensions/feature/2317935/key-challenges-the-pensions-industry-faces-in-2014
www.out-law.com/en/articles/2014/june/uk-pensions-industry-facing-three-times-as-much-regulation-as-six-years-ago-according-to-survey/
References
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Guidant Group, an international managed service provider and recruitment outsourcing specialist, is proud to be part of Impellam Group, the second largest staffing business in the UK. Together we have significant experience of working in partnership with companies within the pensions and insurance arena, reducing recruitment costs by an average of 23.4% while significantly improving customer satisfaction and the quality of new hires.
If you would like to find out more about our services and how we can help you manage any aspect of your recruitment function, please do not hesitate to get in touch:
We Are Guidant Group
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Simon Blockley CLIENT SOLUTIONS DIRECTOR
T: 020 3096 4409
Interested in finding out the specific benefits your company could enjoy? Please feel free to contact our advisors:
E: [email protected] T: +44 (0) 203 096 4450 W: www.guidantgroup.com
