Following the UK electorate’s vote to leave the European Union, there has been a lot of crystal ball gazing as to what it might mean for the insurance industry.
In the main, the insurance market and its representative bodies, including the Association of British Insurers, the British Insurance Brokers' Association, Lloyd's and the International Underwriting Association, were in favour of maintaining the status quo.
So it will be interesting to see whether Brexit will bring in major changes, and when their influences might start to be felt, whether negative or positive.
With this in mind, the third Post Claims Club meeting in September is planning to gather a number of market representatives to discuss this in more detail, with a particular emphasis on claims.
In advance, here are a few of my thoughts, I hope you can join us on 8 September to share your views on a subject that will no doubt exercise the market well into 2017.
1) Are these priorities still priorities?
In the Autumn Statement last year, then Chancellor George Osborne outlined a proposal to end the right to cash compensation for minor whiplash injuries and raise the upper limit for the small claims court for personal injury claims from £1000 to £5000.
No timescales were given, but in December 2015, the Ministry of Justice said that following a consultation the measures would be introduced "as soon as possible".
However, the claimant fraternity insisted that moving from proposal to legislation would not be "plain sailing". And they have proved far-sighted, although after joining forces they might not have guessed the circumstances in which things would hit a brick wall.
Brexit and the subsequent Cabinet reshuffle have certainly raised serious questions about the likelihood of a whiplash consultation before recess, triggering concerns about whether this reform will ever see the light of day. So much so that major insurers like Aviva have already written to the new Cabinet ministers to give them a gentle nudge.
Elsewhere, others are worried that the work of the Insurance Task Force might go down a similar cul-de-sac after it published its recommendations in a 92-page report in January.
Of particular interest were proposals to clamp down on nuisance calls and for the Solicitors Regulation Authority to get tougher on fraud.
Suggestions that, again, might end up getting lost in the EU vote aftermath, to the frustration of many who spent months, or indeed years, campaigning for these changes.
2) Could a market hardening see more fraud?
With regard to business written in the City, Lloyd's of London has already predicted £800m of gross written premium could be put at risk by the Brexit vote.
If this bore out, to make up for any market contraction in premium - and with uncertainty impacting insurers' investment returns - there is an expectation that companies will increase premiums to compensate.
This could also be stimulated by international groups withdrawing from the UK, especially if their business here is only marginally profitable.
The UK commercial insurance market - especially in terms of SME risks - has been characterised by an oversupply of capacity for 15 years now, with competition keeping rates soft or at least steady. Brexit and any market contraction might end that.
The question as to what impact that might have on claims will be interesting, with a rise in fraud one potential outcome if customers try to recuperate some of their outlay. Especially if the economy fails to see much of a bounce next year.
Others have commented that it could exacerbate the underinsurance problem, as companies look to cut corners.
3) Respite for outsourcing
Despite the view of Lord Turnbull, who served as a non-executive director at Prudential, that Brexit could offer an opportunity for the UK to dump the expensive Solvency II framework introduced at the beginning of the year, few think this is realistic given the time and money invested in it.
Especially given that the UK will most likely have to maintain equivalence to the EU insurance regulatory regime so that it can continue to benefit from passporting throughout the European Economic Area.
Market commentators also expect gender-specific insurance rates to be retained, although there might be some respite in terms of increases to the cost of outsourced claims handling if the UK government no longer has to align its VAT position to a recent European Court of Justice ruling, Minister Finansow v BRE Ubezpieczenia Sp.
4) Impact on digital claims investment
Insurance is often seen as lagging behind other sectors. But the recent interest and investment in insurtech indicate that might no longer be the case, as investors and entrepreneurs have become intrigued by the money to be made by disrupting and digitalising the market.
One fear triggered by Brexit is that uncertainty might see some tighten their budgets here. To counter that others have argued that the UK has often been at the forefront of developments in this space, from aggregators to Internet of Things to automation of vehicles - one government proposal for which momentum still seems to be there. And the IP here would be difficult to replicate.
The digitalisation of claims might have been a long time coming, but with some interesting developments starting to come to the fore from 3D printing to mobile claims tracking, it would be sad to see this momentum halted.
5) The loss of passporting?
One major issue to be resolved relates to the passporting rights of UK insurers into Europe. Many international insurance groups have set up major centres in the UK to coordinate their operations across the continent, and some could be at threat of downsizing with claims roles as much at risk as any.
In light of the referendum result, there have been a number of predictions as to the overall hit on the UK insurance market, with Boston Consulting Group predicting a fifth of jobs in London's financial services industry could be relocated. Alongside pharmaceutical and biotechnology, insurance was named as one of the sectors that could be most impacted, with Dublin, Frankfurt and Paris among the suggested beneficiaries.
Before the vote, law firm Kennedys suggested 48 000 insurance jobs could be put at risk by Brexit over two years, while Markerstudy CEO Kevin Spencer went as far as telling his staff their jobs could be at risk if the UK public voted out.
It is still early days, and it will take a while to pick through what is fact or fiction, but Aviva has said that it will not have to restructure, while AIG has admitted it is weighing up its options.
Gibraltar - home to Markerstudy and for long seen as a favourable regulatory regime to set up in to passport into the UK and Europe - is also facing a potential exodus, with Elite already noting it will not wait for the EU/UK negotiations to conclude but is actively seeking to move.
And it is not just the underwriting of business that might be impacted, with some speculating what might happen in terms of claims that have a cross-border aspect, and the role of businesses in a non-EU UK in handling them.
If you have any other points you think that should be addressed at the Claims Club meeting on Thursday 8 September, then email them to me or contribute in the comment section below.
And I hope you can join us at Plantation Place in London to offer your thoughts and insights alongside a panel that currently consists of:
- Matt Baker and Scott Farley, market services manager and communications director, International Underwriting Association
- Malcolm Hyde, executive director, Chartered Institute of Loss Adjusters
- Alistair Kinley, director of policy and government affairs, BLM
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