IPTM1105 - Fundamental concepts: what is an insurer?

Insurance companies

Most such companies for the purposes of this manual are life assurance companies, although there are still in existence several ‘composites’ who also write general business - domestic, motor, aviation and marine are examples - that is annual rather than long term business. The definition of an insurance company is at ICTA88/S431. It is a person other than a friendly society that has permission under the financial services regulatory legislation to carry out contracts of insurance, and extends to similar organisations within the European Economic Area. Policies may, however, be issued by foreign insurers outside this definition authorised under their domestic legislation.

Friendly societies

Although not insurance companies, friendly societies can write life, endowment, sickness and injury insurance. They are mutual organisations with a long history and varied interests. The smallest may do no more than run, for instance, agricultural allotments. The largest are bigger than some insurance companies, and build on their 19th century origins as self and community help organisations. Originally they were exempted from tax on the footing that ‘working people’, who composed their membership, were not taxpayers. They may be ‘registered’, ‘unregistered’ or ‘incorporated’, but only incorporated or registered societies may write insurance business. For more details about the structure of friendly societies see CTM40310. For more details of their business categories see CTM40320.

Like other insurers, friendly societies can write policies that are ‘qualifying’ - see IPTM1115. They can also, within limits, write life or endowment business that is still exempt from tax in the hands of the society. Such policies are known as ‘tax exempt savings policies’ or TESPs. More details are available at CTM40325.