The Government yesterday slated the British insurance industry for being in-bred, too slow, low-tech and too small.
The report, The insurance industry in the United Kingdom, was commissioned by Michael Heseltine when he was President of the Board of Trade to examine the competitiveness of the industry.
Yesterday, key industry figures defended their companies against the charges, but admitted that some of the criticisms had struck home, particularly the need to recruit more graduates and to look outward to leading market practices in the US.
Analysts welcomed the report into what one described as "a boring, very introspective, almost claustrophobic industry."
The Association of British Insurers (ABI), which helped the Department of Trade and Industry to compile the 16-page report, admitted that it was "slightly limited in scope".
The ABI has commissioned the accountants Price Waterhouse to produce its own study of the strengths and weaknesses of the sector, which will be " a lot longer", and will be published in October.
The DTI report says that in relation to other sectors in the UK, insurance has "comparatively few graduates for its size".
Too much industry is "home-grown" not only within the industry but within individual companies, it says. Within the executive director and senior management tier, "there are often too few 'outsiders'."
The report continues: "Perhaps as a consequence of being too home-grown, management has tended to be conservative and has not embraced modern management techniques as readily as other service industries. There is a particular shortage of broader-based management training."
The DTI also claims that insurers lack adequate links with universities and that "compared with other industries, information technology is still not used to its full potential".
One senior insurance executive slammed the report for being "really superficial. The research was not very great."
He was particularly irritated by the DTI's complaint that there were no big UK players to rival the likes of Allianz of Germany and Swiss Re.
"This is a French fashion - bigness for its own sake. It doesn't necessarily mean you can get economies of scale. For instance, it is very difficult to sell life products cross-border."
He added that insurance companies were not like car manufacturers - "If you are not global, you die." Smaller British companies may well be more efficient and better placed to innovate, he said.
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