Greg Clark is Financial Secretary to the Treasury and MP for Tunbridge Wells. Follow Greg on Twitter.
What could be more conservative than the principle and practice of insurance? Long before the advent of the welfare state, people were banding together to protect themselves against catastrophe and to make long-term provision for the future. In fact, many of the core public services we value so much today – like the fire service and the old age pension – have origins in the insurance industry. As for the private sector, businesses and markets would not be able to function without the ability to share and manage risk.
In fact, modern life would be unimaginable without insurance. Perhaps, its very ubiquity in our lives is why we tend to take the insurance industry for granted. But we shouldn’t – and certainly not in Britain where the industry itself is of huge importance to our economy.
Insurance companies employ almost 300,000 people in this country, they contribute over £10 billion in taxes to the Exchequer and they administer investments amounting to more than a quarter of the UK’s total net worth.
Despite these facts, when most people think about the financial services sector, the first thing that usually comes to mind is banking. Certainly, various issues surrounding the banks tend to dominate my in-tray as Financial Secretary to the Treasury. This is not, of course, for the happiest of reasons – and it is quite right that we should, as a Government, have attached such a high priority to restoring the stability and reputations of Britain’s banking system. And yet this is all more reason why we should celebrate our insurance industry, which continues to be an industry in which Britain has a global reputation.
Of course, sure and steadfast does not have to equal dull and boring. In fact, London is establishing itself as the world capital of the insurance industry. In the last year, Aon – one of the largest insurance brokers on the planet – has relocated its global headquarters from Chicago; while AIG – another insurance giant – has moved its European headquarters from Paris.
And this isn’t just good news for London, but also for the country as a whole. From Edinburgh to York to Norwich, insurance companies are of great importance to regional and local economies. This, I know, is true for my own constituency of Tunbridge Wells, where AXA PPP is the largest private sector employer.
Insurance, therefore, is a national success story – one, which I believe, to be of profound relevance to the wider economy. On the one hand, we have succeeded in this field as a free-trading, international economy that is open to people, investment and ideas from around the world; while, on the other, a tradition of fair play and high standards has built-up high levels trust in our public and private institutions.
In recent years and in other parts of the financial services sector, we saw the second half this very British combination compromised by actions that, at the time, were justified with appeals to the first half – as if dynamism could be traded-off against integrity. In fact, there is no trade-off, no balance to be struck. The dynamism and integrity of our financial institution are mutually dependent. The less we have of one, the less we will have of the other. Without integrity, dynamism degenerates into corruption; and without dynamism, integrity crumbles into officiousness.
In the emerging economies of the developing world, new opportunities are arising. As millions of people escape absolute poverty and gain access to mobile communications technology, the global demand for financial services will grow at an unprecedented rate. Insurance will be one of the most important of these services, granting individuals and businesses a level of financial security and confidence that they’ve never had before.
Britain’s insurance industry is ideally placed to play a leading role in this global revolution – and in doing so, it will have the full backing of the British Government.