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  1. Spotlight on Policy
11 November 2022

Securing our future

The insurance and savings industry is adapting to risk.

By Hannah Gurga

The insurance and long-term savings sector was born out of a simple idea: where once the future had been fraught with risk, it could be made secure. The first commercial insurers, in the coffee houses of 17th-century London, freed businesses to pursue ventures they could never otherwise have embarked on. The first personal insurers saved war widows from a life of penury. The first pensions, offered by forward-thinking employers, saved workers from the fear of poverty in old age.

Today, the insurance and long-term savings industry is firmly rooted in society. Homeowners and motorists know they will be covered when trouble strikes, with insurance policies paying out an average of £38m each day. Life insurance policies ensure that a tragedy doesn’t leave a family unable to cope financially, paying out an average of £13m each day. Long-term savings firms, meanwhile, manage the pensions and investments of more than 18 million people, stewards of their assets and guardians of their futures. All told, ABI members manage £1.7trn in invested assets. Without insurance, no UK business could manage its risks and focus on its opportunities. Without long-term investors, no UK business would have the capital to do so.

The opportunity we have now to serve society is greater than ever. Climate change is the greatest threat we collectively face, and both insurers and investors have a considerable role to play. Insurers are already helping society adapt to its impacts, whether that’s helping households become more resilient to flooding or helping farmers who face failing harvests.

They are also helping support the transition to the new technology we need to get to net zero, with risk management services for users of renewable and microgeneration energy infrastructure, and new policies that help project developers manage risks. Long-term investors are doing the same, funding the generational investments in our national infrastructure that the transition requires.

The UK’s renewable energy opportunity is a key example of where our sector’s contribution is vital. Renewables account for more than one third of the UK’s energy generation, and no country has more offshore wind capacity than Britain. This rapid expansion in UK wind power would have been impossible without insurers, whose sophisticated risk assessments and underwriting made embracing new technologies a commercial possibility.

The huge investment requirements of wind farms, meanwhile, could not have been funded without long-term investors. Dogger Bank, 80 miles off England’s east coast, where the world’s largest offshore wind farm will generate 2.4 gigawatts of energy, is one example.

While this sector has never been more important, it is vital that it continues to adapt to a changing world. In this regard, the revolution in data and technology has been transformative. New technology will make it easier for people to manage their investments and savings, for instance, with the launch of pensions dashboards that will allow people to see all their pension information in one place.

Insurance policies can also now be targeted far more precisely to the needs, and risk profile, of a customer. Thanks to new technology, while insurers once only protected against risk, now they can reduce it too. Take motor insurance, for example. Sensors on a car can now monitor an individual’s driving. As a result, careful drivers, less likely to cause a crash, can be rewarded with cheaper premiums. This doesn’t only make insurance cheaper for safe drivers. By dropping prices for those who are better drivers, less careful drivers are incentivised to change their ways.

Of course, it is vital that data and technology do not unfairly disadvantage certain customers. In the UK today, there are already examples of action being taken on this front, both in legislation and by the industry itself. Working closely with government, Britain’s insurance industry has developed a Genetics Code to define what is and is not acceptable in terms of using personal data to model risk for protection policies, as well as health and travel insurance. The Genetics Code has been recognised by Genetic Alliance UK for the valuable reassurance it provides to consumers taking genetic tests, and it reflects the industry’s support for developments that improve health and reduce risks to society.

For all the power of modern technology, in an increasingly complex world, there are certain risks, sometimes called “Mega Risks”, that are beyond what any industry can handle alone. There is nothing new about catastrophes, of course. The modern fire insurance industry emerged from the wreckage of the Great Fire of London in 1666, which destroyed a third of London and left 100,000 people homeless.

More recently, reinsurance – the insurance that insurers themselves take out – was invented to account for risks that might hit all of an insurer’s policyholders at once. Some risks, however, hit every policyholder, everywhere, and so dwarf what even a reinsurer can cover. Think of a massive cyberattack that wipes out the grid. Or an extreme weather event sweeping away an entire region. Or, lest we forget our recent experience, a pandemic that shutters the world.

To handle risks like these, we need to explore new models, and we are doing so. Public-private partnerships are one such solution. Flood Re, a joint initiative of government and insurers, enables homeowners in flood-prone areas to get more affordable home insurance. Pool Re, meanwhile, ensures there is a viable market for insurance against terror attacks. Both are funded by industry, but backed by the state, which would step in if the losses were too great for these institutions to fund. The interaction between state and private sector is also important in the debate on social care, where close collaboration will help people meet care costs. While the approach will vary with each challenge we face, the potential of our industry working with government is considerable.

The insurance and long-term savings industry is more than 300 years old. In that time, the nature of the risks society faces has transformed. This industry has adapted, and is adapting, with our changing times. But its fundamental contribution to life in the UK remains the same: to secure our future.

To find out more about how the insurance and long-term savings industry is securing futures across the UK, visit

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