In the wake of Labour’s recent triumph in the UK General Election, industry experts are weighing in on the potential impacts this political shift may have on the insurance sector.
Rory Yates, Global Head of Strategy at EIS, Julian Hucks, Founder and Managing Director of Starpeak Insurance Solutions, and Beatriz Benito, Lead Insurance Analyst at GlobalData, provide their insights into the challenges and opportunities that lie ahead.
Political and Economic Complexities
Rory Yates highlights the multifaceted nature of the insurance industry, which is influenced by factors such as inflation, Brexit, and rising energy costs. He notes, “The industry’s complexity, influenced by factors like inflation, Brexit, and rising energy costs, can’t be oversimplified. These elements, along with surging claims inflation, strained repair networks, and increasing crime rates, paint a much broader picture than what political soundbites suggest.”
Yates says the need for meaningful political engagement with the insurance sector to address these complexities. “Government collaboration with insurance is vital. Insurance has a profound impact on cost of living, concerns around risk, how well our business is enabled to grow, and so on. So why is it often left out of the big processes of change?” he questions. Yates calls for an evolved dialogue that appreciates the sector’s contributions and complexities, stressing that regulatory intervention alone won’t solve the industry’s challenges.
Support for Small Businesses and Workforce Development
Julian Hucks sees Labour’s victory as a positive step towards addressing underinsurance for small businesses. “Labour’s General Election victory should be a step in the right direction when it comes to tackling the ongoing issue of underinsurance for small businesses. SMEs have had a tough few years navigating the cost-of-living crisis and other economic challenges, which has ultimately led to costs being cut. Unfortunately, insurance cover is among the casualties,” Hucks explains.
He also praises Labour’s pledge to address skills shortages, which is critical for the insurance industry. “The introduction of new Technical Excellence Colleges will hopefully entice more young people into insurance by demonstrating the range of new roles that technology has created across the sector,” says Hucks. This initiative aims to rejuvenate the industry’s ageing workforce and attract ambitious new talent.
Flood risk mitigation may see more support
Insurtech Previsico, the flood forecasting pioneers, announced that they back Labour’s stance on UK
flood risk mitigation, following a meeting at Loughborough University with Shadow Secretary of Environment, Food and Rural Affairs, Steve Reed, and Loughborough’s Labour candidate, Dr Jeevan Sandher.
Prior to being spun out of Loughborough University in 2019, Previsico worked closely with the Conservative government by feeding their live flood warnings into COBRA. However, according to Stephen Reed, the Conservative government had allocated £5bn for flood defences to be spent by 2027, but they have only spent £1bn of it to date, leaving a major flood risk mitigation opportunity gap.
Jonathan Jackson, CEO of Previsico, said: “Naturally, we are grateful to our early high-profile stakeholders, including the Cabinet Office, Met Office, and Environment Agency, who facilitated the first pilots that led to our significant success with brokers, insurers, and corporates alike, in the UK and beyond.
“Today, however, both residential and commercial properties in the UK are subject to increasing flood
risk due to climate change, which is already affecting insurers’ risk appetite and making it increasingly
challenging for them to provide affordable flood risk insurance.
“Now, therefore is time for action, and Previsico welcomes the Shadow Secretary of State for Environment confirmation that Labour would spend the £4bn on measures to mitigate flooding if they come into power, including building flood defences, digging out drainage systems and planting trees along riverbanks.”
Sustained Demand for Private Medical Insurance
Beatriz Benito in her pre-election analysis released last month, provides a perspective on private medical insurance (PMI), asserting that political promises will not diminish its demand. “Concerns about NHS waiting times and/or services is the leading reason why consumers take out PMI, as cited by one in four individuals (25.2%) according to GlobalData’s 2023 UK Insurance Consumer Survey. This has not only been the main purchasing trigger over the years, but the proportion has remained stubbornly high since 2019, which was then compounded by the COVID-19 pandemic,” Benito explains.
Challenges and the Path Forward
Benito further elaborates on the state of the NHS and its impact on PMI demand: “It is difficult to foresee the dramatic recovery that the political parties are hoping for any time soon. Politicians have remained cautious about raising general taxes, with both the Conservative Party and Labour also ruling out increases to national insurance contributions. Meanwhile, the state of the NHS is in tatters, having succumbed to years of austerity measures imposed by the ruling Conservatives, with economic injections being scant and dispersed. The COVID-19 pandemic was the tip of the iceberg, further stretching NHS resources and extending waiting lists.”
Benito continues, “While concerns about accessing healthcare services will continue to drive demand for PMI, an overstretched healthcare system could have a negative impact on the quality of healthcare provision as well as the attitudes and behaviors of staff. This could eventually prompt other patients to consider purchasing PMI. Hence, investments into the NHS are likely to have little impact on demand for PMI any time soon.”
All three commentators agree that while Labour’s policies offer potential benefits, significant challenges remain. Yates cautions that the relationship between politics and insurance has often been strained, with the industry frequently used as a scapegoat for broader economic woes. “The recent moves by the FCA with Consumer Duty are a good example that highlight our policymakers’ ongoing desire to act on insurance rather than with it,” he remarks.
For the insurance sector to thrive under the new government, sustained political engagement and collaboration will be essential. As Yates concludes, “For meaningful progress, political engagement with the insurance sector must evolve, fostering dialogue that appreciates the sector’s complexities and contributions. We can only address the macro-environmental uncertainties and build a resilient future through such collaboration.”
The Labour Party’s victory sets the stage for potential reforms that could reshape the insurance landscape, but the journey ahead will require concerted efforts from both policymakers and industry leaders.
