shutterstock 1425205367 - Prospects And The Provinces: Regional Variations In The UK Insurance Market

Over the course of the last year, we have once again become used to the idea of living in a bubble.

However, whereas the term is now taken to refer to groups of individuals at work or at home trying to limit exposure to the coronavirus, the definition previously held rather negative connotations.

For example, people living outside London have often described the capital as existing in a bubble of its own, with a particular outlook and different economic or cultural circumstances to those in the rest of the country.

It’s a concept which came to mind while I was reading the comments of a leading credit ratings agency, Fitch, on the prospects for the domestic insurance industry this year.

In short, the conclusion was that we’ll see something of a “divergence” in how London and the regions fare.

While London may see a “normalisation of claims”, after the turbulence of 2020 caused by the Covid-19 pandemic, the regions should, warned Fitch, expect a “worsening” market.

As anyone involved in the insurance market knows, though, no two clients are the same, let alone any two regions.

There have been – and will continue to be – parts of the UK which prove themselves more able to weather this and other challenges better than their neighbours.

A quick glance at the latest figures on Gross Domestic Product (GDP) from the Office for National Statistics (ONS) underlines how that is due, in part, to the ways in which different areas contribute to the make-up of the economy.

In the last quarter of 2019, the ONS revealed, the North West actually saw greater growth than the capital and was ranked the second best performing region overall.

Even in the opening quarter of last year – as the economy gradually slowed and the Government imposed the first national lockdown – the North West experienced only slightly less contraction than London and also did much better than many other parts of the UK.

If we look a little closer still at the ONS data, we can see the type of business sectors which drive the different regions.

No-one will be surprised to discover that the financial services, communication, public administration and real estate industries are important to London’s wealth.

Contrast that with the North West, where mining, manufacturing, professional and technical sciences –  and, thereafter, financial services – spur growth.

All that is reflected in the insurance landscape too.

The insurance industry is about managing risk, whether it’s in the home or workplace or on the road.

There is greater severity, frequency and volatility of risk involved in, say, heavy engineering than an office-based business.

That, in turn, affects the type and cost of cover which is provided. Whereas there’s more industrial production or logistics companies based outside London, property prices are generally higher in the capital and some of the financial services transactions in the capital are very large.

Insurance needs across the UK can’t and shouldn’t necessarily be straightforward, compartmentalised or pigeonholed.

In order to establish a clear and effective relationship between the insurer and the insured, there must be an understanding of circumstances and, yes, risk.

It’s one reason why brokers such as ourselves are essential. Done properly, broking ensures that someone needing cover has the policies tailored to the way they live their lives or run their businesses.

Off-the-peg policies may be cheaper but fail when they’re needed most.

Whether claims are paid out or not quite often comes down to disclosure of assets and risk.

If the process is correct, it can even be that premiums become more affordable because the insurer has a more precise picture of what and who they’re being asked to cover.

Reports, therefore, of regional variations needn’t be a source of tension – reinforcing a ‘them against us’ mentality – but a sign that the country’s range of character, economic as much as linguistic, is alive and well.

Daniel Lloyd John0002 - Prospects And The Provinces: Regional Variations In The UK Insurance Market


Written by Daniel Lloyd-John, Chief Executive, Broadway Insurance Brokers