The insurance industry is huge, not just in terms of sales each year. Insurers often hold vast investments in other companies, as we explain in our home insurance guide. In the UK alone, insurance companies manage investments equivalent to around 25% of the country’s net worth.
This means that they are indirectly financing everything from tar sands to the sales of arms. In this guide, we have tried to find the travel insurance companies with the most ethical approach to investment.
Types of Insurance
There are two types of insurance company: brokers and underwriters:
Brokers sell policies on behalf of one or more underwriters, and include well known brands such as Sainsbury and the AA. They make money by receiving a commission from the underwriter, once a policy is sold.
Underwriters are the companies that take most of the money from an insurance premium, but which also pay out when something goes wrong. They may not be as visible as the broker’s insurance brand. But they wield a significant amount of power in the global economy with insurers often holding vast investments in other companies, as we explain in our home insurance guide.
This means that they are often indirectly financing everything from tar sands to the sales of arms. That is why we have focused on them for this report.
Just to make things more confusing, some underwriters do sell directly to the public, or belong to the same company group as the broker itself. Others may re-insure a specific risk via a different underwriter (basically insurance for the insurer).
What to look for?
In the UK alone, there are hundreds of brokers – too many to include in our reports, so our ranking tables only include underwriting companies.
Unfortunately, most of us will buy our policy through a broker, so you may have to do some extra digging. You can find the underwriter by looking at the ‘Key Facts’ document that the broker must provide when you are deciding to take out a policy. Comparison sights like Money Supermarket will also either provide these documents or tell you who the underwriter is.
Lloyd’s of London isn’t actually a broker or an underwriter: it is a marketplace where insurance managers can find capital to cover them. The capital is provided by Lloyd’s ‘members’ or ‘names’. Members were originally wealthy individuals, but now include corporate groups. Today, there are only around 290 individual members compared to 1760 of these corporate groups, which provide Lloyd’s capital backing. They come together to provide insurance, thereby pooling capital and spreading risk. All transactions are further underwritten by Lloyd’s own central fund.
One of the largest travel insurance underwriters is in fact a member of Lloyd’s marketplace. Travel Insurance Facilities underwrites travel insurance policies for the likes of the Post Office and Puffin Insurance. As a member of Lloyd’s of London, Travel Insurance Facilities is in part backed up by Lloyd’s of London’s central fund, and therefore by the policies (or lack of) that go with it.