Willis chairman and chief executive Joe Plumeri recently echoed industry veteran Hank Greenberg's call for a federal charter in the US...
Joe Plumeri, chairman and chief executive of Willis, widely considered to be one of the most vibrant characters in the industry, a fact he acknowledged as he took the stand at the UK’s
Financial Services Authority (FSA) annual insurance sector conference back in March. “So now we get to hear from the guy with the funny accent,”he qipped. The rest of his speech, however, concentrated on the regulator’s announcement that it was planning to implement a more “principles based” approach to general insurance regulation.
The principles-based approach being rolled out by the FSA consists of 11 main standards, which articulate the actions and behaviours that the FSA expects from firms. “Principles are values you hold that are non-negotiable. You should know what the right thing to do is and do it with a passion,” said Plumeri. “Otherwise we spend more time mechanically following the rules by making sure the boxes are checked and the forms filled out and not really acting in the best interest of our clients.”
The introduction of a principles-based approach, which basically moves the focus from the path a company takes to reach an outcome, to simply the final outcome, places the responsibility for a company’s actions squarely on the shoulders of senior management and board members. It comes on the heels of the contingent commission scandal in the US which
“Arguing with compliance is like wrestling with a pig. After a while you realise the pig enjoys it.
Plumeri pointed out had been greatly reduced since the investigations. “Our job as brokers is to protect our clients’ assets – part of that entails making sure we place their risks with a carrier who matches their needs. No question, we should be paid for the work we do. But through profit or volume contingent arrangements, brokers have an incentive to place business with a particular carrier which may not match the client’s needs.”
Plumeri wrapped up by highlighting the advantage the UK has over the US with a regulator that has national authority. The FSA controls the financial sector across the whole of the UK, unlike in the US where each state has its own systems and rules.
“Imagine not one rules-based regulator, but having to work with 50 different rules-based systems,” said Plumeri. “I am not one for more regulation, but I would welcome an optional federal charter in the US just as we have the FSA here in the UK,” Plumeri stated. His words echoed those of CV Starr CEO Hank Greenberg, who made a similar call in a speech at Lloyd’s two months ago.
Plumeri was unable to resist one last dig at the regulators. “Arguing with compliance is like wrestling with a pig. After a while you realise the pig enjoys it,” he said.