The other sides of finance: insurance

Continuing our series on financial sector jobs outside banking, Craig O'Callaghan explores the risk and rewards of the insurance industry

What do insurance firms do?

Insurance is a form of risk management, transferring the potential risk of a loss from an individual or company to an insurance firm in return for payment. Insurance firms assess the risk and charge their customer accordingly. Should a loss occur, the customer can then make a claim with the insurance firm who will pay out to cover any damage caused.

Originally started to protect merchant ships from the possibility of lost cargo, insurance is now an incredibly complex industry with individual policies sometimes worth as much as tens of billions of pounds, and the UK insurance market has grown to be one of the three largest in the world.

How do they operate?

There are two branches of insurance company: casualty insurers and life assurers. Casualty insurers provide cover against accidents or loss of assets, everything from car insurance to protecting agriculture from adverse weather patterns. Life assurers provide insurance against long-term illness and death. These policies are essentially savings products as, unlike casualty insurers, the event they're covering (death) is a certainty.

The UK insurance industry also leads the way globally in "special risk" policies. These are bespoke insurance policies drawn up to cover unique assets, usually in the sport/entertainment industry. Examples include Bruce Springsteen's voice, David Beckham's right foot, and, perhaps more weirdly, Tom Jones' chest hair.

Who are the clients?

Practically everyone! It's extremely likely you've taken out an insurance policy at some point, whether it was on your mobile phone, your car or a holiday. These policies are obviously at the other end of the spectrum from the big businesses protecting their assets but it's all part of the same industry.

How do the firms make money?

As part of an insurance policy, the purchaser must pay the insurance firm sums of money known as "premiums". Should the policy never have to pay out, the insurance firm is able to keep that money. Also, all premiums are pooled together and invested to generate further income, ensuring the firm has enough money available should it be required to pay out on a claim.

Why should I be interested in it?

The insurance industry is extremely stable, allowing it to emerge from recession almost entirely unscathed. As a result, a career in insurance is arguably less of a risk (pun intended) than other careers in finance. Insurance is also a global business - firms will have clients all around the world - providing graduates with a great opportunity to travel and do business internationally.

Major players


Created when Norwich Union and CGU plc merged in 2000, Aviva is perhaps most widely known for their eye-catching adverts starring Alice Cooper, Bruce Willis, and most recently Paul Whitehouse. They predominantly specialise in general and life insurance and have 43 million customers worldwide.


Founded in May 1848, Prudential is one of the largest companies on the London Stock Exchange, consisting of various sub-divisions. Prudential Corporation Asia is one of the largest UK life assurer in Asia, Prudential UK has around 7 million customers and Jackson National Life Insurance Company is one of the largest life insurance providers in the US.

Lloyd's of London

Lloyd's is a slightly different prospect as it's an insurance market rather than an insurance firm, providing a place for insurance companies to do business and join together as "syndicates" to take on large risks. Lloyd's is principally a reinsurance market, reinsurance being a process that allows insurance companies to avoid sitting on a risk. Instead, they place the bulk of a policy's risk with a reinsurer in return for giving up some of the premium.



A demand made for payment under the agreed terms of an insurance or reinsurance policy.


An individual member of Lloyd's who underwrites, with unlimited liability, policies issued by Lloyd's syndicates. Membership is limited and highly coveted, with no new people admitted since 6 March 2003.


A contract of insurance or reinsurance


The amount charged by an insurer or reinsurer as the price of granting insurance or reinsurance


A method of laying-off risk by having a reinsurer agree to pay specified amounts of loss incurred by an insurer in return for a premium


In an insurance context, the process of accepting an insurance risk in return for a price.

Trending issues in insurance

Solvency II

The Solvency II Directive is an attempt by the EU to unify the EU insurance market and make it less risky. Scheduled to come into effect on 1 January 2014, Solvency II will reduce the risk of insurers being unable to meet claims by imposing stricter regulations. In return, firms will have access to the insurance markets of any EU country.

Cyber crime

With stories about internet hackers and online whistleblowers becoming a regular occurence, it's no surprise many companies are choosing to purchase bespoke cyber insurance policies in order to protect themselves.

Climate change

Extreme weather events are occurring on an increasingly regular basis. The insurance industry is having to adapt and take these into account when offering policies. People who are at a high risk from these extreme events may find themselves unable to get insurance at all; for example, UK households in areas prone to regular flooding.

Did you know...?

Lloyd's of London is well-known for a history of unusual insurance policies. Notable ones include a $100,000 "love insurance" policy that provided payment if a certain photographer's model married and $22,400 of protection against death caused by a falling sputnik. Not every policy gets approved though: a request by a European gentleman to insure his daughter's virginity was refused.