Prime Minister Theresa May performed one of the biggest u-turns in political history on Tuesday when she made the surprise announcement to hold a snap general election in June. No one in Westminster saw this coming, especially in light of the fact that the PM had been emphatic that there would be no election before 2020. This raises an interesting question for the insurance world: would any insurance company consider insuring a politician’s promise?
Is a politician’s promise a contract?
When Mrs May took over leadership of the Conservative Party in July last year when David Cameron resigned following the vote to leave the European Union, she famously declared ‘Brexit is Brexit’.
This was seen as a clear indication to the British people that Mrs May – who campaigned to remain in the EU – was not going to back peddle on the will of the people and try to keep the UK within the EU. She also said on a number of occasions that there would not be any new election until 2020. As late as March this year, Downing Street denied the government would call a snap election.
If we consider these promises from Mrs May as her contract with the British people, how would this look from the perspective of an insurance company, supposing insurers ever got into the business of insuring political parties?
I think an insurance company would be on very strong grounds if it argued that such a brazen u-turn would be a breach of contract and therefore would invalidate any policy.
Mrs May argued that the reason for calling the snap election was to give her a strong mandate to deliver Britain’s successful exit from the European Union.
She said she requires a clear indication of support to ensure her decisions have weight and this would give more power to her elbow in her negotiations with the 27 European leaders over the next two years. These negotiations need to be successful, she argued, for Britain to secure a buoyant economic future once we are outside of the EU.
The decision to call an election has had to be voted through Parliament, and with an overwhelming backing by MPs of 522 to 13. It was only seven years ago that fixed-term parliaments of five years were introduced by the coalition government, with the express purpose of providing more stability and predictability to the election cycle and to deny the government of the day a political advantage – exactly what many are suggesting the Conservatives are doing now in what some say is a nakedly political move to secure a bigger majority for their own party.
It does appear incredible, however, that politicians can enact and repeal legislation so easily. It seems it’s not worth the statute paper it’s written on – a familiar refrain levelled at the insurance industry, which has also had its fair share of negative press coverage when there has been a failure to ‘play fair’ and pay a claim.
Conversely, one of the strengths of our constitution is the very fact we can change things if they don’t suit, enabling a nimbler approach when the situation dictates. This freedom is of course the very thing just over half of the country wanted to embrace when they voted to leave the EU.
The business community is relieved that the process of exiting the EU should now be conducted in less of a rush, since in theory the next general election won’t happen until 2022. In all probability, this will avoid the problem of a ‘cliff edge’ exit because we have more time and negotiations should result in a better outcome for companies having to adjust to life outside of Europe.
Much as insurance industry losses lead to dwindling reserves that must be slowly rebuilt, so the country’s ability to grow its economy and get back into the black will be a top priority for any UK Government that is elected on June 8th. I think with this much at stake, I’d want have the backing of the country as well. A collective decision on difficult settlements always feels much safer than going out on a limb. If Mrs May wins the general election, and if the polls are to be believed, it is highly likely she will have a strong and direct mandate for delivering Brexit.
What would this week have done to Mrs May’s premiums?
Politicians, of course, are notorious for saying one thing and doing another – which is probably the reason why the insurance industry would never countenance insuring their promises. Mrs May has been widely criticised this week for breaking her word when she called this snap election. On balance, however, I think her decision to renege on her pledge is a good thing. Had she been insured, however, her premiums would go through the roof as a result of this decision.