The insurance industry responds to Labour election win

The 4^th of July General Election saw the Labour party win by a landslide, securing a 412-seat majority and ending 14 years of Conservative rule. With a new party set to take control, this article explores the insurance industry’s response to the election result.

Following Labour’s historic victory, the insurance industry responded by highlighting issues it wants the government address, with Lloyd’s and the Association of British Insurers (ABI) expressing a wish to collaborate on mutual goals.

Following the election, ABI Director General, Hannah Gurga, commented:

 “We look forward to working closely with the government to deliver on […] mutual priorities. Our industry shares many areas of common interest with the new government, including an ambition to drive growth and competitiveness, boost household financial resilience against risks, and tackle climate change.”

Meanwhile, Bruce Carnegie-Brown, Lloyd’s chair suggested that Labour could bring “a period of greater stability and […] enact reforms necessary to improve the economy’s competitiveness”, and that “Lloyd’s looks forward to partnering with the new UK government to generate growth and to build resilience into our economy.”

Elsewhere, Jonathan Jackson, CEO of flood forecasting Insurtech Previsico, stated that, following Labour’s victory, “[n]ow […] is the time for action” regarding flood risk insurance. Referring to the previous confirmation by former Shadow Secretary of State for Environment of Labour’s intention to spend £4 billion on flood mitigation measures, Jackson continued:

“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.”

In addition, British Insurance Brokers’ Association (BIBA) CEO Graeme Trudgill expressed support for Labour’s commitment to introducing a Regulatory Innovation Office and called on the government to introduce secondary legislation in relation to the Leasehold Reform Act to allow broker commissions and fees to be classed as permitted insurance payments.

Trudgill emphasised the need to increase SME business resilience, specifically in relation to cyber and flood risk, boost capacity issues in Northern Ireland, and progress reform of the apprenticeship levy and access to EU insurance clients.

Trudgill also referred to the BIBA manifesto:

“Our 2024 Manifesto is all about managing risk, increasing resilience and growth, placing the role of insurance brokers at the heart of this.”

“We will raise the value of insurance brokers and highlight member issues and our priorities. Above all else, we look forward to showcasing the skills and expertise of the sector in finding solutions to some of the biggest risks we are facing and will face in years to come.”

Julian Hucks, Managing Director of Starspeak Insurance Solutions, suggested Labour’s 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 noted”, Huck added.

Hucks also praised Labour’s pledge to address the sectors skill shortage with an initiative aiming to attract fresh talent and rejuvenate the ageing workforce:

“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”.

Will Labour act to tackle the cost of motor premiums? 

Pre-election comments have led to increased discussion around the steps Labour will take to fulfil their pledge to tackle the cost of motor premiums. During the election campaign, new transport secretary Louise Haigh said that regulators such as the FCA and Competition and Markets Authority needed to investigate premiums in the sector, and that Labour would “urgently call in the regulators to crack down on any unfair practices and to come clean on the causes of soaring costs for consumers.”

Whilst motor premiums have risen, so have the costs to insurers. According to data from the ABI Motor Insurance Tracker published in April 2024, motor premiums increased by just 1% in the first quarter of 2024, indicating an ease in rises seen in 2023, whilst the average claim paid by insurers rose by 8% to reach a record of £4,800 over the same period.

Speaking to the Mirror, Haigh stated: “car insurance is a legal requirement and an essential – not a luxury. Labour won’t sit back and watch while drivers are punished by the out-of-control cost of cover”.

The new Labour government also pledged to reduce claims by decreasing the number of potholes on the road, aiming to repair up to one million more potholes every. According to Haigh, potholes caused drivers to pay out £500m in 2023. Labour’s claim, if achieved, could therefore relieve claim pressure on insurers.

Aviva CEO Amanda Blac, however, criticised Labour's proposals to address rising motor insurance prices, calling the strategy “fundamentally flawed” and, attacking the proportionality of Labour’s plans to involve the CMA and FCA in an investigation of the motor insurance market, compared the party’s approach to using a “sledgehammer to crack a nut”.

At the Financial Times' Global Insurance Summit in London, Blanc rejected the notion that there was an issue with pricing in the market: “If you look at prices relative to where they have been, five, six, seven years ago, [prices] were not [high]… The motor insurance market is incredibly dynamic. […] It’s highly competitive.”