Predicting how Andy Burnham as Prime Minister will affect the insurance industry
Andy Burnham is the new Prime Minister of the United Kingdom. He has already promised a house building programme, education changes, busienss rates reduction, and a aid to the cost of living. The ex-Manchester Mayor has been denoted a new title of ‘The King in the North’, with headline-grabbing plans of devolution, and creating a Northern No.10 – a place from him and certain governmental offices to reside in Manchester.
Government policies can have a major impact on both insurers and their customers and any new Prime Minister is likely to create some uncertainty at first. However, some of Andy Burnham’s proposed policies could also create opportunities for insurers and businesses if they lead to more investment, construction and economic growth.
While Andy has grand plans, the new ‘Northern’ Government is still expected to be a low spending ‘typically-Labour’ government. Any expansion plans Andy may have might be hamstrung by the reality of the budgets, and with defence spending almost certainly increasing, the new PM will need to find financial solutions. For insurers, business owners and our partners, we hope to illuminate the path ahead, and predict what to expect of Burnham’s premiership.
What are Andy Burnham’s political policies and how will they impact insurance
Property Tax Reform
Burnham has proposed replacing council tax with a system based on property values.
For insurers, this could affect the home insurance market as more expensive homes face higher tax bills, which could in turn slow growth in the high-value home insurance sector. On the other hand, lower costs for many households could make home ownership more affordable and increase demand for standard home insurance.
Conversely, businesses that own property may be understandably concerned about how the changes affect their costs. If property taxes become less predictable, some companies may delay buying, developing or expanding property assets. Property developers, landlords and investors will also no doubt be watching closely to see how any new system is introduced. Needless to say, as costs come under greater scrutiny, businesses may also look for opportunities to reduce their insurance spend.
Housebuilding Programme
Andy Burnham’s plan to build more affordable homes could in theory create significant opportunities for both insurers and businesses.
During construction, developers and contractors would need insurance such as:
- Contractors All Risks
- Professional Indemnity
- Public Liability
- Employers’ Liability
- Latent Defects insurance
Obviously once homes are completed, they will also require property and landlord insurance.
For contractors, developers and property owners, a large housebuilding programme could increase competition between insurers, which may initially help keep insurance costs down. However, increased construction activity can also lead to higher building costs, labour shortages and more expensive claims. If this happens, insurance premiums may rise despite the increase in business for a firm. As such, the most likely outcome may not necessarily be lower premiums, but instead a more competitive insurance market with slower premium increases than might otherwise have occurred.
Business Rates Reform
Business rates reform could be particularly important for commercial insurance customers and especially those in the hospitality sector. Burnham has argued that pubs, hospitality businesses and smaller firms pay too much in business rates. Lower rates would reduce costs and improve profitability.
Stronger businesses are more likely to buy wider insurance cover, including policies such as cyber, management liability etc, whilst also investing in more robust risk management. Insurers may also become more willing to insure hospitality businesses if the sector becomes more profitable and business failure rates fall.
Also, the #VatstheProblem campaign by Tom Kerridge has put a lot of pressure on the government in recent times, and points to the financial pressure that many want alleviated.
Pay-per-mile car tax
Burnham has proposed a mileage-based tax for electric vehicles.
If this encourages people and businesses to drive less, there could be fewer accidents and therefore fewer insurance claims. This would improve profitability for motor insurers and therefore help moderate premium increases. However, many businesses may see little benefit if the new tax initiatives increase the cost and complexity of managing vehicle fleets.
Defence Spending, Borrowing and Inflation
The wider economy is likely to have the biggest impact on insurers and policyholders.
A Burnham government may face pressure to increase defence spending whilst also funding domestic reforms. This could lead to higher government borrowing or taxation. If these policies contribute to inflation, insurance costs are likely to rise.
For insurers, inflation increases the cost of repairs, labour, building materials, vehicle repairs and medical treatment, and higher claims costs generally lead to higher insurance premiums. For businesses, inflation increases replacement costs and creates a greater risk of underinsurance if policy values are not updated regularly.
How will Andy Burnham impact the insurance landscape in the short term vs the long term?
As we have seen in the past, changes to leadership creates ripples throughout the financial markets. Burnham may well opt to bring in a new cabinet, and by far the biggest decision he will have to make is whether to keep on Rachel Reeves. The BBC understands Andy is likely to replace her, which would certainly shock the markets. Reeves has been a stable presence, and without her, regime change promotes uncertainty. Yet, Andy is likely to give Reeves a top position in another post.The short term impact of Andy’s cabinet selection is as of yet unknown.
Indeed, a Burnham government could create both risks and opportunities for the insurance sector.
In the short term, changes to leadership, taxation and regulation could create uncertainty and make businesses more cautious about spending and investment.
In the longer term, policies that encourage housebuilding, regional development, support for small businesses and economic growth could create opportunities for insurers and commercial customers alike.
Construction companies, property developers, hospitality businesses, tradespeople and SMEs could all benefit from increased economic activity.
Ultimately, the insurance market performs best when there is steady economic growth, controlled inflation, business confidence and a stable regulatory environment. If Burnham’s policies help deliver those conditions, both insurers and policyholders could benefit in the long run.
Andy Burnham’s stance on war and defence spending
In 2003, Andy Burnham voted for the Iraq War, and then later against an inquiry into its legality. 20 years later he commented on the regretfulness of his poor decision. But in his new role, Burnham will have to meet with NATO, tackle American security pressures, defend Ukraine, meet spending targets and decide whether to play a larger role in the Iran war.
Andy Burnham the man is not overly keen on war. As a non-practicing Catholic, he has a universalistic view of the world, believing in human dignity and social empathy. He will however not shy away from longstanding international promises, understanding the importance of national security and the UK’s role in defending allies.
Whatever Andy Burham’s stance on war is, the new PM will have to find £4.7billion regardless because of promises made by the outgoing Sir Kier Starmer. The BBC published that in the four years up to 2029-2030 defence spending will rise by an average of £3.75billion each year.
To make up this shortfall, budget cuts or tax increases will need to be pledged. The freeze to fuel duty is the most likely to go, instead increasing it in line with inflation. The transport department will also likely see cuts, and land and assets owned by the Government could be sold.
War, particularly in Ukraine and the Gulf, has had immense impact on the global insurance markets. Energy costs peaked and companies are looking at safer alternative transport routes for shipping. If these wars are resolved during Andy’s premiership, and the energy prices continue to fall, then this will alleviate a huge pressure, allowing the new PM to follow through with his ambitious plans for the devolution of power, electoral reform and employment support.
Andy Burnahm’s influence upon the insurance markets could be profoud, and yet it’s his impending impact upon the hospitality and nightlife sector which is turning heads. His promise for a rebalancing of power, a VAT cut, and perhaps a Minister for Nightlife sparks hope for many late night venues across the country. Here, NDML insurance brokers assesses which businesses are most likely to benefit from Andy Burnham as Prime Minister.
Andy Burnham To Save UK Nightlife?
Co-Authored by Stuart Dobbins
Stuart is the Technical Claims Director for Romero Insurance Brokers, heading up the inhouse claim department. Stuart has written on many areas within his expertise, including commercial and corporate insurance, cyber insurance, comparative risk, vicarious liability and duty of care. Stuart is clued up on newly published legislation, providing invaluable guidance for the business and clients.