The insurance industry still has an image problem with the general public which the new regulatory structure is unlikely to help, according to research by the ABI.
It is also concerned with the increasing burden of European legislation and is wary of the government's commitment to support economic growth.
The ABI questioned 57 industry leaders alongside its quarterly consumer market survey and released the results at its biennial conference.
Otto Thoresen, director general of the ABI, explained that the industry needed to improve its reputation to make the most of current opportunites.
"The reputation of UK financial services firms was undoubtedly harmed by the banking crisis, but insurers are not banks," he said.
"Despite this, we have to tackle our reputation head-on and we have a good platform to do this from.
"Yet, despite the valuable role insurance plays in millions of people's lives, the public perception of our industry is not high. We need to do something about this," he added.
Thoresen continued that the regulatory upheaval provided the chance to enhance the industry's image.
"Unprecedented reforms in how we sell to our customers and how people save present real opportunities to raise our reputation and improve understanding of insurance.
"We need to grasp these opportunities with both hands, and make sure that we create an environment where our reputation reflects our value to society and the economy," he concluded.
According to the study, a third of industry leaders believe the greatest weakness is its reputation, ahead of how the industry interacts with customers.
A further two thirds of executives recognised that, in light of wider implications of the financial crisis, more needed to be done to show customers that it delivers a good service.
Conversely 39% suggested the industry's greatest strength is helping customers at their time of need, followed by its contribution to the economy (21%).
This was also the top answer for customers (18%).
On regulation, the survey data revealed that almost half of industry leaders felt UK's new twin peaks regulatory structure will do nothing to improve customer trust, with over half of consumers believe that they are responsible for the products they buy.
Only 4% thought this was the job of the regulator.
The growing impact of European regulation is also being felt by firms as 98% of leaders reported being somewhat or very worried about the impact of the EU on the UK market.
Nearly half are worried about ensuring a coherent regime, with a third very concerned that the EU does not understand the need for a cost benefit analysis when proposing new regulation.
Consumers are also skeptical as only one in ten believed EU intervention is appropriate and 57% said that the EU intervenes too much in Britain's financial services.
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