July 29, 2010

Cutting things is all the rage these days. Sharp-edged instruments are the metaphor of the moment. Cutting, chopping, slashing – it’s everywhere you look.

As ever at the cutting edge of incisive (with a small i) reportage, Insurance Times this week brings us a portentously Eugene-O’Neill-inspired special feature: The Axeman Cometh!

Intent on disabusing us of the pipe dream that we can somehow spend our way out of recession, “The coalition,” IT reports, “wants £83bn slashed from the state budget by 2014 – a swingeing 40% cut in some departments.”

To speak of swingeing (Middle English Swengen) suggests a dark-ages style of axeman laying about him pell mell with his mighty blade – though George Osborne would doubtless rather cast himself as a judicious nip and tucker trimming back excess fat.

Be that as it may, most expect there will be blood. The UK economy is going to be “incredibly anaemic” for “up to five years” IT suggests, quoting Bank of England man Spencer Dale.

We’ll have to wait for October’s spending review to find out exactly where the axe will fall, claims IT reporter Anglo Saxon West. But the “first stabs of pain have already been felt as the government aims to cut £6bn this year alone.”

So what manner of chopping (or stabbing) lies ahead for our beloved insurance industry? With talk of grim (but oddly not of reaping), of slicing and of scars, Sax predicts a “significant negative impact.”

Cutting the education budget could apparently hurt insurers like Zurich and Chartists who insure a lot of schools and things. Zurich’s Larry Stokes fans the flames of apprehension with fears that sprinkler systems won’t be fitted, leaving educational establishments to flare up undefended.

And if cuts delay any recovery in construction, Saxon adze (adds, geddit?!), “brokers with professional indemnity packages for architects, surveyors and solicitors will also suffer.”

Meanwhile Defra’s promise of “efficiency savings” casts doubt, Times says, on the government’s commitment to flood management –raising once again the spectre of insurers cutting cover for at-risk homes. The ABI says it doesn’t expect flood defence budgets to be cut, but will certainly have something to say if they are.

Though most of us know it better as the national electricity company in Didier Drogba’s homeland, CIE apparently also stands for Compulsory Insurance Enforcement. This involves vigorously encouraging their owners to insure the estimated two million motor vehicles lurking around the UK uninsured. Whilst clearly a good thing for insurers, this has precious little to do with cutting anything. But what the hell.

The Men in Black (MIB), are fully on board, with their Motor Insurance Database (MIB-MID) teed up to meld seamlessly with luxury luggage marque DVLA’s database to track down uninsured vehicles.

But BIBA’s Eeyoresque Graeme Trudgill anticipates a long uphill plod. He fears “the government may not put its full weight” (approximately 2.4 tonnes, if you include all cabinet members) “behind the programme” and says “We would be very disappointed if we did not get support after the efforts we have made.”

Returning to the theme of cutting things, IT suggests the multibillion Crossrail project could still be under threat, before concluding that it probably isn’t.

OK then, how about tax rises? Very worrying for insurers! Malcolm Smith of Groupananarama makes a difficult point of real significance, telling Times “There’s a real need to significantly increase commercial writing. A 1% increase [in IPT] makes this difficult in an already difficult market.”

Plus: maybe tax rises will force Brit go-getters to leave the country en masse, and (the irony!) poor Phil Collins, who left when Labour got in, may yet have to put his repatriation plans back on hold.

Then there’s the risk that government-funded bodies and projects will cut back on risk management – forcing insurers to charge higher premiums. Hmmm…

David Cameron is apparently very keen on something called the private sector, and a mystery source tells Times there are “phenomenal opportunities” in government-tendered contracts: “There’s a business opportunity for brokers. It’s fill your boots time basically.”

“Brokers are entrepreneurs and survivors,” the mystery man continues, saving Sax the bother of summing up his own article. “They will have to react to market conditions when they see them. If it’s raining, put on a raincoat, and if it isn’t, don’t. It’s as simple as that.”

Bankstone News only wishes someone had spelled it out that clearly before.


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