The most recent general unrest that has sparked from the Middle East last year has finally hit Europe and more importantly it has had an impact on the society in the British Isles. What does this mean for us?
Well, there are a few things.
A) A break down for the fabric of society such as trust, law & order.
B) High levels of Unemployment will leave the economy stagnant and thus making this a far greater problem than it already is.
C) Increases in the cost of insurance. (Yes, that’s right. Be prepared for an increase of 25% in your premium!)
Now, let’s assess each issue separately.
Q) What is the greatest problem related to law & order in Britain or if anything, around the world?
A) Well, it is pretty much obvious that we have a lack of policing on our streets. The government claims that we have enough if not more to cope with the riots however, in real terms we are outnumbered unless the army is given a chance to shine. More so, unlike what took place in the Middle East for a chance of government is not the issue here. Instead, in Britain it is concerned with pure looting rather than making a stance. It is understandable that there is a lack of funds to provide for families however the austerity measures enforced by the government are for the better future of this economy.
Q) Why are people rioting then?
A) They are rioting because we have a high level of unemployment. This is in simple terms is due to the fact that many have become frustrated with the lack of opportunities for them. It is understandable that in Britain we are experiencing a shift in the labour market are more and more jobs are for those who have some recognised level of education and qualifications but in disguise this once again is to make our labour force efficient.
Q) Do these riots mean we will experience lower growth in the coming quarter?
A) It is unlikely that due to the riots growth will be damaged as we don’t depend on manufacturing as much as the service sector. Furthermore, consumer spending will have been given a dent to some extent. I am pretty sure that once the horizon has calmed down people will go out to spend and buy the goods and services they require. Also, the damaged buildings and demographics will require a clean-up. This will create jobs in the construction sector also has a ripple effect on the local communities.
Q) Is it plausible to see growth have a rebound next year?
A) Yes, given the economic outlook we can justify that growth will be given a boost going into the New Year and with the Olympics on the way spending is definitely on the increase.
Q) What do you mean by an increase in the cost of Insurance?
A) Well, let’s just say if you spend money you have to earn some money back to spend again. The insurance firms will be experiencing pay-outs which will be in the £millions! These will mean that the likelihood of risk increasing and the cost of insurance for the individual will be higher. Let’s look at a simple model of fair insurance where the cost of insurance is the fair price of risk.
Fair insurance is: Welfare * Risk.
Thus, if the welfare has a value of 100 and a risk factor of 10% then fair insurance is 10.
However, let’s say this individual has now made claims and he is more risky then his risk factor will increase further to 20%.
The new cost of insurance will be 100 * 20% = 20. An increase of 100% in terms of the insurance premium.
This is just a basic model. In the typical method of working out insurance they use scorecards to determine risk.
Q) Will my car insurance go up too?
A) Yes, the car insurance will increase as many insurance companies seek the funds out of a pool to make the pay-outs. This pool will contain premiums charged for life insurance, pet insurance, home insurance and anything else you want to insure!
Next time there will be an insight into the stock market and the impact it has on our Economy.