Britain’s Insurance Industry
January 14, 2004
The health of Britain’s insurance industry is a vital part of this nation’s financial strength. During the last few years insurance, alongside the pensions industry, has prompted much concern both for the way it has run itself and for the manner in which its millions of customers have been let down….
The health of Britain’s insurance industry is a vital part of this nation’s financial strength. During the last few years insurance, alongside the pensions industry, has prompted much concern both for the way it has run itself and for the manner in which its millions of customers have been let down.
In my dealings with the City of London it is clear that tremendous efforts have been made and continue to be made to rebuild the confidence in both our insurance and assurance industries. As a result I became interested in finding out how my constituents currently feel about insurance matters and how it affects their business and personal lives. To that end I carried out a survey amongst more than 4,000 folk in Paddington and Marylebone.
The results did not make for very encouraging reading. What came over most strongly was a desire for a review and reform of the current British insurance system. Many were upset at what they regard as the "fraudulent adviser culture" which has grown up in recent years. The subject of endowment policies failing to cover home mortgage costs came up in many people’s responses because it had, alongside the crisis in the pensions industry, undermined people’s faith in the integrity and capability of British financial institutions.
One suggestion that was repeatedly made was that those people who install preventative measures such as alarms and reinforced doors/windows should qualify for reductions in their insurance rates. Many respondents thought that more should be done to encourage a society to be less risk-averse. There were several replies from victims of the Lloyds re-insurance failures who were still suffering the after-effects of those collapses so their letters to me were extremely robust in what they regard as a failure of the industry to resolve improper or corrupt practices.
Overall it was felt that there should be more done to protect individuals against the acts of financial institutions but at the same time central Government should not rush into ill-thought out and costly new rules and regulations which might be a further disincentive to save.
We all realise that the insurance industry in this country is one of the bulwarks of our financial strength. All businesses have felt the force of increased premiums in recent years caused by new health and safety legislation. Most people who have taken out an endowment policy for their mortgage repayment have suffered the pain of being told it most likely will not do the job that it was designed to do (that is to make a full repayment of the mortgage at the end of its term). The global industry of insurance still continues to suffer from terrorism and the fear of a repeat of the 11 September 2001 outrage but it is definitely recovering.
Many constituents were very grateful to be offered the opportunity to write on some personal or particular aspect of the insurance industry but what came through overall was a sense that government and institutions had turned their back on the gravity of the situation and let every individual sink or swim in the marketplace without the necessary proper safeguards. My fear is that this will continue to reduce the level of investment into this country’s financial institutions with a negative effect on our nation’s financial health.
In summary, those constituents who wrote in from their own experience were telling me that the government has failed properly to "police" our insurance industry. As a result the industry is regarded as having failed to live up to the levels of integrity and reliability to which it should always aspire. This alone is a sobering thought as we enter the New Year.