As the first Labour Budget in 14 years unfolds, it signals a notable shift towards increased taxation, with implications for a range of sectors, particularly the insurance industry. Key tax hikes – including increases to employers’ National Insurance, capital gains tax, and VAT on private education – set the stage for a landscape that demands careful navigation. In this alert, we focus on the specific commitments made in the Autumn Budget that are poised to impact motor and general insurers, shaping both operational strategies and market dynamics.
Insurance Sector Developments
- Contingent Liabilities Reporting: The government will publish an annual report detailing its contingent liabilities, which encompass guarantees, insurance contracts, and provisions. This transparency will be of interest to insurers, offering insights into government risk exposure and potential impacts on market stability.
- Support for SMEs: The extension of the Enterprise Investment Scheme and Venture Capital Trust schemes through to 2035, backed by over £250m in funding for small business loans in 2025–26, will enhance access to finance for small and medium enterprises (SMEs). Insurers may find new opportunities for coverage as these businesses seek financial products, including tailored insurance solutions that address their unique risks.
Housing Initiatives
- Cladding Remediation: A £1bn investment aims to address the removal of dangerous cladding from housing. Insurers providing property coverage will wish to monitor developments here, as this may affect claims and underwriting practices in the residential sector.
- Stamp Duty Changes: The increase in higher rates for additional dwellings from 3% to 5% may influence property market dynamics, potentially affecting demand for property insurance as investors reassess their strategies.
- Build-to-Rent Support: The government will allocate £3bn of additional support for SMEs and the build-to-rent sector through housing guarantee schemes to bolster the private housing market. This may create more insurable assets and increase opportunities for property insurers to provide coverage in a growing sector.
Crime and Security Measures
- Funding for Crime Reduction: The allocation of £400m to combat economic crime (in part to fund Companies House which is working to cut this type of crime), may reduce risks associated with fraud. Insurers will welcome these measures, which should hopefully see Companies House able to remove sham companies currently fronting criminal ventures.
- Combatting Shoplifting: The decision to scrap immunity for low-value shoplifting, along with additional funding and training for police officers specifically focused on this issue, may enhance security for retail businesses, potentially reducing insurance claims and encouraging insurers to reassess risk profiles.
Auto-Industry and Electric Vehicles
- EV Incentives: The government is bolstering incentives for electric vehicles (EVs), including adjustments to Vehicle Excise Duty and continued support through company car tax. Insurers will need to adapt to the changing landscape of vehicle coverage, as EVs become increasingly prevalent.
- Investment in Infrastructure: With over £1.6bn earmarked to maintain local roads and an additional £200m for EV charge point rollout, this infrastructure investment is likely to enhance road safety, potentially leading to lower claims in motor insurance.
- Accelerated Charge Point Rollout: An investment of over £200m in 2025–26 will support local authorities in installing on-street charge points across England. As the UK’s existing charging network continues to grow – with over 70,000 public charge points – insurers may need to adapt policies to reflect the changing vehicle landscape and associated risks.
- Increasing Appropriate Percentages (APs): The appropriate percentages for zero-emission and electric vehicles will increase by two percentage points per year in 2028–29 and 2029–30, ultimately rising to an AP of 9% in 2029–30. Insurers should consider how these changes may affect premiums and policy structures for EVs.
Workers’ Rights and Employment Policies
- National Living Wage Increase: The planned increase of the National Living Wage (NLW) by 6.7% to £12.21 per hour from April 2025, along with the creation of a single adult NLW rate, may influence operational costs for insurers and insureds alike, particularly those with large workforces. It is also likely to put additional pressure on care costs and carers’ wages, at a time when care inflation is already facing significant upward pressure.
- Funding for ACAS: The government will allocate part of a £150m settlement to the Department for Business and Trade to fund the Advisory Conciliation and Arbitration Service (Acas), which will help employers and employees access free, impartial advice on workplace rights and best practices. This initiative could lead to a decrease in employment-related claims, benefiting both insurers and businesses.
Conclusion
The Autumn Budget presents both challenges and opportunities for the insurance sector. Insurers must stay vigilant and adapt their strategies to align with new tax structures, market conditions, and evolving regulatory frameworks. As the landscape shifts, those who proactively assess and respond to these changes will be better positioned to navigate the complexities ahead. We will continue to closely monitor developments and provide updates.
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