IE COMMENT:
It’s arguably one of the dullest General Elections of the last 50 years, with an electorate fed up of broken promises, outright lies, corruption, Covid contract nepotism, plus total incompetence being handsomely rewarded across the entire UK public sector. This perfect storm of weak, selfish politics matched to the FPTP system really does bore 70% of voters, who see little value in voting, since it rarely changes anything.
When it comes to the insurance sector, politicians seem unable to grasp that this is one of the biggest – and well paid – employers in the UK, plus a massive generator of overseas payments. Truly global and competitive with the world’s best in every sector; Marine, Cat, commercial, Motor, Specialty and Life. These are not Deliveroo zero hours jobs, these are real careers, jobs that can offer people a chance to better their situation in life, raise a family, build a future. Yet politicans and the mainstream media seem completely unable to understand the sector, or it’s huge contribution to the UK economy.
It’s very telling that not one party has proposed the abolition of IPT – perhaps the most insulting tax of all. Basically the law abiding and those who do the right thing, are being penalised to help pay for those who refuse travel cover, drive uninsured or feel someone else can pay their funeral costs if the worst happens.
Meanwhile Rory Yates, Global Strategic Lead, EIS, offers some crisp analysis of politicians promises vs hard reality.
Rather cynically, the current poll winners, Labour, decided to attack car insurance this past couple of weeks in an attempt to gain votes. This got me a little riled to be honest, and I wasn’t alone in the insurance industry with many turning to Linkedin to express their outrage.
Firstly, inflation and the economy, along with Brexit and the damage it’s done to the cost of labour & parts are a real issue in most sectors. Insurance is no different. Even energy costs have had an impact and contributed to inflating costs. At one point, insurance claims inflation in the UK was at around 30%, some three times higher than peak inflation. So, there must be an additional problem here beyond mere economic inflation.
There are many more factors at play, and the complexity of insurance will start to become apparent to the Shadow Transport Secretary if she is lucky enough to assume power. EVs, repairability due to struggling garage networks, the rising car population, the shift back to the car as public transport has failed us with strikes and dramatically rising costs, rising crime in key areas, and so on are all contributory factors to the car insurance you pay.
Simply calling in the regulators won’t resolve these problems. Insurance companies aren’t lying about the outcome of inflation and generally rising costs. As it stands, car insurance looks unviable, with ratios battering some of the largest and most scaled car insurers.
If anything, there’s good evidence insurers aren’t passing on all of the costs, with some suggesting more rises are needed to balance the books and sustain these important businesses. What does all this really tell us?
Lack of Understanding
My first big takeaway from the General Election so far — none of the parties have displayed any real understanding or commitment to this industry. There are plenty of examples of a greater focus on banking and other job sectors, but given most things aren’t feasible without insurance, you’d have hoped for a lot more here.
It’s a real shame that insurance is viewed so narrowly. It disregards its critical role in so many areas of our lives. Examples like income protection and the value it provides in the face of volatility in the job market, and the adverse effects of unwelcomed life changes. Or bigger
commercial insurance, which essentially lubricates the wheels of much of the UK’s trade prospects.
This is a fundamental gap in any of the party’s manifestos and is reflected in a lot of the past general elections as well. The second observation is that much of the language aimed at insurance suggests measures that’ll be done to us, rather than developed with us. The signs of collaboration and using insurance to help drive much-needed change in areas like climate change, other than a nod to flood resiliency, are extremely limited.
A bold, collaborative future
So, what can political parties do? In reality, the answer is relatively simple to write down but harder to act on. We need the government, and political parties more broadly, to work with, and not merely look to act on insurance. Avoiding assumptions and misplaced decisions, could be unlocked by understanding the naturally collaborative nature of insurance. Insurers are massive interconnected businesses, looking at a wide range of data sources, large supporting supply chains, and often largescale customer bases sold through many distribution points. They’re largely open networks already.
Examples of the potential benefits of collaboration are plenty. Developing an “adverse weather” intelligence centre would be game-changing. Allowing insurers to provide insights into their understanding of risks and how these might be mitigated would create profound,
mutually beneficial outcomes. In car insurance, we could develop better education and training in the repair networks. Then there’s addressing the economic impacts of policy development, so that the government better understands the symbiotic relationships between these things and insurance, e.g. the impact of insurance on trade.
A really profound example is in cyber insurance, where the “unknown” potential for harm is being addressed directly by insurance.
There are so many examples of the potential positive impact of government and insurance collaborating effectively together. In the face of many macro-environmental uncertainties, we need to see this relationship evolve urgently.
The industry reaction
Insurance professionals appear to have a very nuanced response to this. Balancing support for consumer protection and affordability, with concerns about regulatory impacts on market dynamics and pricing models, is a tricky topic to handle in the media.
However, I know from lots of industry engagement on this that insurers are generally supportive of initiatives that promote transparency, fairness, and sustainability. They’re also cautious about measures that could disrupt risk-based pricing or stifle competition and innovation. It’s really at the heart of most insurance business models and the balancing act that makes these insurances viable.
There’s a huge need for collaboration with policymakers to achieve balanced and effective solutions. Insurance should be far more visible in politics, and there should be a lot more opportunity for discussion and dialogue, as well as key representation in tackling bigger
macro-environmental factors. The way forward is a better discourse and politicians who are prepared to be far more engaged with the deeper topics involved. Some of the pledges seem to miss the changes that have already been put in place with GIPP and Consumer Duty. This demonstrates a disconnect between the FCA and senior policymakers as well. This needs to change.
It’s time for a change on lots of fronts. Change is coming, but not necessarily the one we needed in insurance.
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