The Purpose of Insurance – The Social Safety Net
Most people will be familiar with insurance as a customer. If you own and drive a car in the UK, having some form of insurance cover for your vehicle is required by law. And even if you don’t, you’ll likely have been offered insurance any time you made a significant purchase such as a washing machine, TV, computer or mobile phone.
Insurance doesn’t have a very popular reputation with the average person – most people, hopefully, will never need to make a claim on their insurance and therefore may see it as little more than an extra expense. However, when insurance works the way it’s supposed to, the people who are impacted by unforseen events and challenges can find it a lifeline.
Insurance exists as a financial safety net. A household fire or flood can cause damage and loss to entire rooms full of belongings. Even the most frugal person who sources most of what they own through freecycle will likely to struggle to replace a large amount of their belongings at such short notice. Additionally, the damage from fire and flood can render all or part of a home uninhabitable for weeks and result in the need for more substantial work to the property. Homeowners and tenants both feel the impact of this and may find themselves needing to quickly find a short-term alternate living option.
It isn’t just accidents like household fires that can make insurance a lifeline. In 2023, insurers in the UK paid out £573,000,000 in weather-related property claims. And as global warming makes extreme weather conditions more common globally, the impact this can have not only on the individual person but entire infrastructures will continue to grow. A recent example of this is the payout that the Moroccan government received to help rebuild following quakes in September 2023.
Insurance doesn’t only benefit the world by providing a safety net in cases of crisis, although this is one excellent application of it. Insurance can also influence how we all behave in other ways.
The Purpose of Insurance – Supporting Responsible Risk-Taking
Chances are, you’ve had an amazing idea for a business venture at some point in your life. If not you, then at least some of your friends and family will have talked about plans for what they would love to do professionally. The skilled baker in the family who has been successfully selling cakes online on the side of their day-job, and would love to rent premises where they could start a dedicated bakery. The tech wizard who has been developing an app but can’t find time to spend marketing it with their other responsibilities. The older relative who dreams of taking over a local bar or music venue that is in need of new investment. All of these dreams carry potential, but they also carry risk. It can be very scary to quit a stable paying job to work for yourself, especially if you have children or other people dependent on you. For most, the fear of what could go wrong can prevent them from ever making their dream a reality.
But the purpose of insurance is to collectivise risk, and provide a layer of security in the face of losses. Small business insurance can help protect against business interruptions, supply chain breakdowns, liability issues and stock or premises damages, empowering people to take a risk that could positively transform their lives.
Even insurance companies cover themselves against the risk of doing business through reinsurance, which allows an insurance company to reduce the impact of a large payout on their own financial security.
The Purpose of Insurance – Engineering Social Responsibility
If you drive a car, you’ll be familiar with the way both incentives and exclusions in insurance can encourage you to act more responsibly on the road. We all know that certain behaviours can make driving safer, such as wearing seatbelts, avoiding alcohol, keeping within the speed limit. Car insurance policies that exclude claims for incidents where specific irresponsible behaviour caused the incident can encourage people to learn to act more responsibly.
Whether it’s the loss of a no claim bonus, an increase in premium the next year or finding it hard to find insurance in the first place, the existence of specific exclusions and clauses around behaviour of the policyholder makes it less likely that people will act irresponsibly and, as a result, reduced the amount of accidents, injuries and losses day-to-day.
More responsible driving means fewer accidents, which means more people safe and healthy. But it also means fewer traffic interruptions caused by crashes or other incidents, positively impacting everyone who has to drive or travel for work or personal reasons, which has a further knock-on effect of improving business outcomes. It’s possible to measure the economic impact of traffic congestion on business.
The industry doesn’t always work perfectly, of course, and there are always improvements to be made. Customer duty and the needs of vulnerable customers are big topics of discussion in the industry right now, with organisations like the ABI – the Association of British Insurers – developing good practice guides and organising research to help push standards of care forward.
While this all makes the industry a worthwhile one, there are other – more personal – reasons why it’s a good industry to work in.
Why Pursue an Insurance Career?
The insurance industry offers significant opportunities for meaningful, long-term roles, and offers significant benefits to employees. There is a high amount of competition for talent right now, with estimates that the industry will lose 400,000 people globally between 2023-2026 by attrition. With over a quarter of industry employees aged over 50 and capable, talented individuals retiring faster than they can be replaced, there is a high incentive for insurance companies to offer competitive salaries, generous benefits packages and significant opportunities for development and advancement.
Employees of insurance companies can expect to enjoy access to training and advancement supported both financially and with time allowances for study and exams. For individuals at more entry-level roles, secondments are a very common practice whereby individuals are encouraged to take temporary placements in other departments, to gain a more diverse skillset and find potential career paths that could last a lifetime. The range of career roles in the industry is incredibly diverse, and exposure to other roles, skillsets and working styles is actively encouraged.
Beyond the desire we all have for meaningful, secure and well-compensated employment, insurance roles can also offer opportunities for more personal fulfilment through engagement with social causes.
Many insurance companies will sponsor national and/or regional charities to provide substantial additional funding, including both large-scale donations from the company itself and fundraising campaigns organised by the employees. It’s also increasingly common for insurance companies to offer “charity away days” and “volunteering days” as an additional employee benefit, wherein employees are given an additional allowance of leave each year to spend volunteering at specific projects for sponsored charities.
Ecclesiastical, a Company that forms part of Benefact Group, is one example of an insurance company that puts charitable activities and social good at the heart of their work. Benefact Group is charity-owned, and gives all available profits to charities and good causes. Over £200 million has been donated over the past 10 years to a range of communities, charities and good causes, with funds being distributed both in smaller amounts such as £1,000 grants, up to and including larger grants of £10,000 or more.
There is a lot more to cover than can be included in a single article. Over the next few months, the Career Club newsletter will feature a new article series diving into the details of the industry; how it works, what roles are available and what skillsets they use, how to establish a career in the industry, and more.
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