Before the riots and looting in London and elsewhere show any signs of being tamed, the insurance industry is finding that it is creeping into the headlines. Most of the stories at this stage are along the lines of "when will they pay, when won't they pay" but over the coming days and weeks they will evolve into stories about the availability and affordability of cover, especially for smaller retail businesses in inner city areas. It is notable that the British Retail Consortium has already raised this issue and it is quite possible that we will hear it raised in Parliament in the emergency session on Thursday.
My plea to the insurance industry is a simple one: learn the lessons of the 1980s. Then, you mucked it up big time. Everyone knew that many underwriters wouldn't touch inner city risks after the Toxteth and Brixton riots of 1981 were followed four years later by the first Broadwater Farm disturbances yet the industry stuck its head in the sand and denied there was a problem. This resulted in months, if not years, of bad publicity and political anger as the industry collectively refused to face up to the problems that its underwriters were creating.
Eventually, the Association of British Insurers (then recently formed) reluctantly and, as I recall, with bad grace, stepped in with a clearing house scheme for risks that couldn't be placed. Of course, it is not just a matter of finding someone to take on a risk, but finding an insurer who will quote an affordable premium. Blanket assurances that "there is a market" won't wash with MPs being bombarded with tales of businesses being quoted huge premium rises on renewal, the point the BRC was raising today.
Another related issue that came later was the effect insurers were having on the image of many high streets as they came back into the market but with an insistence on heavily shuttered shopfronts at night in return for affordable premiums. This is a tough one. I think we have seen over the last few days how vulnerable glass-fronted shops without adequate shutters can be to a few determined looters and I can see insurers insisting on a return to better overnight security for retail premises. They will probably have to accept that this will not go down well with some MPs and local authorities.
The insurance industry needs to ready itself for the problems to come. It needs to listen and respond. We all know that some insurers will not be able to remain in this market if they sustain heavy losses and it is no use pretending otherwise. But without insurance many businesses will not re-open so the insurance industry has a major role to play in the hard task of setting the districts most affected on the road to recovery. This requires a collective response, maybe even a collective spreading of risk.
My post has provoked a prompt response from Nick Starling, director of general insurance and health at the ABI, who emailed me to say that he hopes "we have moved on in 30 years". The statements issued by the ABI on the immediate problems are certainly both informative and timely (see below). That is a very good start but it will be the fall-out in terms of rates and availability that will be the real test of how far the industry has moved on.
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