For any type of hot water storage, energy is lost through the walls of the cylinder even if no hot water is being used. This is called 'standing losses'.
Although modern electric cylinders are better insulated than older cylinders, even modern A-grade cylinders will benefit from extra insulation, reducing heat losses by about 0.3kWh/day, saving about £30 a year at 25.5 pence/kWh.
If you have an older cylinder, which is not as well insulated, then adding a cylinder wrap could save you up to 1 kWh/day, (saving about £93 per year at 25.5 pence/kWh. Wraps cost very little – about £70 in 2016 – so insulating your cylinder could pay for itself in less than a year.
Indirect cylinders can't be fully insulated as they have an exposed flue in the middle where the flame heats the water.
Cylinders are now sometimes installed outside the house to save space. The cold and rain outside mean that the cylinder insulation needs to be particularly good.