As Gordon Brown faces his first conference as prime minister, Ellen Bennett sets out what he could do for the insurance industry
The ABI, the lobbyists and the chiefs of some of the industry’s biggest players are in Brighton this week, glad-handing Labour grandees and fighting to get insurance to the top of the political agenda.
With a new prime minister, chancellor and minister for financial services (Kitty Ussher) attending their first conference in post, it’s all to play for.
While in his fiefdom at No 11, Gordon Brown made reassuring noises on the thorny questions of tax and regulation: but nothing has happened since. From the flooding fields of Britain to the sunny shores of Bermuda, insurance needs the Labour party’s help.
To some extent, that help has been forthcoming. ABI head of political risk Alan Leaman says of the Labour party: “They are not naturally hostile and suspicious – they increasingly want to work with the industry.”
Leaman reserves particular praise for Brown’s old stomping ground, the Treasury, seeing the appointment of Alistair Darling as chancellor as “a positive development for the industry, which he knows well from a number of previous positions”.
Let’s hope Darling can influence his Cabinet colleagues, because insurance remains beneath the horizon of key departments such as health and transport where, Leaman readily confesses, “there’s a big job to do”.
Here, Insurance Times highlights six key ways the Labour party could win the industry’s votes.
1. Money for flood defence
Following this summer’s catastrophes, floods are at the front of every insurer’s and brokers’ mind. The industry expects to pay out upwards of £3bn in claims, while the government has committed less than £1bn to improving defences. Royal & SunAlliance property development manager Alan Gairns says: “We need consistency in flood defence spending. The spend from government always follows an event. We need a programme looking perhaps 10 years ahead to provide certainty.” This is especially pressing as the government prepares to build thousands of homes on flood plains.
2. Bermuda exodus
With every week bringing news of another company disappearing into the Bermuda Triangle, the Lloyd’s and London markets are anxious for the UK to increase its competitiveness – in plain English, to cut its corporation tax. UK corporation tax currently reaches up to 30%, which doesn’t look good next to Bermuda’s 0%. Chuck in the capital’s creaking infrastructure and soaring cost of living, and you might ask why more companies haven’t packed their bags. Biba chief executive Eric Galbraith says: “The
“The government has listened to us in the past, but any actual change takes such a long time. Itâ€™s a great frustration
Eric Galbraith, Biba
government must ensure a good tax environment if people are to stay in the UK. The government has said it will engage with the tax environment, but nothing has happened at all.”
3. Listen to the industry
In 2006, as chancellor, Brown established the high level group for financial services with great fanfare and pledged to hold an insurance summit this autumn. But since he moved next door, little has been heard from the group and, while the Treasury insists the summit will go ahead, it is unable to name a date. With little more than one autumn month left, the government had better get cracking if it is to keep its promise. And if the summit does take place, ministers must act quickly on the industry’s advice. Galbraith says: “They have listened to us in the past, but any actual change takes such a long time. It’s a great frustration.”
4. Ease the regulatory load
The Labour government introduced FSA regulation of the general insurance market – for which it may never
be forgiven. With the Treating Customers Fairly initiative, there has been a much-needed shift towards principles-based regulation but, particularly for the smaller broker, the red tape is still stifling. IIB director general Andrew Paddick says: “From a broker’s perspective, regulation by the FSA has been a bitter disappointment. It has been extremely expensive and I don’t believe there have been any consumer benefits at all.” Paddick also bemoans the lack of democracy in the new system, with the FSA unelected and unaccountable.
5. Uninsured driving
There are some two million motorists driving on UK roads without insurance – the vast majority motoring on unpunished. The industry is left to meet the cost of accidents involving uninsured drivers, adding £30 a year to the premium of honest drivers. Yet an uninsured driver faces a fine of just £100. Industry lobbyists believe the government must make the minimum penalty for driving without insurance at least comparable to an annual motor premium if it is to stop the epidemic of uninsured drivers.
6. Injury claims reform
The average employers’ liability claim takes three years to process. This may fill the lawyer’s boots, but for all other parties, it’s a costly delay. The vast majority of claims are uncontested and could be resolved in a matter of months. The government moved in the right direction with its recent consultation on reform, but, the ABI’s Leaman says: “We require legislation and more government action.”.