'If you don't have insurance, nothing works'

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Flooding, motor insurance premiums, consumer confidence and professional standards were all discussed in relation to the insurance industry at an event in Parliament on Wednesday.

The symposium-style event, jointly hosted by the Chartered Insurance Institute and the Association of British Insurers gave MPs, researchers and staff from the Palace of Westminster the opportunity to voice their concerns regarding the insurance industry to a panel of experts.

Following the news overnight that 100 people were forced to evacuate their homes due to flooding in Cornwall, Jonathan Evans MP, chair of the APPG on insurance and financial services, raised the issue of the 15 per cent reduction in flood defences announced by the government in the spending review and the increased danger this could bring.

Geoffrey Clifton-Brown MP (The Cotswolds, South West), whose constituency was affected by flooding in 2007, spoke of the series of public meetings he put together with relevant agencies following the flooding because he was "dissatisfied" with the progress being put in place to mitigate against future floods.

Acting director general of the Association of British Insurers, Maggie Craig, agreed that the multiplicity of agencies involved does make things very difficult, but reassured the audience that the insurance industry is working in closer partnership with customers around "flood resilience and flood resistance".

Using the flooding in Cockermouth as an example of this improvement, Dr Alexander Scott, chief executive of the Charted Insurance Institute, noted the industry's huge improvement in managing flood disaster.

"All the homes in Cockermouth have been put back together again," he said.

The issue of high motor insurance premiums, particularly for young drivers, can be a regular feature in MPs’ postbags.

Panellists were in agreement that the insurance industry has to price against risk, so in the case of motor insurance high premiums can be justified.

Yet Craig accepted the industry has not performed well in communicating to the customer, "where motor insurance premiums go and what the industry is covering", she said.

Of a £400 insurance premium, Craig totalled up around £130 straight away which is taken out in insurance premium tax, money towards uninsured drivers, undetected fraud and costs towards injury compensation lawyers.

"For every pound that comes into the industry we pay out around £1.23," said Dr Scott.

Justifying why the industry prices against risk, Craig used the example of young male drivers:

"Young men are sadly ten times more likely to kill or be injured in a crash. They are twice as likely to make a claim, their claim tends to be three times more expensive, and if it is a young man driving with three of his mates in the car, it triples the chance of the car crashing," she said.

With the role insurance plays in protecting consumers, and consumer confidence at an all-time low, Scott championed the value of professional standards in providing consumer confidence.

"The CII has recently managed to persuade all of the leaders of the general insurance industry to get together and adopt voluntarily a package of professional standards. That means a package of qualifications so that people have the knowledge and the skills to do their job properly," he said.

The insurance industry is no small fry, with Craig estimating the total investment the industry manages in the UK economy at about £1.6 trillion, "which is something like a quarter of the UK's total net worth", she said.

Scott reiterated the importance of insurance to both the economy and society by quoting a leading industry spokesman: "Insurance is the DNA of our society today because if you don't have it, nothing works," he said.