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Insurers could take on £17bn welfare state burden, says working group

Insurers could step in to meet £17bn worth of annual welfare state payments to ease the burden on the Government under proposals made by the Insurance Industry Working Group.

The report, published today, by the group co-chaired by Chancellor Alistair Darling and Aviva chief executive Andrew Moss looks at ways for the insurance sector to take a greater role in managing the risks facing the population such as unemployment, ill-health, retirement income and the cost of long-term care, in order to lift some of the burden which the Government currently shoulders.

It says that currently 64 per cent of these risks are underwritten by the Government, but that if this were to shift so that the private sector took on a five percentage point greater share of these risks, it could save the public purse £17bn.

The report says: “Over time the challenge of funding these costs will rise, due to a decline in the relative size of the working age population and rising costs in areas such as healthcare.

“This raises the question of where the optimal balance between private and state provision should lie in the future and how much emphasis should be placed on personal responsibility.

“If, for example, the private sector increased its share of the addressable risk market by five percentage points, the corresponding saving for public sector risk management could be almost £17bn per year.”

The Association of British Insurers director general Stephen Haddrill says: “The recommendations represent a solid set of ideas for both insurers and policymakers about how best to build on the strength of the sector, improve its competitiveness and support UK plc.

“Achieving the best results will depend on all the report’s recommendations, which the ABI wholly support, being implemented in full. Doing so will create the virtuous circle referred to in the report

“We will be working with our members to achieve this, and we urge the Government and FSA to do the same.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. This could be a very dangerous move
    To ‘Place State Pensions’ into the private sector in view of the past losses in pensions in the private sector this is seen by myself as a way of washing their hand of any losses incurred. Most possibly leaving millions without any pension at all.

    Signed Carl Barron Chairman of agpcuk

  2. Julian Stevens 30th July 2009 at 5:05 pm

    Insurers could take on £17bn welfare state burden, says working group
    The best way to incentivise people to effect private insurance against ill health is to allow tax relief on the premiums (which is why most large companies have Group Income Protection schemes). The best way to incentivise people to put money into a private retirement plan is to repeal all the restrictions and punitive tax charges imposed on pension funds by Gordon Brown during his period as Chancellor. Plus consign the annuity trap to history and allow tax free inheritability of unspent funds in retirement (into a Personal Pension for the next generation). What chance of any of these things happening under a Labour government? None, of course. And the shame of it is that these measures are so straightforward that pretty well everyone across the land would understand and appreciate them and, above all else, very probably act on them. But, as usual, there are none so blind as those who will not see. Don’t you just hate politicians?

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