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What does the insurance industry make of Levelling Up

If you were to do a google search of ‘what does levelling up mean’ you would get lots of results and analysis pieces from various commentators. Beyond the pandemic, all the talk in the Westminster bubble over the last two years has been on how Boris Johnson’s Government can deliver on the promises they made to Red Wall voters at the General Election in 2019 through the levelling up agenda. The establishment of Michael Gove as the new Secretary of State for Levelling Up and the subsequent publication of the Levelling Up White Paper has set out a direction of travel for the Government on levelling up but it is the detail to come as part of the expected Levelling Up Bill that will move the agenda on to delivery for the rest of this Parliament.

For our sector, a key concern is how much the Bill will reinvigorate and deliver on the Government’s proposals for reform of the planning system, which has been widely trailed as being linked with Levelling Up rather than through separate legislation on planning and housing. With the latest Environment Agency figures indicating that 1 in 4 properties across England alone are at risk of flooding, ensuring that our planning system does not exacerbate and increase the risk of flooding for households and businesses will be essential as the UK adapts to increasing climate risk. Over the last two years we’ve seen ABI members set to pay almost £2billion for domestic and commercial weather claims for storm and flood damage – this isn’t a problem for the future, it’s a problem to deal with now. The flash flooding across London in Summer 2021 also showed how areas that have previously never flooded before are now being affected.  Over 3 million properties in England are at risk of surface water flooding, even more than those at risk of river and coastal flooding, and this could be made worse with planning policies that don’t promote sustainability and resilience.

One part of the puzzle to respond to climate risk is through the provision of flood defence infrastructure. The Government’s commitment to £5.2billion spending in flood defence investment over the next six years is certainly welcome but it’s essential that sufficient funding is allocated to maintaining our existing defences. ABI and Flood Re research published in 2021 showed that every £1 spent on maintenance spending will save £7 in capital spending on Flood defences.

Flood Road Closed WarningIt will be very important for measures in the Government’s planning and levelling up reform to close the loopholes in our planning system that allow developers to get permission for developments on the understanding that they will install flood mitigation measures, which are then never installed. Ensuring sustainable urban drainage systems are a mandatory requirement for large new developments, and that Environment Agency guidance on surface water flood risk is considered by planning authorities when determining applications, will also increase the resilience of our future housing stock to climate change and flooding. More can and should be done by a wide range of groups, from Government to the private sector, in order to communicate to people that their homes and businesses are at flood risk.

Every part of our society has a role to play in tackling flood and climate risk and we want to see a clearer system of local authorities monitoring where planning permission is being granted to homes in areas at flood risk. We understand that never developing in flood risk areas is probably unrealistic – we’ve got a housing shortage and a finite supply of land – but homes built in areas susceptible to flooding must be built in a resilient and sustainable way so they can be insurable for the whole building’s lifetime. Greater collaboration between the Departments for Levelling Up, Housing and Communities and Environment, Food and Rural Affairs on planning policy would be very welcome and should be delivered through the Levelling Up agenda. Greater co-ordination on planning will also improve our understanding of the use of Modern Methods of Construction, ensuring their sustainability benefits can be realised without compromising the fire safety of buildings. The measures in the new Building Safety Act will help but we still need a greater focus on understanding the long-term durability and repairability of MMC products.

In 2016 the insurance industry worked with the Government to establish Flood Re. Over the last 6 years the Flood Re scheme has enabled over 350,000 households to obtain affordable. Whereas previously it was difficult for homes that had been flooded to renew their insurance, now 94% of people with prior flood claims can get receive quotes from 5 or more insurers. With the Flood Re scheme set to end in 2039 and home insurance to return to risk reflective pricing, it’s important that we look at how we can reduce the risk of flooding and ensure those who are repeatedly flooded are able to increase their resilience. This is a key part of our industry’s Climate Change Roadmap on how insurers can help support customers as we all adapt to world rapidly changing due to climate change.

As well as ensuring that the planning system increases our resilience to climate change through effective planning reform, the legislation on Levelling Up can also help unlock investment from insurance and long-term savings providers in productive assets such as social infrastructure and green energy. The potential to unlock pension fund investment was referenced in the Levelling Up White Paper and one of the key changes that can help make this investment a reality is through the Government’s reform of the Solvency II regulatory framework. However, only meaningful reform can free up more capital to be productively invested in the UK economy, helping with the Levelling Up agenda and Net Zero transition whilst maintaining high levels of policy holder protection. Alongside measures in the expected Financial Services Bill, now is the time for the Government to be brave and enable our world leading insurance and long-term savings sector to fully play its part in levelling up communities across the UK.

Another reference of note in the Levelling Up White Paper is the recognition of the importance of health and wellbeing in boosting productivity. The skills, health and experience of a workforce, the ‘human capital’ as the paper says, is one of six disciplines which collectively contribute to levelling up.  If an area in the UK is rich in all six disciplines, it reduces the need for people to move away from their community. The insurance and long-term savings sector may not be front of mind when it comes to this aspect, but our industry has a huge role to play. Firstly as employers, with two-thirds of the sector based outside of London, and secondly, through the support we can provide to businesses and individuals for financial resilience and wellbeing: life insurance, critical illness cover, income protection for example. For businesses, group health insurance or protection products can actively help to keep workforces fit, well and in work. Whether it’s a matter for this Bill or for future discussion, a review of Statutory Sick Pay could create a fairer and simpler system that adequately encourages a supported return to work.

We’ll find out more as the Government’s Levelling Up Bill comes forward but it’s crucial they seize this moment to embrace wider reform of our planning system and ensure that future homes are being built safely and are resilient to increased risk of flooding.

Last updated 09/05/2022