New Meaning for Old Truths: What the FCA Sector Views 2020 Tells Us About Success in the London Market

GreenKite’s Shân Millie shares her thoughts on the messages for London Market firms to take from the FCA’s analysis …

I look forward to the publication of the annual FCA Sector Views. This year’s is not a disappointment. As a piece of communication, it is well done. The reader is in no doubt about what the FCA will be zeroing in on as priorities for the 2020/21 Business Plan. I like the way they articulate their Purpose: adding public Value by reducing harms in the contexts of (a) consumer (b) market integrity and (c) competition seems both noble and very necessary to me.

In my work with GreenKite, I’m deeply interested in London Market, and specifically, what does it take to set up, grow and scale brilliantly? I think there are some very clear messages for firms at all stages in the lifecycle to be taken from the FCA’s analysis. 

How does London Market fare?

Two of the seven ‘themes of harm’ the Report observes for General Insurance & Protection relate directly to the London Market: non-financial misconduct here is threatening market integrity, they say, and operational inefficiencies — ‘some complex distribution chains’ and the perceived tardy adoption of Tech to reduce costs — are leading directly to higher prices for commercial customers. Nothing less than London’s position as a global Insurance leader is at stake, according to the FCA, and (in common with the other five harms), the drivers of peril are:

(1) Poor Culture

(2) Low Consumer Engagement

The Report does refer to the Lloyd’s Blueprint, and some of the technical, operational and cultural developments underway, but overall what’s said about the London Market makes for an uncomfortable read — can it really be true that Lloyd’s operating expenses are about the same as in 1990? LMG CEO Clare Lebecq’s response on behalf of the market was a letter that had to be written.

Purpose Makes Profits

The Regulator is being doggedly consistent with the messaging on the themes of Customer and Culture  (see: 2018’s Transforming Culture in Financial Services and to January’s ‘Dear CEO’ letter) and how intrinsic they are to the UK market’s integrity, competitiveness and reason for being. I read both a warning and a prescription from our Regulator: you’re failing in two key areas that we define as necessary for success, and this not just bad business for you.

It is not so long ago that it was possible to have completely separate conversations about what makes a business successful financially, and successful as a place of work: ‘Values’ was what you put in your CSR report (if you had one) and ‘Purpose’ was obvious: to make as much profit for shareholders as possible. Many still think that, but it’s getting a lot harder to ignore the growing harvest of research, business thinking, stakeholder activism and employee voices. Some firms last longer, and look successful longer than others, but ultimately, the moment that your Talent and/or your Customer are not stuck for real choice, they exercise that choice. Permanently.  (That’s why despite all the inevitable and annoying hype, I remain positive about the benefits of an energetic InsurTech ecosystem, at least in so far as it creates more options for Customer.)

In insisting that how and why firms do what they do is at least as important as the financial metrics — if not the critical determinant of those financial metrics — the FCA is also in tune with a much bigger, and I believe permanent, shift of opinion in wider business and civic society.  When the Financial Times’ first editorial campaign in 12 years is ‘Capitalism: Time for a Reset’, you know something unusual is afoot! In both Lloyd’s Blueprint and the LMG’s ‘Future of Skills in the London Market’, Culture and Customer are far from box-ticked; the LMG Report in particular analyses inadequacies in some depth, and quite bluntly.  For firms new and old, working hard to grow and scale in the London Market, these key bodies share the direction of travel with the FCA: your Purpose underpins not only your Value Proposition but your Business Model, too, so live it, lead it, manage, reward and govern by it.