Report calls for insurers to take bigger role

Monday, 27 July 2009 12:00

Insurers could take some responsibility for the cost of ill health, retirement and unemployment from the government, according to a new report.

The report, Vision for the insurance industry in 2020, outlines the conclusions from a nine-month inquiry, jointly chaired by chancellor Alistair Darling and Andrew Moss, chief executive of insurance group Aviva.

A key proposal is to encourage individuals to take out insurance against the risks of unemployment and ill health to reduce the burden on the state.

"Exploring the extent to which the insurance industry can help provide insurance against some of these risks, also has the potential to help reduce pressures on the public purse," the report said.

The government currently provides almost 65 per cent of the market for retirement provision, accident, health care and income protection, with insurers underwriting the remainder.

But if the private sector increased its share of the addressable risk market by just five per cent, the government would save almost £17 billion per year.

If the report's proposals are accepted by the government, insurers could take on more of the risk, reducing the role of the state.

The report also suggests financial education and financial literacy initiatives are organised to help people take on more responsibility for their financial wellbeing.

The government is keen to tackle the growing 'protection gap', which insurer Swiss Re recently suggested could be as high as £2.4 trillion in the UK.

The Association of British Insurers' (ABI) director general, Stephen Haddrill, said:
"A competitive insurance sector, able to provide a wide range of risk management tools, will bring good consumer outcomes.

The ABI said it will "wholly support" all the recommendations in the report.

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