So the insurance industry should have a greater role in helping people deal with unemployment and ill-health. Apparently, action is needed to reduce burden on the State, says Working Group.
Furthermore, there should be a greater role for the insurance industry in helping people deal with risks such as unemployment and ill-health, the Insurance Industry Working Group, co-chaired by Chancellor of the Exchequer Alistair Darling, along with Andrew Moss, Group Chief Executive of Aviva.
In ‘Vision for the insurance industry in 2020′, the Working Group moans that there is evidence that many people are not saving enough for their needs and do not have sufficient insurance to cover them against the risks they face, and that both these trends place a burden on the State, by increasing the need for benefit payments.
The Government currently provides around 64 per cent of the UK’saddressable ‘risk management’ market for individual and occupational pensions, healthcareand long term care and income protection funded through tax and national insurance on a ‘pay as you go’ basis.
And they further whimper that over time, the challenge of funding these costs will rise, due, for example, to a decline in the relative size of the working age population, and that 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.
Oh yes, personal responsibility….. here we go…again.
‘More can be done’, they exclaim regarding the insurance industry.
Where it is commercially viable’, to act in partnership with the government to explore whether private sector solutions could be helpful in areas of social insurance.
The document is available here.
What is all this about? I mean, in the words of Stewie Griffin, what the deuce..?
Perhaps the state retirement pension scheme is worth thinking about. £70 billion each year paid out to pensioners with very little in the way of administrative cost.
It is run by junior and middle level civil servants based in the North East of England (i.e. they don’t even get London weighting).Very cost effective. Not perfect. It does not pay out much but then you don’t pay in much in the form of national insurance contributions. Women get a raw deal from it but that can be dealt with relatively easily by the appropriate use of credits for maternity and carer breaks. In fact this already happens to a limited extent now. These remedies could be introduced with little disturbance to the general nature of the scheme or to it’s administration.
Of course the problem with all this as your unfriendly local neo-liberal will point out is…no one is getting rich out of al this! 5% of GNP and not a millionaire in sight!
If the benefit system, the health service, social services and social housing are added up along with more minor components of the welfare state such as legal aid are added up and you have a nice juicy target of several hundred billion…lots of lots of bonuses (bonii if you are D Cameron Esq) for those who like to rob the poor to give to the rich.
Just finally…Separate though connected, Serco (that private company with its grubby paws in lots of financial pies) has made a massive profit. Now there’s a surprise….
This is a total joke; you buy insurance to hedge against unpredictable risks: pensions, health, unemployment etc. are, to a large extent predictable and will move within certain calculable margins. If you insure these risks in a commercial setting, brokers will want their margin, insurers will want their margin, reinsurers will want theirs etc etc.
Insurance works in the same way your car insurance works, if you have a claim in one year, the insurers will want their money back from you in higher premiums in future years (plus some profit of course!). Insurers don’t take away the costs associated with risk, they just spread them out over predictable and manageable periods so you aren’t faced with a sudden and massive cost for something unpredictable which has happened to you in the short term.
Even if you did, for some bizarre reason, have an unexpected rise in unemployment and health related claims in a particular year and the insurance and reinsurance company could not cover the losses… where would they go for a hand-out themselves?! The ultimate insurer when all else fails: The Government. Massive insurance companies, as we have seen, are not immune to failure, AIG and Lloyd’s of London provide classic examples of crises in the insurance industry.
It is utterly disgusting a chief-executive of an insurance company should co-chair this working group – of course he’ll want these risks transferred into a commercial setting; it will mean massive profits!
Last point I promise … you only need to look at how health-insurers deal with people making insurance claims in the US to know this is a very very bad route to take. American HMOs are evil incarnate.
Great blog btw!
Thanks for the compliment Oliver, much appeciated.
“you only need to look at how health-insurers deal with people making insurance claims in the US to know this is a very very bad route to take. American HMOs are evil incarnate.”
I was thinking that as well. They are indeed the devil incarnate and Michael Moore’s Sicko really exposes these heartless profit driven bastards!
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If you want to look at the insurance industry getting involved in Welfare you cant go far wrong with this article;
New Labour, the market state, and the end of welfare
http://raw-rap.com/blog/new-labour-the-market-state-and-the-end-of-welfare.html
Thank you for your good article.
I always enjoy your blogs. This one is a particular cracker.
“little in the way of administrative cost” is the phrase you apply to the DWP. I’d have to pick you up on that. The DWP has a cost/budget ratio of nearly 10%. Compared to other financial institutions it is extremely simple to run
– it has a monopoly, with compulsory contributions by government decree
– it has highly predictable costs and revenues
But the managers of private sector financial institutions are typically sacked if their cost/revenue ratio exceeds 2.5%. So please drop the guff about the pension being cheap to administer.
“you don’t pay in much in National Insurance contributions”. That’s because National Insurace contributions are not, in fact, insurance at all. They are a tax. They don’t, and never have, come close to covering the current cost of your future pension / unemployment benefit etc – which is one reason why the country’s budget deficit is so terrifying. Unbudgeted pension payments in 20 year’s time are almost certain to dwarf today’s banking bailout.