Making financial uncertainty count: Unit-linked insurance, investment and the individualisation of financial risk in British life insurance.

Arjen Heide

doi:10.1111/1468-4446.12783

Abstract

While most scholarship in the sociology of insurance has focused on the making of insurance risk by investigating mechanisms of pooling and spreading, this article examines insurers' management of financial uncertainty. Based on a large corpus of written sources and 44 semi-structured oral history interviews, this article seeks to describe and explain a shift in how financial uncertainty is dealt with in British life insurance, away from traditional multipolar arrangements revolving around actuarial prudence and discretion, towards bipolar arrangements that rely on explicit risk quantification and the logic of risk-based capital to "individualise" financial risk. The article identifies two factors that were key in bringing about this shift: first, the competitive dynamics that unfolded with the emergence of challenger "unit-linked" insurers in the 1960s, and, second, changes in the professional ecology, as manifested by the changing relations between the actuarial profession and insurance supervisors.

Highlights

While much of the sociology of insurance focuses on insurers’ efforts to construct risk out of mortality, fire hazards, illness and so on, this article rather focuses on the “backstage” practice of financial risk
Few scholars have scrutinised how insurance arrangements deal with financial uncertainty— how they construct financial risk as part of the insurance commodity—and how this has changed over time
While most scholarship in the sociology of insurance has focused on the making of insurance risk by investigating mechanisms of pooling and spreading, this article has shifted its focus towards insurers’ management of open-ended and “non-diversifiable” forms of financial uncertainty

Summary

Introduction

VAN DER HEIDESociological studies of insurance often focus on the ways in which insurers “make” risks (Van Hoyweghen, 2007)— that is, the practices through which insurers construct risk pools, classify individuals into different risk groups, market risk, manage their relations to policyholders and seek to include or exclude specific individuals from their risk pools (Baker, 2000, 2002; Bouk, 2015; Ericson & Doyle, 2004; Ewald, 1991; Lehtonen, 2014; Lehtonen & Liukko, 2015; McFall, 2015). Article by an MPIfG researcher Arjen van der Heide: Making Financial Uncertainty Count: Unit-Linked Insurance, Investment and the Individualisation of Financial Risk in British Life Insurance.

Results

Conclusion