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The Actuary The magazine of the Institute & Faculty of Actuaries

Prioritising consumers

After the Institute’s annual general meeting on 30 June 2003 a short event was held to advance the debate on the importance of considering consumers’ needs when giving professional advice. The theme ties in with the Faculty and Institute presidents’ priorities for their second year: to assert more widely the value of the mechanisms that actuaries develop, and to tackle more public policy issues.

The evening was structured around four short presentations, each on a different aspect of the interactions between actuaries and consumers. Jeremy Goford, Institute president, chaired and led interactive polling between the presentations.

In the first presentation, Jeremy outlined his thoughts on why we should be looking at life from the consumer’s end of the telescope. He explained how both individual actuaries and the profession are inextricably tied to the success of our clients and employers in satisfying consumer needs. Every actuary should fully understand where he or she fits in the chain of relationships whose purpose is to satisfy consumer needs, either individually or collectively. He also suggested a little change of language: the ‘end consumer’ is dead; roll on the ‘begin consumer’!

Tom Ross spoke about pensions provision from the perspective of employees. He spoke of the inadequacies of the state system, whose extensive means-testing results in major savings disincentives and in very different choices for many employees. On occupational pensions, he doubted the wisdom, and the permanence, of current moves to defined contribution schemes. He believed that these changes were not in the interest of many employees nor necessarily in the interest of those employers who regarded long-term investment in their human capital as of major importance. While visualising that the final salary version of defined benefit provision may have had its day, he believed that other ways of sharing financial risks between employers and employees would be developed, and he urged actuaries to play their full part in this evolution.

The director of consumer affairs at the Financial Services Authority (FSA), Anna Bradley, put forward what the FSA would really like actuaries to do for consumers. After touching on the benefits of the with-profits actuary role and the importance of senior management responsibility, Anna went on to cover her views on the non-financial aspects of fair treatment, including the need for communications that are honest, open, and transparent. It will come as no surprise to hear that in relation to consumer communication, the FSA would like to encourage firms not just to meet the compliance requirements but to go the extra mile.

Paul Bradshaw spoke on why the providers of capital need to know about the consumer’s needs. He envisages a business model based around service rather than products, in which heavy consumer demand forces decision-makers to think ‘begin consumer’. He ended with a quotation from the Financial Times: ‘Businesses may find customers difficult, amusing or just plain stupid – but they are the only customers they have got!’

Perhaps the most entertaining part of the evening, and certainly the most interactive, was the liberal use of ‘digivoting’. By issuing electronic voting boxes to those present, polls on all manner of questions could be conducted and the results displayed immediately on the big screen. Some of the results were particularly interesting when contrasted with results from a UK-wide MORI poll on consumer finance.

For me, the most striking result came when comparing attitudes to short-term debt of the audience with those of the general public (see figures 1 and 2). Although the actuaries who voted were older and wealthier than the members of the public, many of the differences in views highlighted the public’s unfamiliarity with one of the most basic financial principles – expensive debt should be repaid as a priority. Living within your income, without unaffordable self-indulgence, is an ideal long lost to the excesses of the seemingly inexhaustible credit card and overdraft. Unfortunately the excesses cause all sorts of problems, both for individuals and the wider economy. Jeremy questioned whether we as a profession should be more involved with raising the profile of this issue.

On a more positive note, when the audience was asked what they would spend an extra £100 a week on, it was refreshing to see that 11% of them would give it to charity. When the economy picks up, watch for a surge of donations from actuaries to the National Debtline…

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