Will Treasury insurance strategy group be well driven?

Into the meeting of the new Treasury task force on the isurance industry will walk the financial fools prepared to raid reserves to keep afloat the ill-behaved and undeserving whose own lack of control should see them paying higher penalties.

While that description could apply to the government and its bailout of the banks, it could equally apply to the insurers too, especially given that the countries’ biggest motor insurers will be there. The two sides should get along swimmingly. This new committee has all the hallmarks of a love-in, with both sides telling each other what they want to hear.

The insurance industry is all mouth and no trousers. It repeats the mantra that it is going to underwrite for profit like a drug addict announcing each injection will be his last fix. Then it cuts and cuts, and raids the reserves to keep the price competitive, paying out more in claims than it receives in premiums. A government that spends more than it receives in taxes while squawking parrot-fashion the word “prudence” should feel comfortable in their company.

And then there’s the flood risk. Every year insurers dig out their rusty and bent sabre and rattle it un-threatengly in the government’s face declaring they will no longer offer cheap insurance to those on flood plains. And every year the government makes equally untruthful promises to improve flood defences and stop building on the flood plains. It’s like a Monty Python sketch.

If the government and industry are serious about the industry’s future then insurers need to be charge to proper amount for each individual risk. That means higher car insurance premiums and soaring prices for cover for the most vulnerable homes (with discounts for those at less risk). That would be unpalatable right now but the right thing to do.

I wouldn’t hold your breath.

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