The Insurance Industry Working Group, comprising the bosses of major firms in the insurance industry, was set up in October to assess the challenges in the insurance industry.
It recommended a partnership between the insurance industry and the Government to better manage risk in society and to explore options to increase savings and protection provision.
The chancellor, Alistair Darling co-chaired the group. He said: "The insurance industry is a vital part of the UK economy, employing around a third of all people who work in financial services and managing almost £1.5 trillion in assets. While the industry has fared well in the global financial crisis relative to other financial sectors, it is facing the challenge of an increasingly competitive global market.
"I welcome the industry's commitment to work in partnership with Government to improve confidence in insurance products, enhance financial capability and further build the competitiveness of this key British industry."
But Brendan Barber, general secretary of the TUC, raised concerns. He said: "Who would pay for these insurance policies? National insurance is split between employers and individuals equally, but here individuals may have to take on the whole financial burden.
"While we all pay the same National Insurance contributions, in private insurance premiums are related to risk. The TUC is concerned disabled workers, part-time workers and anyone in insecure jobs or with an atypical employment contract would be seen as higher risk, and therefore have to pay a higher insurance premium.
"Those who need protection the most would be at risk of going uncovered as they would have to pay the most - this would be the opposite of the welfare state."
Unemployment and sickness benefit payments could be transferred to private insurance sector
Private insurance companies could pay out benefits such as unemployment and sickness instead of the Government, according to a report into the industry.
