Briefing: What are the Labour party’s plans for insurance?

By Stuart Reid

For the first time in 14 years, the UK has a change in government as the 4 July 2024 general election saw the Conservative party defeated by new prime minister Keir Starmer and his Labour contingent.

Therefore, surely it is now time for us to take a breath, see what has been promised by Labour and explore how that might affect us here the in the insurance world.

To be fair to the new government, it is very early days and it will be interesting to see what actions are taken and when – but let me see if I can tease out a few of the things the party has mentioned so far.

What’s new – if anything?

A simple Google search on Labour’s approach to insurance simply stated that the party will “focus on leveraging solvency UK reforms to unlock investment potential”. Nothing new here.

In its manifesto, published in June 2024, Labour wrote that “financial services are one of Britain’s greatest success stories” – but it only specifically mentions insurance once, referencing its desire to “support drivers by tackling the soaring cost of motor insurance”.

The party also plans to do more about potholes apparently, costing the insurance industry £500m a year. So, at a glance, nothing really new here.

We all know that there are serious issues that absolutely need to be resolved – such as Biba’s public desire to increase SME business resilience, especially in respect of flood and cyber, and to address the age-old issue of market capacity in Northern Ireland.

Add to that Biba’s desire to look at the basic cost of living problem in terms of insurance costs – not just motor – rampant underinsurance across all lines, the need for progress to reform the apprenticeship levy and greater access to European Union-based (EU) clients and there is much to do.

And don’t get me started on claims. Service levels are disastrously poor and need addressing – Biba has been laser focused on this problem.

The broking trade body has been hugely successful during the last 10 years or so in its relationship with the government, so I have absolutely no doubt that it will also be successful in forging fruitful relationships with the new incumbents. The association should have our full support.

A view on regulation

More substance and thoughts around Labour’s view of our industry can be found when it comes to regulation.

Labour wants to “ensure a pro-business environment, with a competition and regulatory framework that supports innovation, investment and high quality jobs”. Lofty ideals I’m sure, but what about the detail?

Importantly, it appears that there are no plans to change the structure or the responsibilities of the regulator or, most importantly, its independence.

That said, the noise around the FCA’s name and shame proposals in May 2024 – which suggested publishing the details of individuals and firms under investigation – from both the main political parties showed that despite having independence, any government retains a heavy influence.

Labour is a strong advocate of Consumer Duty too. It “recognises the value” of the rules and their ambition to reduce “harm to consumers” and ensure “that firms deliver fit for purpose and affordable products and services”.

This, the party stated, provides a good reason for the removal of some of the current rules to streamline the rulebook – a view echoed by the FCA itself in a meeting I attended at the Treasury earlier this year.

There is also a strong desire from Labour to invest in the UK by using regulation for growth – the example given being “the use of AI in financial services”.

Interestingly, Labour has also stated that it wants to streamline regulatory mandates and resolve any gaps or overlaps in order to promote transparency on the regulator’s performance. It also hopes to set up a Regulatory Innovation Office (RIO), to provide better accountability and help innovation.

The RIO, a regulator of the regulators so to speak, should give greater clarity on the regulator’s performance and is, certainly for me, the key proposed reform mentioned by Labour so far.

When you consider the much greater power handed to regulators, including the FCA, following Brexit – with previous EU governance disappearing overnight – the introduction of the RIO will be interesting to watch play out.

It should ensure a greater transparency, but should not, ever, impact the independence of the regulators. With many of us surprised at the weight and breadth of the current compliance regime, especially compared to other countries, the RIO’s view will be fascinating.

I have never found politics the most interesting of subjects, but a knowledge of what our government intends, especially following a change in party, is vitally important.

If you have got this far, thank you – I guess you agree.