Public sector cutbacks have the potential to hit the insurance industry from all angles
It may be summer but, as we report this week, the chill wind of austerity is still blowing through the insurance sector. While the brunt of the new government’s spending cuts will be borne by the public sector, private companies have plenty to worry about too (page 14). When public projects are scrapped, the private companies that feed off their contracts suffer – and their insurance exposures fall or disappear entirely. Brokers tell us every day that, despite the odd ray of hope, it’s still tough out there, and will be until at least the end of this year.
Insurers don’t get off scot-free either. Public sector cutbacks also mean there’s less money for vital projects, such as the improvement of flood defences or the implementation of continuous insurance enforcement. Against a background of ever-rising claims costs, it is difficult to break even, let alone turn a profit. Witness this week’s news that IAG UK expects to make “significantly” less profit for the last financial year (page 7).
The Australian insurer recently had to bolster its reserves by millions of dollars, blaming bodily injury claims. In the UK, moves to sort out the tortuous mess of the claims system are afoot: this week the government gave its “full backing” to the Jackson Review, which contains a raft of sometimes radical proposals that, if fully implemented, would go a significant way to improving the system. But has the government got the money and the will to push past the many vested interests and make it happen? Don’t hold your breath.
Fair Fees campaign sparks overwhelming responses
Given the economic backdrop, the hikes in FSA fees that are threatening to put many small brokers out of business are all the more galling. That’s why we’re campaigning for major changes to the way brokers are treated under the Financial Services Compensation Scheme, the levy that makes up a big part of the FSA fee. Your response to our Fair Fees campaign over the past couple of weeks has been overwhelming. Turn to page 12 to read just some of your comments and stories – and rest assured that we will continue this fight. Please keep sending your comments and signing our online petition at insurancetimes.co.uk. IT