Paul Robertson, Managing Director of Midway Insurance and 1st Sure Flats provides his view.
At the time of writing Mrs May has just announced her plan and it appears it’s going to be a hard Brexit. But we are all reassured that central to government priorities is the protection of the UK’s financial services industry. Anyone worrying about how Brexit will affect insurance has nothing to worry about then, or do they?
The European project has brought many changes to insurance in the UK. The free movement of goods and services has enabled the London insurance market to thrive with so called “Passporting Rights” enabling London to trade across Europe and access European capital and reduced costs in offshore markets. Already insurers are planning to set up offices away from London to enable them to access the best routes to markets that may become far more complex and difficult to trade in.
Whilst you could argue that Europe has brought us far too much red tape and our regulatory regime has gold plated that in respect of the so called “mediation” (European language for the bringing about, assisting or arranging insurance) is that really a bad thing for the customer? After all the insurance act last year was designed to redress the balance of power between the customer and the insurer and that can’t be a bad thing.
So, you may ask, what does this really mean for block insurance and why does it matter? As this is becoming a frequently asked question here are my personal views and predictions:
Insurers will regroup their operations in the UK in preparation for the likely impact of Brexit. Already there are signs of this happening and history dictates that where there is change at the top of insurers structures and changes of senior management this will result in restructuring down the companies. Sadly this normally results in disruption to service as a result of these reorganisations and I predict that we may see a fair amount of this. To operate insurers need capital and we already have changes coming that will increase these requirements. If the availability of capital in the UK reduces because it moves offshore then we can expect insurance premiums to rise.
Personally I can see no reason for a relaxation in red tape when it comes to regulation. Ultimately insurers operating both in and out of Europe will probably adopt the lowest common denominator in terms of regulations, being the rules we have at the moment. Obviously we can derive alternative rules but will there be time or the incentive to do so?
That said most of the challenges in the block insurance market are driven from ensuring the insurance product meets the needs of the lease. Currently this is driven from current understanding of landlords and tenants law. Thankfully this sits firmly within our own jurisdiction and as such I see no reason that Brexit will impact on this. But Brexit may actually allow insurers to tackle elements of fraud and the investigation of such in a stronger capacity. Obviously we need to be mindful that the balance should not fall too strongly in favour of the insurer but there is a strong argument for insurers to be able to deal more effectively with fraud without some of the limitations that Europe brings to this process.
Ultimately the UK insurance industry is large enough that maybe the impacts of Brexit will be small and ultimately I suspect that in 10 years times it will have made little or no difference. Many of these changes would probably have happened anyway. Whatever your views on the European project the legacy will be with us for many years and probably there is little of it most of us really want to change.
Paul Robertson is MD of Midway Insurance and 1st Sure Flats / www.1stsureflats.com Tel: 0345 370 2842.
