Director General sets out how the sector underpins society and the economy in speech to Parliamentarians

As we are gathered in such an historic setting I want to take this opportunity to talk about the industry I represent , the role it has played in society through the ages, how relevant that role remains today and how we must adapt in step with a changing world.  

The insurance and long-term savings industry is 300 years old, but it serves a timeless purpose: to make the future more secureAs an industry, our past is storied. The first insurers were born in the coffee houses of seventeenth-century London. They freed businesses to pursue ventures they could never otherwise have embarked on, and so helped unleash the modern, global economy. Over a century later, a group of eminent Scots founded one of the earliest life insurers. In doing so, they provided security for the many families bereaved by the Napoleonic Wars. 

In the midst of the industrial revolution, decades before the great welfare reforms of the twentieth century, pioneering employers set up the first pension funds, providing workers with security from the dread of a poor old age. 

Both insurance and long-term savings were born of a simple idea: Where once the future had been fraught with risk, it could be made secure.  

Three centuries on from that simple yet revolutionary idea, the insurance and long-term savings industry is firmly rooted in society. Insurance is vital to the everyday economy and to the security of everyday life. 

Long-term savings are equally rooted in modern life. ABI members are steward to more than £1.7 trillion in assets -  the guardians of our financial security, managing the pensions of more than 18 million people.

Home-owners and motorists know they will be covered if disaster strikes, with insurers paying an average of £38 million in property and motor insurance claims each day. Life insurance policies ensure that a tragedy doesn’t leave a family unable to cope financially, paying out over £18 million every day. 

Long-term savings are equally rooted in modern life. ABI members are steward to more than £1.7 trillion in assets -  the guardians of our financial security, managing the pensions of more than 18 million people. 

Without insurance, no business could limit risk and focus on opportunity. Without long-term investors, they would not have the capital to seize it. 

The challenges we face today make our industry more important than ever.  

Consider the threat of climate change. Already, the insurance industry is helping households become more resilient to flooding and protecting farmers from the devastating effects of failing harvests. 

But it’s not just mitigation. Our industry is also helping adopt green technologies that will power our transition.  Insurers are making it possible for companies to invest in new, and therefore riskier, green technologies – such as offshore wind and, in the future, the green hydrogen sector. 

Long term investors are backing those same breakthroughs. In the UK, renewable energy accounts for more than a third of energy generation. Today, no country has more offshore wind power than we do. This rapid expansion would have been impossible without insurers, whose sophisticated risk analysis makes embracing these new technologies a commercial possibility.  

Meanwhile, the huge investment requirements of wind farms would never have been met without the patient capital of long-term investors, like pension funds. To see the results, just look to Hornsea 2. 89 kilometres off the Yorkshire coast the world’s largest installed wind farm generates 1.3 gigawatts of energy which - together with its sister project Hornsea 1 -  will help power 2.5 million homes.

As the world changes around us, our industry is changing too.  The data revolution has transformed the way insurers operate.  We can now precisely target the needs and risk profile of a customer. Not only that:  Where once we would protect customers against risk, now we help reduce it too.

Such a transformation will yield immense social and economic benefits. Take vehicle insurance for instance, sensors on a car can now monitor an individual’s driving. Sensible drivers, less likely to crash, are rewarded with cheaper premiums. This both makes insurance cheaper for the safest drivers and incentivises less careful drivers to change their ways. 

Technology, then, offers new opportunities– but we must work together to ensure it is used appropriately and ethically, and we must guard against a situation where people are left uninsurable. 

Where once we would protect customers against risk, now we help reduce it too. Such a transformation will yield immense social and economic benefits.

In the UK today, insurers and the government are already working together to ensure this does not occur.  The Code on Genetic Testing and Insurance, for instance, was developed in 2018, its signatories declare that they will not pressure anyone to provide genetic information that could affect their access to life, critical illness or income protection.  

These are big, ethical questions, and, as an industry, we want to partner with the government to solve them. That partnership, between our sector and the state, is critical, and never more so than today.  

There are some risks that demand a new approach. In our industry, we call these mega-risks. 

Now, catastrophic risks are nothing new - and insurance is no stranger to them. Some of the insurance products we take for granted today were born of catastrophes. The modern fire insurance industry traces its origins to the Great Fire of 1666 which destroyed a third of London.

But there are mega-risks out there so great they would dwarf our industry altogether. I’m thinking of climate change, a massive cyber-attack that wipes out the grid, or indeed a future pandemic as devastating as the last. 

Handling such risks will demand that the insurance and long-term savings industry adapts. 

Public–private partnerships offer one such solution. Flood Re is a partnership between the public and private sector that means homeowners in flood-prone areas are able to take out home insurance. Pool Re, meanwhile, has helped create a viable market for insurance against terror attacks. 

While the nature of the risks we face will vary, the potential for partnership is great. The same model will not apply to every risk, but we should seek out new ones together. Exploring possibilities like these will prepare us as a nation to face the mega risks of tomorrow.  

The insurance and long-term savings industry has an outsized impact on the world, but that impact could be greater still. 

With meaningful reform to the Solvency II regulatory regime, we could invest further in national priorities:  In new infrastructure that will increase our national productivity, in new industries that will create jobs across the UK, in the energy transformation we need to reach net-zero, bring down household bills and secure our energy independence. 

The insurance and long-term savings industry is 300 years old, but it serves a timeless purpose: to make the future more secure.  

In that time, the nature of risk has changed dramatically. But we have changed to, seizing on new technology that makes us better insurers and investors, seeking partnerships that help us better protect people and businesses, helping them invest in their priorities, and in securing their future.