We have a new Prime Minister – but what does Theresa May mean for your insurance?
After a few whirlwind weeks in recent UK political history, we voted to leave the EU and as the repercussions of this decision play out we now also find ourselves with a new Prime Minister.
Theresa May, former Home Secretary, is the first female Prime Minister of the United Kingdom since Margaret Thatcher.
These recent political shakeups will have a dramatic affect on many different aspects of UK life, from education to welfare and, of course, our relationship with our European neighbours. But what does it mean for the insurance industry and more specifically, for our insurance policies?
It is still early days, which makes it hard to tell the long-term effects but there are two very important factors to consider.
The first thing to consider is that despite siding with ‘remain’ during the run up to the Brexit vote, Theresa May has stated she is committed to acting upon the wishes of the British public in negotiating a separation from the European Union. While the exact logistics of this are still uncertain, this announcement has caused a wobble in a number of financial markets, including the insurance market.
Following the results of the EU referendum, Aviva suffered an initial drop of 20% before recovering half of these losses, while the Financial Times reported that Direct Line, RSA and Admiral all suffered falls of “mid-single digits.”
This is likely to settle as things become clearer and is therefore unlikely to have any immediate effect upon things like insurance premiums but if this temporary downturn becomes a more permanent one, it is possible that prices will rise in the future.
Another effect of the UK’s withdrawal from the EU on the insurance industry will be the loss of “passporting”, which is the ability of banks and insurers to operate in all member states without the need to obtain separate authorisation in each. This won’t really impact upon typical home or motor insurance policies but for businesses trading or operating overseas, this could drive the price of premiums up to accommodate these extra costs.
The second important consideration is that unlike many other politicians, Theresa May has actually been fairly involved in the insurance world in the past, passing laws and taking a direct interest in certain areas of the industry and how they affect customers.
In 2014, as Home Secretary, she was integral in introducing a complete ban on UK insurers paying out on claims linked to ransoms paid to terrorist organisations. Of course, it was already illegal to fund terrorist organisations but the law was less clear when it came to areas like ransom payments in order to release kidnapped individuals. The impact of this law upon ordinary people was very small but it did show that May had a close eye on the insurance world.
More notably when Theresa May’s constituency of Maidenhead suffered serious flooding in 2014, she published a document on her website regarding the issue of insurance for flood victims in order to address some of the shortfalls of the Flood Re program. This involvement has continued until as recently as March of this year when she met with the chairman of the scheme ahead of his induction in April.
After this meeting, she said: “It was useful to meet with Flood Re and hear about how the scheme is set to help local people in the Maidenhead constituency. Some households struggle to access affordable flood insurance and I hope that the situation will improve after Flood Re has launched in April.”
So what does this all mean? Well firstly, it means that there are no certainties, especially until the effects of the Brexit vote become clearer, though there might be some mid-term impact upon insurers if things do not immediately bounce-back, with the effects more likely to be apparent for businesses that operate internationally in some way.
Secondly, it means that our new Prime Minister has previously had a close involvement in the insurance world, closing legal loopholes and looking to improve the situation for customers. This involvement will likely take a back seat as she assumes her new position but it also means that she might continue to take a more immediate interest in the affairs of insurance companies and their clients than her predecessor.