Being Isle of Man-headquartered, what has been your reaction to the Code of Conduct?
IOMA has never paid high levels of commission upfront so it is not really an issue for us. We have been very much RDR compliant from the start. There is going to be some infrastructure change because there are more documents and very prescribed formats in which you have got to produce documents.
It is going to require some change but, from our point of view, the main challenge is going to be building the key information document into the system, which will probably take about three days. It is not going to be a huge shock to the business.
We have almost been ahead of the curve because our business model has not been commission led. We haven’t had a large parent that is hungry for business, trying to earn a 5-7.5% return on capital.
As more companies depart the market, opportunities will open up for those that provide compliant solutions to clients who have disclosed their money and want to invest and save properly.
We very much see transparency disclosure as a benefit, not an enemy.
The Code of Conduct is just part of the wider trend for regulatory change. We’ve also got Solvency II coming in, which is massive and will continue to be so. Solvency II makes you see your business in greater detail. It is continuous and repetitive, and allows you to really understand trends.
The key element is having data, having it in a timely fashion and being able to analyse it. That’s why we are investing in our actuarial function and taking the development of our IT very seriously.
IT seems to be a key focus at IOMA.
For us, like every other insurance company in the world, the watchword is IT. We embraced it early and have recruited a number of developers to work in-house for us. Using our breadth of licences and technical expertise we are able to cut down the number of layers in the chain, from product creation to product delivery.
We have started doing a lot more with the technology element of insurance, looking at distribution, underwriting and claims. We will typically work with a mid-sized broker that has a product suite they currently underwrite but would like to either revamp it or add a bolt-on product.
We provide a turnkey solution to take that product from an idea to something we can then underwrite. We do the same with IFAs where we can white label or develop our products for them. Consolidation in the market has helped us because there are not many companies willing to spend time developing ideas and products with IFAs.
How do you see these IT developments impacting on the life insurance sector?
We get approached by quite a lot of insurance technology entrepreneurs that you can divide into two business models: those that want to provide additional value to insurance companies and those that want to compete with them.
I favour the companies that are looking to add value to the industry. This is because insurance companies have been around for a long time, have large balance sheets, reams of data and actuaries who crunch the numbers. I don’t think it will be as easy as it first appears to displace such established insurance companies.
However, the industry is recognising that systems and IT are going to be at the forefront of their USP and what clients expect. The barrier of client expectation is always creeping up and companies have to find a way to deliver what they want.
