Why there should be greater recognition for standards

There is plenty of evidence that organisations perform better when they adopt voluntary quality standards. Yet insurers ignore these standards when setting terms and conditions for policyholders - something that vexes Airmic technical director Julia Graham.

There are thousands of quality standards to choose from – more than 800 just in the food industry, with the plastics sector coming in with another 600 of their own. These standards assure customers and other stakeholders of consistent quality in products, services, processes, systems and people. They are based on the practical experience of senior and highly qualified professionals, and are a means by which organisations can provide assurance about the quality of their risk management.

A study[1], conducted by the Centre for Economics and Business Research earlier this year, underlined the economic and practical value that standards can have. It was based partly on a comprehensive survey of 527 companies in seven key sectors, as well as interviews and case studies with businesses. Overwhelmingly the senior executives agreed that standards always generate more benefits for companies than the cost to implement, including improved productivity, supply chain management, regulatory compliance and enhancement of reputation.

The study found that the most productive UK sectors are the most intensive users of standards, with aerospace and defence showing a productivity increase of 20.1% between 2005 and 2014 compared to 4.9% for the economy as a whole. 

Whilst the research was commissioned by the British Standards Institute (BSi), it is backed by the findings of other studies conducted by the Department for Trade and similar research in other countries, including France and Germany.

You might think that the insurance industry, with its often-stated wish to reward good risk management, would respond positively to policyholders who can demonstrate that they have come up to the mark in these areas, but that is rarely the case. According to Airmic technical director Julia Graham, “whilst standards might not contribute an obvious advantage in terms of insurance policy terms and conditions, the lack of recognition of standards by the insurance industry is both surprising and disappointing, given the mounting evidence that standards benefit business and the British economy.”

For those concerned with risk, there are a range of certifiable standards covering important and sensitive areas. These include the environment (ISO 14001), business continuity management (ISO 22301), flood risk assessment (BS8533), information security (ISO 27001) and quality (ISO 9001).

Graham has been heavily involved herself in producing international standards. She is currently the UK lead expert on the risk management standard ISO 31000. She believes it has already proven its worth even though, unlike some of the standards mentioned above, it is considered to be a “behavioural” standard and as such, not certifiable. 

ISO 31000 is high level, generic and intended to be applicable to all types of organisation, which makes it more challenging to prove the added value of following this standard to third parties such as insurers.

“Risk management maturity points towards improved performance in financial markets. Risk maturity models[2] typically include the key components of collaboration and communication,” she says. “The principles, framework and process outlined in ISO 31000 can facilitate these key components, thereby assisting achievement by organisations in achieving risk maturity.” 

The Chartered Quality Institute will be holding a 2 1/2 hour symposium on 3 February 2016, hosted by Willis, entitled ‘Voluntary standards & the insurance industry: why aren’t quality accreditations given direct recognition by insurers in the form of premium reductions and enhanced cover?   www.cqi.org

Julia Graham – disappointed by insurers' attitude to standards