Social exclusion – the idea that people are denied banking and insurance services because they're too poor to milk a profit from – is fast becoming a major political battleground for the industry.
The Government is very keen that insurers should "do something" to ensure the poorest can afford to insure their homes – but the industry believes politicians have grasped the wrong end of the stick. This has all the makings of a major scrap, but it's a fight the industry cannot win. The political always takes precedence over the actuarial.
The background to this quite long-running story is that, contrary to what government maintains, the ABI denies that postcode "redlining" exists. To back this assertion, it points to a 1998 Joseph Rowntree report which found that only two per cent of people without cover were actually refused cover.
Unfortunately for the industry, Government is not desperately interested in rational defences of the status quo. Its social mission is at stake – and contrary to the impressions Tony Blair may create in other areas of political life, Labour does actually want to improve the lot of the disadvantaged.
It would help Labour's stock in the run up to the next election – not that far away now – if it could boast it had forced big business back into the most deprived inner city areas. It would also like to claim that it had helped re-establish a greater sense of personal responsibility and respect for property among the citizens of these areas. At the moment, it is hard for such values to take root when criminals are rampant and the victims cannot replace their lost goods. All that can take root is a sense of anomie – helplessness in the face of a breakdown of the society's rules of conduct.
So, for Labour, the stakes are high. And just as it forced the lowest possible level of commission for ISAs on the insurance industry, so it will force through some new thinking in this area too.
Insurers will find themselves being encouraged to devise new products on which they cannot possibly make a profit – not the greatest way for the general insurance industry to reward its shareholders.
But if the number of people currently being denied insurance coverage really is as low as industry estimates, this may be a price worth paying for the community kudos it bestows.
A first for brokers
It was only a matter of time before the sea-change in the provision of Lloyd's capital threw up something appealing to outside brokers. But that is to take nothing away from the ingenuity displayed by Edgar Hamilton & Wellard in conjuring up a vehicle that allows brokers to own a slice of a managing agency to which they bring their best business.
In the past, Names have often felt disenfranchised from their syndicate. Their managing agent would always make his profit; they often would not. By offering brokers a stake in the managing agency, EHW is establishing a true sense of community between capital provider and underwriter – just as it always should have been, but sadly all too often is not.
The idea is particularly in tune with the current practice, as brokers rather than underwriters are now often seen as the true drivers of success. It is the broker who receives the accolades or the brickbats, depending on what quality of business he introduces to his underwriters. And if everything depends on the skill of the broker, it makes sense for the broker to derive a greater share of the success of the business.
This is an idea whose time has come.
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