Brexit – Will it affect your insurance cover?

There is still plenty of uncertainty over the exact nature of Brexit and this means there is also uncertainty within the insurance market. In the current period of uncertainty, it is hard to say whether Brexit will negatively impact the UK’s insurance sector. However, based on the feedback from some of the biggest insurers in the UK, the likes of Lloyd’s and Be Wiser state that they will be unaffected by the Brexit negotiations, largely due to having solid foundations in the UK. While the specific consequences of Brexit on the UK insurance industry are as yet unknown, its impact is likely to be far reaching in terms of the types of products insurers bring to the market and in the way insurance companies operate.

The UK manages £1.8 trillion worth of investments, making it the third largest insurance industry in the world, according to the ABI. By leaving the EU, the biggest risk is that Britain could lose its passport rights to freely underwrite policies and insure across European borders. If the UK does not maintain a strong hold in the insurance sector, it may have profound effects on the UK economy, including the £18 billion worth of taxes that it contributes and employment of 300,000 people.

With Brexit the UK insurance market will no longer be bound by EU laws, meaning that it can create a whole new set of rules and regulations if it wants to. The EU framework currently known as Solvency II is the one size that fits all policy for all EU countries that offer insurance products for vehicles, homes, businesses and more. UK insurance firms will be able to look again at compliance new opportunities may emerge. For instance, the EU Gender Directive means that UK firms cannot use gender when underwriting policies, despite evidence that females are safer drivers and could be entitled to lower premiums. There are similar restrictions in life insurance and industry bodies such as the ABI are lobbying for changes to the regulatory framework in post Brexit Britain. Creating a new set of UK rules and regulations will come with its own compliance requirements, and insurance companies and broker will face additional costs in adjusting everything from their own procedures to literature and websites to ensure they comply with the new regulations.

Insurers are currently issuing renewals for insurance policies that run beyond the 30 March 2019, the date set for us to be outside of the European Union but which may be expected to operate in the EU or be with a European insurer writing business in the UK. Part of the Brexit negotiations will involve ensuring that there is no rush on “uninsuredness” next year.

When it comes to life insurance the state of the stock and financial markets which provide the backing for policies is of key importance. There was a significant fall in share values just after the referendum result, but a steady recovery since. As the UK markets are currently seen as undervalued compared to the rest of the world then a positive outcome to the Brexit negotiations could make the UK an attractive prospect for international investors with the added benefit of a greater supply of funds to support the insurance industry.

We won’t know the result of negotiations for some time yet, but with more positive messages coming from government the prospects for the insurance industry and its customers may be brighter than it seemed a while ago. Only time will tell. To keep up to date on the latest developments read our blogs and get in touch for advice about your personal circumstances.

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