Heading towards a cliff edge: insurance industry loses confidence in post-Brexit Britain
Speaking to PoliticsHome, Lawrence Finkle of the Chartered Insurance Institute shares the insurance industry’s concerns following worrying member survey results.
Every year since 2011, the Chartered Insurance Institute (CII) and the Centre for Economic and Business Research have conducted an economic temperature check of CII members measured against economic, business and employment prospects indices.
The survey asked CII members for their views on the UK’s economic, business and employment prospects, with an additional section on the UK’s decision to leave the EU.
The annual survey has found that optimism in the UK economy had been building year on year but this time around, in the wake of the decision to leave the European Union, the results showed an unprecedented and alarming drop in confidence.
The latest survey reveals that 48% of CII’s membership expects the UK economy to deteriorate in 2017 - nine times higher than a year ago.
On top of this, only 23% of their membership expects the economy to improve, which is a dramatic reduction from the 67% who were confident in the economic outlook for the country in the survey conducted in 2015.
Lawrence Finkle, CII’s Public Affairs Executive, told PoliticsHome that the results came as a surprise.
“Given the political upheaval of 2016 I perhaps didn't expect that economic confidence would rise at the same level we have become accustomed to over the past few years, but I certainly did not expect this dramatic fall.
“These results are comprehensive and reflective of the profession as a whole – the drop in confidence has affected at all levels of seniority We really think this is something that should be of concern to the market, to the wider financial services and to the Treasury. If this is reflected across the sector then surely it raises alarm bells.”
The general feeling of uncertainty that clouded CII members’ expectations of the direction of the UK economy ahead of negotiations to leave the EU was revealed elsewhere in the survey too. While different subs-sectors within the membership prioritised issues such as passporting and membership of the single market to varying degrees, it was ‘general economic certainty for future planning’ that unified the profession in attaching importance attached to it.
“The divergence between business and economic outlook for the whole economy would suggest our members have more faith in their own businesses to navigate this uncertainty than they do in the direction of the macro economy.”
In a bid to mitigate this uncertainty, the CII have drawn up their own recommendations, published yesterday morning.
The CII joined other bodies in the sector to call for an early commitment from Government to secure a transitional implementation period between the UK’s departure from the EU and the UK’s new relationship outside of the bloc, to provide the conditions for as much business continuity as possible for the insurance sector.
“We feel that it would ultimately be to the benefit of the livelihoods and businesses that the insurance sector protects.”
“We fear that without alleviating this uncertainty that clouds our members’ faith in the direction of the UK economy, we will be in a position where decisions are taken pre-emptively based on a worst-case scenario that would ultimately be to the detriment of the consumer. We are monitoring this closely. The news that Lloyd's of London have plans to relocate some of their operations to the EU is an indication of how much disruption areas within the sector expect there to be.
“If we start seeing similar upheavals across the sector then there are likely to be knock on consequences for the consumer in one way or another, whether that is added costs, or access to products.. It’s still too early to tell, but I think it should be a warning sign to the Government, to the Treasury and those negotiating on the sector's behalf.”
Although the sharp downturn in economic confidence among the CII membership for the year ahead raises serious questions over the Government’s decision to refrain from making a substantial disclosure of the UK’s negotiating objectives to business and the public, Mr Finkle admits that Theresa May couldn’t have given much more detail on transitional arrangements than she revealed in her keynote speech yesterday.
He concluded by saying: “Yesterday we called on Theresa May to make an early commitment to a transitional arrangement as our membership could not afford to adopt a ‘wait and see’ approach to the UK’s future relationship with the EU indefinitely. Although she neglected to speak about timescales, it was definitely a step in the right direction to hear of her ambition to avoid the economic and legal ‘cliff-edge’ that business fear so much - a nightmare scenario where the UK is a member of the European Union one day and the next, in a totally new and unprecedented regulatory environment without any opportunity to prepare or to plan.
The full CII member economic outlook and Brexit survey is available to read here.