It has been an absolutely dreadful few days of course for the banks culminating in the resignation of Barclays CEO Bob Diamond and his subsequent appearance before the Treasury Select Committee following the LIBOR fixing scandal. Coming so soon after the colossal computer failure at RBS, that left thousands of customers stranded without access to their accounts, the already tarnished reputation of the UK banking system has sunk to a new low. Perhaps no surprise therefore that in an international survey published this week by Ipsos Mori only the Belgians mistrust their banks more than the British. Even the Spanish and Italians, whose financial system has been wrecked by the Euro crisis, evidently retain more faith in their banks than we do in UK.

As the relentless attacks on the integrity of our banks continues insurance chiefs will surely distance themselves from their cousins currently operating in the eye of this vicious storm. Interestingly, in revealing their new strategic plan on Wednesday Aviva’s Chairman John McFarlane surprised and delighted many by openly criticising the company’s previous leadership. That under Andrew Moss, Aviva was perceived in the city to be over complex, too risky and self-serving in its approach to executive remuneration; in other words a bit like a bank, McFarlane’s comments might be interpreted as the first real sign of the industry, previously keeping its head down, now overtly scrambling to portray itself as very, very different from banking.

One important reason for insurers to disassociate themselves from the banks is that UK oversight of each has just this year converged under the Bank of England’s Prudential Regulation Authority (PRA). Already reeling from the costs and complexity of implementing Solvency II, the insurance industry is not in a strong position to import into its business and processes any additional regulation that might arise as a consequence of the latest wave of unease with the bankers. With new people now in charge, it is critical more so now than ever, that the industry engages constructively with the PRA to ensure that strong regulation does evolve but firmly inside a sensible framework that is appropriate to the nature of insurance business and proportionate to the risk that an insurer failure poses to the global financial system.

Along with calls for tougher regulation, the battering of the banks has been accompanied by ever louder demands for their internal culture to improve. To many observers Bob Diamond’s biggest failing was not addressing the behavioural factors in Barclays that on a broader stage contributed to the financial meltdown of 2008. There is little evidence that the regulators have had much influence in this respect and it has taken the shareholder spring, impacting Aviva amongst others, to force change at least insofar as executive pay is concerned. For insurers to sit back and allow others now to dictate the change agenda would be a mistake. Instead there is an opportunity to seize the initiative, setting the tone for the whole financial services industry by proactively developing a “good company” culture from top to bottom. By equitably realigning and prioritizing the interests of all stakeholders, including customers and the wider community; designing and promoting better products that meet a social need; and agreeing far longer term growth objectives with capital providers, insurance companies can preserve and enhance their public reputation, reaping the benefits this entails.

To transform into a “good company” and still satisfy the short term demands of investors is some challenge, made all the harder given the compressed timeframes that analysts and media commentators judge performance. Interestingly in the specialist end of the insurance market, with the recent completion of CNA’s acquisition of Hardy and the eventual sale of Omega, just Novae of the small-cap stable will be publically listed. Only four of the larger Lloyd’s firms are now openly traded so the flirtation with the stock market that began in the mid 1990s might be approaching an end game. Generally speaking external investors have struggled to understand and respond to the cyclical and volatile nature of the specialists so most of these independent companies have now found refuge in larger groups where access to capital is easier and quicker to come by. Ironically at a time when calls for banks to be broken up are increasingly voiced, the insurance industry seems to be heading in the other direction towards further consolidation.