As the UK general election date was finally set, Insurance Times brought together financial services representatives from the three major parties in a special hustings, and put them under the grill on their plans for the industry. Would any be able to win the hearts of the sceptical audience?
Gordon Brown finally called the general election this week, ending the long pre-poll ‘phoney war’ between the parties. General insurance is unlikely to figure much during the next few weeks’ campaigning. But to keep the issues affecting the sector on the decision-makers’ radar, Insurance Times organised a special pre-election hustings at Church House, just a stone’s throw from the Houses of Parliament.
The event, which took place a few hours before Channel 4’s debate between the chancellors last Monday, gave a select industry audience the chance to pitch their concerns to the financial services spokespeople of the three main UK parties: shadow financial secretary Mark Hoban, junior Treasury minister Sarah McCarthy-Fry and Lord Newby, the Liberal Democrats’ Treasury spokesman in the House of Lords.
The topics discussed included fraudulent claims, Europe and, of course, the future of financial regulation.
So, what did they have to say for themselves, and who fared the best?
In the blue corner
Of the three representatives lined up at last week’s hustings, shadow financial secretary Mark Hoban has the most hands-on insurance experience. As he was quick to remind his audience, before being elected to parliament, Hoban spent his formative years auditing insurance brokers for PricewaterhouseCoopers.
Hoban, who has spent the five years since he was appointed to the financial services portfolio busily cultivating the City, kicked off by outlining the Conservatives’ plans to replace Labour’s system of financial regulation. “It has failed not just the financial sector, but the entire economy,” he said.
As a sector that is systemically important to the wider economy, Hoban said insurers should be regulated by the Bank of England, while non-systemic functions will come under the wing of the Consumer Protection Agency. “We want the CPA to be a real consumer champion. We believe that our regulation package will increase confidence and can safeguard the sector from the crisis.”
According to the Fareham MP, the guiding principle behind reform should be that the level of regulation is proportionate to the risks involved. “The disproportionate burden of regulation has reduced the number of people who are prepared to be in the market,” he said.
London can’t afford to rest on its laurels if it wants to continue to be a centre of the insurance industry, he insisted. “We need to make sure that London is the best place for insurers to be in the future.”
When pressed on the Tories’ approach to claims, Hoban said that while the Jackson Review had “made a start” at tackling the legal procedures around compensation, his party would go further. “We want to embark on a wider review of what is needed to tackle the compensation culture and ways to get greater predictability on costs.”
And he said a Tory government would crack down on fraudulent claims. “It’s in the long-term interest of the consumer and the insurer for those costs to be kept low. If that means higher penalties for making fraudulent claims, that is something we will have to look at as well.”
Summing up, Hoban got the audience on side when he said he didn’t believe McCarthy-Fry had the temerity to claim that Labour should be entrusted with securing the UK’s economic recovery. The audience’s laughter made clear where their sympathies lay.
In the red corner
Sarah McCarthy-Fry has been a junior minister at the Treasury since the middle of last year.
She tried to appease a sceptical audience by paying tribute to the insurance industry’s importance.
“It makes a huge contribution to the wealth of the country and to the government’s taxes and receipts,” she said, adding that it is also a key provider of investment capital.
And the insurance industry could be a key partner for government in meeting its social goals, like the provision of long-term care for the elderly. “You take the burden of risk and move it away from the individual,” she said.
Trust in the financial services sector had “taken a blow” as a result of the financial crisis, she added, which the government was seeking to tackle by improving personal finance education.
The Portsmouth North MP agreed with the rest of the panel that creating a dedicated minister for insurance would not be a good idea. Instead, she suggested that a cross-cutting group could be set up, bringing together those ministers whose portfolios have an impact on insurance.
But consensus broke down when McCarthy-Fry’s attention turned to Tory plans to reform financial regulation. Business liked certainty, which the Conservatives were failing to offer with their proposal to scrap the Financial Services Authority, she argued.
“To encourage capital flow into the UK insurance industry, we must make sure that we have a stable regulatory regime. If there is some stability, people are able to plan for the future.”
McCarthy-Fry defended the FSA, insisting that it was “getting there”.
She said the tricky issue for the government was to get the balance right between too much and too little regulation. And that balancing act extended to members of the public. “We need to emphasise that consumers have responsibilities as well as rights, and that it is their responsibility not to make a fraudulent claim.”
But her staunch defence of Labour’s economic record, in which she stuck closely to chancellor Alistair Darling’s Budget day script, clearly didn’t win many fans among the audience.
McCarthy-Fry faces a difficult task holding on to her constituency seat, where she is defending a narrow majority against a strong Conservative opponent. She clearly faces just as tough a challenge persuading the insurance industry that Labour has its best interests at heart.
In the yellow corner
It is the fate of Liberal Democrat spokesmen to be ignored and mocked: the recent Private Eye cover describing party leader Nick Clegg’s wife as ‘The Other One’ springs to mind.
But while Lord Newby has a low public profile, he is a seasoned backroom operator in Lib Dem circles. As Charles Kennedy’s chief of staff, he had the tough task of keeping his party leader on the straight and narrow.
The former taxman offered an olive branch to his audience with a staunch defence of the financial services industry. He described the current financial services-bashing climate as “dangerous” for the UK economy. “It’s one area where we have a competitive advantage over other parts of the world. I hope that all parties will keep that in mind.”
He lined up with McCarthy-Fry to criticise Conservative plans to get rid of the existing system of financial regulation. While expressing concern that the financial regulators had not been using their enforcement powers sufficiently robustly, he branded the Tories’ proposals as “fundamentally mistaken”.
“You are going to be faced with a minimum of two years of uncertainty because a piece of legislation of this size takes a long time to go through parliament and it won’t be introduced on day one.
“We think at a point like this, when there are major issues facing the industry and the regulatory framework, it makes no sense to be worrying about the name plates on the door.”
He added that the FSA was “learning” not to gold plate every directive that came out of Brussels.
Lord Newby also took a swipe at the Francophile Hoban’s stated desire to engage more closely with the European Commission on financial regulation. He argued this statement sat strangely with the Tories’ decision to quit the main centre-right grouping in the European parliament. Taking this stance would negate a Conservative government’s influence over important directives, like Solvency II, that the parliament has a key hand in shaping.
But, on the issue of public spending, the peer turned his guns on both Labour and the Tories, criticising their commitment to rule out cuts in areas like health, education and overseas development.
“The concern is that if you ringfence areas that are politically popular, the inevitable consequence is that other areas are going to be cut disproportionately,” he said. “Those areas of public expenditure that are not ringfenced will see cuts that could be up to a fifth or a quarter.”
Many of these cuts would fall in areas close to the insurance industry’s heart, like flood defence and criminal justice. Cutting the latter would undermine efforts to combat fraud, he argued. “You need real resources to be put into this area. There’s a real risk that the business of dealing with fraud is going to be cut very significantly, which I think would be a big mistake.”
Lord Newby may have started the day as an unknown factor, but with his thought-provoking contributions, he may have advanced his claim to a financial services portfolio if the Lib Dems end up in coalition government. However, if the audience had its way, a Conservative government would be a shoo-in. IT