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The Business Plan: ABI Prioritiesfor 2010-2011

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Foreword

The ABIs mission is to enable the insurance industry and its investment businesses

to grow their markets, increase their profitability and to enhance their reputation with

consumers and stakeholders.

This Plan sets out our priorities for action to achieve these goals over the next two

years.

Consumers

Savings & Protection

Regulation & Competitiveness

Reducing risk and unnecessary costs

Capital Markets.

The Plan show the main workstreams in each priority. More detailed plans are

developed with our key committees. Progress is reported to each Board meeting and

the Plan as a whole revisited at the end of each year.

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Consumers

Objective:

To promote and enhance the reputation of the industry with consumers and stakeholders,

based on action to improve real outcomes for customers.

Rationale:

Members want to increase confidence and trust in the industry and stimulate demand for

products. To do this, the industry needs to improve outcomes for customers by dealing withareas of detriment that can be addressed through collective action.

Strategic Focus:

To focus on the development and implementation of an industry-wide consumer strategy

through a four-stage process:

proactively identifying areas of detriment;

developing and implementing plans to improve outcomes for customers; gathering evidence to demonstrate improvements; and

using that evidence to secure justified reputational gains and seeking regulatory

reform to the benefit of consumers and members.

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Consumers

Work streams

Strategy Development

Ongoing identification of areas of detriment and development of solutions

Promote improvements achieved

Solutions Development

Further develop OPTIONS tool to enhance industry process efficiency and reduce costs.

Income protection claims - build on evidence base and action plan.

Consider the case for a major industry led review of household insurance to assess how

it works for consumers & what changes may be needed.

PRIORITY PROJECT: Review ABI consumer work and revise to meet the needs of

an incoming Government. In particular promote solutions to consumer saving,protection, health cover and financial education that avoid excessive regulation, and

which create trust in the industry.

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Consumers

Building consumer capability for financial decision making and demand for products

2010:

Assess work streams in light of measurement under consumer strategy

Success Factors

Improvement in the way the industry is viewed

Investment in relationships with consumer lobby groups, regulatory and Government

stakeholders, media

Conferences and member workshops e.g. Customer Impact, TCF, stakeholder

involvement

Providing a policy agenda for consumers that an incoming government will sign up to and

which will benefit both consumer outcomes and provide a growing market for firms.

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Savings and Protection

Objective:

To enable ABI member firms to meet consumer needs by providing savings and protection

products more effectively and in new ways and so develop new and existing markets.

Rationale:

Through collective action ABI members can persuade authorities to tackle regulatory and legalobstacles to the industry in its development of new products and services that will then better

secure consumer confidence and larger markets. In doing so the ABI needs to work across

savings and protection objectives to ensure that key workstreams are aligned.

Work streams

PRIORITY PROJECT: To review industry thinking about the annuities product in the lightof current Conservative thinking and the wider political and regulatory changes

underway. To evolve and lobby with a robust view about retirement income that is

focused on consumer needs.

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Savings & Protection

Work streams

2010:

Further work with Government & stakeholders to promote saving and pension reforms.

Ensure Long Term Care proposals feature in manifestos and that the development of this

sector has a strong role for the insurance industry.

Promote use and benefits of auto enrolment into workplace pensions. Work with Government and regulators to reduce the cost implications of regulation, to

benefit both providers and consumers of savings and protection products.

2011:

Prepare for implementation of Long Term Care proposals;

Further employer and consumer communications to prepare for 2012 changes.

Ensure readiness and fair competition in workplace pension and retirement income markets

for 2012 pension auto enrolment requirements.

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Savings & Protection

Reforming Distribution

2010:

Implement RDR proposals including in corporate pensions market.

Ensure publication of effective Simplified Advice guidance by FSA.

Lobby on FSA proposals for protection market to get a practical outcome.

2011:

Implementation of proposals in protection market (if applicable).

Savings & Protection: Success Factors

Outstanding outcomes for consumers with the implementation of the RDR framework so that

distribution is made cheaper, and appropriate support for consumers made much easier for

the industry to deliver. A PADA regime emerges which is, as far as possible symbiotic with private sector provision

and the implementation of which is made as straightforward as practical.

A regeneration of the market for retirement income, and the full buy in from a future

Government to the need to enhance retirement savings.

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Regulation and Market Confidence

Objective:

To promote consumer confidence in the financial services sector through better regulation

combined with encouragement of competition and market based solutions to problems.

Rationale:

Our aim is to ensure the regulatory regime secures a proper balance for consumers between

being well protected and being able to enjoy competitive and innovative markets.

Strategic Focus:

Our principal focus, through work with the FSA, EU and international regulators is to secure

confidence in the solvency of insurers in current market conditions and ensure that the solvency

regime, in the UK and internationally, protects consumers from risk at appropriate product cost

and enables the efficient use of capital to be achieved internationally.

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2010 Key Outcomes

In 2010 we will continue lobby for a Solvency II directive that is practical to implement and

includes recognition of illiquidity premium; to make sure the European supervisory

architecture takes account of the needs of insurers; to promote UK competitiveness in the

tax and regulatory arena; and to engage both in UK and European discussion about the

product and conduct of business rules that affect insurance and savings products.

Work streams

Capital Requirements and Supervision

Delivering the best possible supervisory framework for insurance through the

Solvency II, and related work in respect of the IORPS and insurance groups.

Influence developments on IASB Phase 2 and on accounting and tax in the interests

of a stable and transparent industry, consistent with Solvency II.

Regardless of institutional location, promote a modern approach building on the ICA

and ARROW and seek as much in the way of a common European rule book as is

practical.

