Insurance

  • A general overview of the insurance industry in the United Kingdom
    • The insurance industry offers a wide range of services and products designed to benefit both businesses and individuals. The main insurance sub-sectors in the UK include:

      - Life and medical insurance
      - Pensions
      - Savings and annuities
      - Business insurance
      - Professional indemnity insurance
      - Property insurance
      - Motor insurance

      Only motor vehicle insurance has a compulsory nature. Incidentally, the pet insurance market has been trying to create new market space for the past decade. It is estimated that the potential value of this particular industry could be in the region of £2.5 billion.

      According to the Association of British Insurers, on an average day the British insurance industry pays out almost £270 million to its clients, with the major disbursements being related to pension payments and life and disability insurance. However, and generally speaking, there has been a marked decrease in the number of individuals who have life insurance. While in 1996 approximately 61 per cent of the British population was covered, only 39 per cent had it in 2006.

      Currently, the government is responsible for 65 per cent of the insurance risk management market, while private insurers cover the remaining 35 per cent. Of course, this excludes the motor insurance market, which is fully managed by private insurers and which generates more than £8 billion every year. There are approximately 1,200 insurance companies in the country.
  • The role of the insurance industry in the British economy
    • In terms of the industry's contribution to the country's economy, the total value of the assets managed by the sector amounts to £1,478 billion, and insurance contributes with almost £10 billion in tax payments. These figures mean that insurance is one of the United Kingdom's largest economic sectors, after banking, manufacturing, and the public sector. Exports related to insurance total £5.5 billion, which represent 0.4 per cent of the UK's gross domestic product. More than 310,000 people are employed in the insurance industry across the United Kingdom.

      The United Kingdom's insurance industry has a leading role in the global insurance market, as it is the world's second largest and it clearly dominates the European market. The investments linked to the insurance industry amount to nearly 25 per cent of the country's net worth, and even during the worst of the financial crisis the sector proved to be resilient. The local private pension market is also renowned for having some of the lowest charges in the world. Overall, the British insurance market has a strong reputation for operating within a solid regulatory framework that supports the expertise of many professionals.
  • Future predictions
    • In 2009, the HM Treasury released a report that outlined the future of the insurance industry in the United Kingdom up to 2020. According to the report, we can expect the insurance sector to focus on four main areas in the near future:

      - widening the range of risk management solutions available
      - working towards increasing consumer confidence and consumer awareness
      - staying competitive at global level so as to encourage higher capital flows (mainly from new international players in this industry, such as China and India), and
      - developing close partnerships with the central government in order to reduce the current burden that the State has regarding insurance payments

      In particular, the industry has set out to make insurance products appealing and available to the 34 per cent of employees at national level who currently are not saving towards a pension. Approximately £20 million will be invested in collaborative and educational projects that aim to increase the consumers' awareness of the insurance industry.

      The Automatic Pension Enrolment Scheme, which was introduced in October 2012, is the first of a series of initiatives that will transform the insurance market over the coming years.
  • Regulatory bodies
    • The Financial Services Authority (FSA) is currently the regulatory body that oversees the operations of the insurance industry in the United Kingdom. In the past, the HM Treasury was responsible for regulating the market, along with the Department for Trade and Industry.

      As of 2013, a regulatory reform will come into force. This reform implies the creation of two new regulatory organisations, namely the Prudential Regulation Authority and the Financial Conduct Authority, which are intended to take over the current role that the FSA has over the insurance industry over the next two years.
  • Further information and useful contacts
    • For further information, consumers can contact the following organisations and their websites:

      Financial Services Authority http://www.fsa.gov.uk/about
      Association of British Insurers http://www.abi.org.uk/
      Chartered Insurance Institute http://www.cii.co.uk/
      British Insurance Brokers' Association http://www.biba.org.uk/InsuranceGuides.aspx
      Age UK http://www.ageuk.org.uk/money-matters/consumer-advice/insurance-advice/
      Advice UK http://www.adviceuk.org.uk/supporting-you/insurance
      Citizens' Advice Bureau http://www.adviceguide.org.uk/england/consumer_e/consumer_professional_and_financial_services_e/consumer_insurance_e.htm