Here today, gone tomorrow

It has been a bad few weeks for the insurance industry.

First, we were reminded that insurance companies fail because they are badly run. The 818-page Penrose report into the Equitable Life scandal makes painful reading (not just because of its excessive length). It explains how poor management can destroy a sound, reputable and successful company in short order. This story is even worse than Independent, which was a 'here today, gone tomorrow' phenomenon. Equitable had been in existence for nearly three centuries when it was led onto the rocks by corporate greed and arrogance.

The furore over Equitable had hardly died down when the Treasury Select Committee published its report into endowment mis-selling. Another painful read.

There is currently a dangerous tendency among those in general insurance to feel immune from such scandal, particularly during the transitional period into a highly regulated environment.

These scandals, along with the earlier disgrace of pensions mis-selling, tarnish the entire industry. Lay those alongside Independent, Iron Trades and Drake Insurance and you have a sorry tale of failure and destruction of public confidence. The public, along with MPs, make no distinction between different types of insurance.

Worse, however, is the sheer complacency, especially in the general insurance market, which maintains that this sort of thing can never happen again.

Is this really the case?

Just consider what drove the mis-selling of the pensions and endowments.

It was the prospect of large commissions. This is especially true of the endowment scandal where the banks and building societies saw the potential to earn massive amounts of money in commissions from endowment sales.

This drove the big switch to endowments in the early 1980s under the cloak of a change in the taxation treatment of mortgages. This continued for 15 years.

Endowments were a bad product grossly oversold so the sellers could pocket inflated commissions. But, the next mis-selling scandals are happening today right under our noses. Driven by the same greed for excessive commissions, retailers are currently overselling extended warranties, many travel agents are mis-selling travel insurance and the banks are making a very tidy sum on loan protection cover. Incidentally, the first two are subject to a 'light touch' regulatory regime just like Equitable. Do we ever learn?