Regulation and Market Confidence

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Regulation & Market confidence

UK Competitiveness

Promote UK competitiveness with a particular focus on insurance companies so that the

UK becomes a natural headquarters location, and firms are encourage to invest in UK

insurance markets.

Continue close engagement with HMT and HMRC officials on all matters of taxation; and

keep lobbying ministers as well as officials on the ABI competitiveness agenda.

PRIORITY PROJECT: Develop and promote a lobbying agenda around the importance

of the insurance sector to the City and to the wider UK and international economy.Stress the importance of insurance relative to other parts of the financial system and

explain why it has proved robust in the recent crisis. Use this material with the media

and others to build trust in the sector and to explain its core role in the financial

sector.

Expanding and Preserving Markets

Wholesale Insurance: Push for the UK regulatory regime to become more competitive andbenefit from possible decline in markets such as Bermuda.

Pensions Buyout / Bulk Insured Pensions: Influence the development of regulation and

processes for the market for insured solutions in the defined benefit pensions arena.

Across all retail insurance and related products lobby for regulation which allows markets to

work and consumers to benefit. Defend attacks on retail products which have little purpose,

while seeking an open an innovative approach to matters such as the Packaged Retail

Investment Products agenda, and the 2010 proposed review of the IMD.

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Supporting Work

Excellent but challenging relationship with the FSA and EU institutions as well as

with HMT and HMRC.

Thought leadership and excellent lobbying leading to better outcomes for members

and consumers.

Ensuring that members across different sectors are fully engaged in work that affects

them.

Regulation and Market Confidence

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Reducing Risk and Unnecessary Costs

Objective:

To reduce risk and unnecessary cost to consumers and the industry.

Rationale:

Our members costs, and customers premiums, are driven by claims experience and risks that

determine their cost base. We aim to prevent and reduce risk, and therefore the frequency andcost of claims, and to tackle the unnecessary costs that our members face. This will help to

bring down the cost of insurance, increase profits and grow markets, and improve customers

experience.

Strategic Focus:

To focus in particular on

securing Government commitments on flood prevention

tackling fraud and financial crime

Developing a new strategy for ABI work on motor insurance

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Reducing Risk and Unnecessary Costs

2009Key Outcomes

In the first year we will secure the public funding and Environment Agency commitments needed to

deliver the new agreement on the Statement of Principles; deliver Government agreement to further

road safety changes; secure implementation of the Governments fraud strategy and produce a new

fraud assessment; and secure Government action to implement its proposals on motor injury

compensation reform.

Work streams

2010:

o PRIORITY PROJECT: To bottom out the degree to which an incoming government will

support , or even enable the private sector provision of social insurance in areas such

as private care. To undertake a finely constructed dialogue with stakeholders and an

incoming Government on these matters and lobby for an insurance sector role.

Election Manifestos include substantial climate change, flooding etc commitments

New Flood Act

Government introduces new uninsured driving offence

Front End Fraud Prevention and influence National Fraud Agency roll out

Raise importance of addressing arson and financial crime

Deliver IFB enhancements

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Reducing Risk and Unnecessary Costs

2010:

Tories commit to extend personal injury reforms

Establishing ELTO and the new mesothelioma claims process

Scottish Government reforms personal injury compensation system

Roll out of motor insurance strategy

Deliver progress report to Board on the priority project .

2011:

Personal injury reforms extended

ELTO goes live

Public perceptions of fraud improved

NFA outcomes and future established

Uninsured driving falls below x%

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Reducing Risk and Unnecessary Costs

Supporting Work

Investment in Relationships with:

Department for Transport Ministers

Department for Energy and Climate Change

Home Office

Chairman and CEO, Environment Agency

Promotional work through conferences on:

Environment (Climate Change)

Fire Strategy

Fraud

Motor

Close engagement with members on emerging risks and new claims experience.

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Capital Markets

Objective:

To promote confidence in markets in the wake of the financial crisis, by securing a considered

approach to regulation and supervision that avoids protectionism and inhibition of innovation, by

supporting the rights of ABI members as responsible providers of long term capital and by

securing recognition of their contribution. We also aim to enhance the status of the insurance

industry with its customers, the authorities and other stakeholders through our work on

governance

Rationale:

Our aim is to protect the value of insurers investments in the short term and build foundations

for longer term growth.

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Capital Markets

2010Key Outcomes

In 2010, we will seek to secure investor safeguards in the reform of bank capital structure;

strengthen the investor contribution to governance; secure a satisfactory outcome to fair value

debate that balances transparency and market stability; secure better investor role in IASB; and

work to ensure that regulatory initiatives permit sensible innovation and maintain investor choice.

Work streams

Protect investor choice through amendments to the Hedge fund Directive.

Position members as shareholders to play a constructive role through corporate governance

that reduces the need for additional regulation; and promote the new ISC Code on

Stewardship

Promote healthy market regulation as an outcome of the current debate on regulatory

architecture.

Actively contribute to shaping the policy response in the UK and internationally to specificissues raised by the crisis, including executive remuneration and incentives; and an

appropriate treatment of OTC markets.

Work with the IASB and other relevant parties to develop accounting standards that inspire

confidence and meet the needs of users

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Capital Markets

Establish good relations with the new European Commission due for installation at

end 2009

Work to explain investment and regulatory to the Tories in the UK ahead of the

election in 2010

Further develop relationships with the UK and European Parliament to facilitate

deliver of the priority

Maintenance of close relations with the EC

, HMT andF

SA and build strong tieswith other trade associations.