15 April 2024
The IFoA is pleased to publish the findings of a roundtable discussion on minimum levels of insurance protection.
At the start of 2020 the IFoA launched its campaign on what we termed the ‘Great Risk Transfer’. It is a recognition that there may be a pattern of risk transfer from institutions to individuals occurring across a range of settings in financial services.
As part of this campaign, we produced The Great Risk Transfer report. It highlighted the recommendation that:
“Government, in consultation with the IFoA and others with technical and industry expertise, determines the appropriate minimum level of insurance protection needed by all – including low-income families – to be financially resilient to specific risks and unexpected shocks.”
To launch the second part of our Great Risk Transfer campaign the IFoA, in partnership with WPI Economics, convened a roundtable to discuss this recommendation in more detail and consider how a minimum level of insurance provision could be realised.
View roundtable summary (PDF, 440 KB)
The roundtable brought together academics, industry experts, and consumer advocates to address the following questions:
- Which types of insurance cover should be seen as essential for financial resilience?
- To what extent is low take up a supply side or a demand side issue?
- What ‘levers’ can government and regulators pull to increase take up of insurance to a defined level?
- What is the role of mandation? How has this worked in other spaces?
- How can insurers be supported to take on risks that they would not currently?
The discussion helped to shine a light on some of the key issues around establishing a minimum level of insurance protection, as well as a series of potential areas for further exploration. The IFoA plans to take forward and further explore a number of these, including:
- The interaction between aggregating demand and risk sharing – how can ‘re’ schemes and mandation or defaults complement each other to address issues around low take up. By creating a bigger pool of risks, boosting demand for insurance products through mandation or defaults can help address concerns about adverse selection. The combination of these two interventions may be a particularly strong route for improving access to protection insurance, where there are concerns about both low take up and adverse selection.
- How can we take a product-based approach to defining minimum standards – product by product, how can we determine the minimum level of protection required by different groups of people? Establishing the minimum level of protection society aims to achieve is required before introducing strategies to address take up (one of which could be mandation). The Retirement Living Standards developed by the PLSA could be an important example to build on.
- Strategic risk management and insurance take up – more broadly, there is a need ensure that we integrate the management of the underlying risks that society faces into our thinking about insurance take up. This could include considering how we do this across climate change, cyber risk, and other risks. Flood Re already looks to do this as part of its various transition activities, such as Build Back Better
- Social dialogue, essential products, and risk pooling – many of the questions addressed as part of this roundtable are values-based decisions for society as a whole, rather than commercial or technical ones. As a result, ways to engage the public in these questions should be considered, such as citizen assemblies.
To find out more about the campaign and read the report, see: Great Risk Transfer. You can also contact a member of the team via policy@actuaries.org.uk.
