The impact of Brexit on the UK insurance industry

What do you need to know about Brexit and its implications on the insurance industry?

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2020 has been swept away by COVID-19. But there’s one thing on the horizon that’s still set to have a big impact on the nation: Brexit.

The transition period will conclude in December 2020. Up until this point, most arrangements between Britain and the EU will be unaffected. However, from 1st January 2021 new changes will come info effect. So it's imperative you are aware of these changes and how to deal with them.

Quick jargon buster

  • EU – The European Union is an economic and political partnership between 28 European countries (27 after Brexit). These countries cooperate on key issues and policies.
  • EEA – The European Economic Area is an agreement which enables non-EU member parties to participate in the EU’s single market.
  • EHIC – The European Health Insurance Card allows people from eligible countries access to free or reduced cost health treatment in EEA member states. The EHIC does not cover all medical treatments or medical repatriation back to the UK so travel insurance should be arranged to protect you for these eventualities.
  • EU27- Essentially the European Union countries involved in Brexit negotiations (all EU member states excluding the United Kingdom).

A brief overview

The British public opted to leave the EU in June 2016 and four years of uncertainty followed.

The UK formally left the EU on 31st January 2020, entering into an 11-month transition period. Throughout this period, the UK and EU officials are expected to come to an agreement on what the relationship between the UK and the EU will look like going forward.

What’s going to change?

New rules will come into effect from January 2021.

As the UK will leave the single market and customers union at the end of 2020, a new free trade agreement will need to be agreed. The process for importing and exporting goods will change, including how to declare goods, what import licences you may need and the rate of custom duties and VAT. Several other aspects of the UK’s relationship with the UK will need to be decided, too.

One of the key differences for individuals will be travelling to Europe from 1st January 2021. Individuals must make sure their passport is valid, their mobile phone’s roaming policy remains in place and they have the right level of travel insurance in place (including health insurance).

Currently, guidance is unclear as to what the specific changes will definitely be. There are a lot of “may” and “might” caveating potential changes at the moment, though as agreements are reached this will change.

How will Brexit impact you?

The government have provided a Brexit tool to allow individuals, families and business owners to see how they will be personally impacted.

The BBC has created an ultimate Brexit guide to answer all questions, including a guide to Brexit jargon to help you navigate the complex procedure.

Is a no-deal Brexit still a possibility?

If the transition period ends without the UK and EU reaching an agreement on free trade and other matters, the UK will have to follow World Trade Organization rules until a deal can be implemented. As we left the EU in January with a withdrawal deal negotiated, the possibility of a no-deal Brexit is not likely.

How will Brexit impact the insurance industry?

How Brexit will impact the industry is still unconfirmed as trading agreements are still to be put into place.

Currently, UK insurers will not have passporting rights to EU countries following the withdrawal. At this stage, there are still three possible trading agreement scenarios (all of which result in different outcomes). We explored these scenarios in a previous blog on the subject.

Passporting rights allow firms registered in the EEA to do business in other EEA states without additional authorisation being given from each country.

Without passporting rights, UK intermediaries may not be permitted to place certain European risks with insurers. It’s worth noting that there might be a difference between individual insurers as each will have different regulatory permissions. UK intermediaries must instead work with a broker partner local to the country in question to insure the risk.

Specific information about market access can be found here.

How do I know if I can sell insurance policies abroad?

Insurers and brokers will have different regulatory permissions, allowing them to place and accept different risks. You can check current permissions on the BIBA Brexit microsite or the FS Register. Remember – it is illegal to carry out regulated activities without having the correct permissions in place.

Many insurers have been restructuring their business for a while now, relocating or opening new branches of the business in EU member locations. This should allow them to continue to operate within the EU following Brexit, thus avoiding lost revenue or huge business disruption. Here is specific guidance on the regulatory impact on the UK, including regulatory permissions and temporary regimes.

In most cases brokers won’t be able to insure European risk without a broker partner in the EU. So it’s important customers work with a broker who has a trusted network of international brokers to support them. Hint: we do.

My clients are based abroad, how will Brexit impact them?

Property and businesses located abroad may be impacted by Brexit. UK insurers are not now able to use their passporting rights to underwrite the risk, so UK intermediaries may not be able to insure certain European risks. For more information about insuring certain risks, visit the BIBA microsite.

What happens to existing policies?

Romero Insurance Brokers is proud to be part of Trust Risk Control, an international network of brokers with representations in over 170 countries. This means we are already part of a network of brokers across the globe, enabling us to work with local brokers in different countries to protect our clients.

During the transition period, other UK insurers and intermediaries may also continue to work with clients based in the EU. This is because BIBA and the Worldwide Broker Network (WBN) have reached an agreement which connects BIBA member firms to another member firm in an EU state.

Brokers and insurers should, obviously, communicate with its customers regarding the impact of Brexit on any existing or new contracts. Any changes to their contract, including the validity of their insurance, any change or loss of cover, tax implication, changes to the claims handling procedure and more should all be communicated to the customer as soon as the insurer or broker becomes aware of any change.

Are insurance policies likely to change due to Brexit?

Insurers and brokers should have open, in-depth conversations with customers regarding Brexit. Any changes in business procedures or operations should be discussed with insurers / brokers to make sure the customer is comprehensively protected.

What is the best result for insurers?

A future trading agreement that allows insurers and brokers to continue to service clients and risks located in EU countries would be the best outcome. However, as UK intermediaries no longer have passporting rights to European markets, and a frictionless trade agreement has not been agreed, this does not look likely.

Instead, brokers must focus on putting their customers first. Develop strong networks with local brokers in EU countries that will be able to assist when insuring European risk.

What about staff members?

Insurers and brokers may employ EEA citizens wishing to apply to the EU Settlement Scheme. The deadline for applying is 31st December 2020. From an employer perspective, ‘right to work’ checks aren’t currently changing but do keep an eye on the latest news as in 2021 this could change.

Will data transfer arrangements change?

There will be no immediate alterations to the way the UK deals with data and data protection. GDPR will be brought into UK law, so all UK businesses and organisations will need to continue to be compliant with data protection law when dealing with sending personal data out of the UK to the EU/EEA. Keep an eye on further guidance from the ICO for any additional actions you might need to take.

If you’re travelling abroad for business

You will need to make sure you have at least six months of validity left on your passport. If you’re planning to drive in an EU country, you’ll need to be certain your UK car insurance is valid. It’s also worthwhile arranging personal accident cover and motor legal expenses cover, in case you are involved in an accident with an uninsured or untraced vehicle abroad. Some countries within the EU have yet to agree that UK visitors have access to the local guarantee fund for compensation in these circumstances. So it’s important you have your own motor insurance to protect you.

BIBA is calling for the UK to remain in the free-circulation zone so drivers won’t require a Green Card to drive in EU countries. However, if a Green Card is necessary, there are pressures on the Government to digitise the current system. Allowing Green Cards to be carried digitally is more convenient for travellers and generally much more sustainable. At the time of writing, there will be different arrangements in place for each country – with the government’s official guidance explaining that extra documents and permits may be required. It’s unclear exactly what this will involve just yet.

Travellers must arrange adequate travel insurance. It’s worthwhile taking your EHIC with you, for now, but that should never be seen as a replacement for travel insurance. The EHIC regime may continue until the UK transition period ends, but travel insurance will be necessary to ensure you’re protected should you fall ill or have an accident.

If you’re travelling abroad for business, check the Government’s advice.

Preparing for Brexit

There are many ways businesses should carefully and sensibly prepare for Brexit. It would be prudent to keep a close eye on the negotiation developments, and follow official sources of advice for breaking news and information. However, there really is no way to predict how an individual business may be impacted. There are understandable concerns regarding unclear trade tariffs and the durability of supply chains. That’s leading to some businesses stockpiling goods. This can have safety and security implications, plus have a knock-on impact on your insurance policy.

How will Brexit impact Romero customers?

As we mentioned earlier in this article, we’re proud to be part of Trust Risk Control. This international network of brokers enables us to protect our customers, no matter what. It’s true that currently UK brokers must work with a broker partner in the EU to insure certain risks. Thanks to our extensive network and experience, we’re confidently able to do just that. It’s always our goal to look after our customers at every step of the way, and thanks to our involvement with Trust Risk Control we’re able to continue insure our customers across a number of different countries (including EU countries).

How can I find out more?

BIBA’s Brexit microsite is a good way to find out up to date information. You can also speak to our expert team on the subject matter at any time. We’re happy to help.

Talk to us!

If you’d like to speak to an expert for advice on all things insurance, get in touch with our team.

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