Article Synopsis :
The European market has continued to change with a continued shift towards index and unit-linked products away from traditional with profit participation ones. This is seen by the continued shift from defined benefit (DB) to defined contribution (DC) within the pensions sector.
Gross written life insurance premia increased by 11%, driven by a 42% increase in index-linked and unit-linked insurance, now the largest life insurance line of business.
Non-life grew very little (0.3%), though while some states saw growth in excess of 10%, penetration remains low in some EU member states.
Cars and healthcare
Motor vehicle liability and other motor insurance lines were the most prominent non-life insurance products. Five of the 24 member states that saw growth experienced an increase above 20%.
Distribution continues to change. The UK market saw 60% of policies intermediated in some way by price comparison website in 2017.
More than a fifth (20.5%) of motor policies issued at the end of 2017 were for a vehicle fitted with a ‘black box’.
The most important non-life line is medical expense insurance, with growth ranging from 5% in Belgium to 33% in Lithuania and Romania.
Demand is being driven by consumers needing to supplement state provision in some states, an increase in cross-selling of personal accident insurance with motor vehicle insurance and that technology is creating more tailored and better value cover.
The impact of technology
Technology is being rolled out across the value chain, though mostly in the non-life sector, most commonly in the motor, household, and accident and health insurance.
Telematics is increasing, particularly in southern Europe, offering better-tailored policies.
Analytics within health insurance is yet to be applied systematically, but when it does, it could reduce costs and help identifying, assessing, and insuring new types of risks.
Behavioural based data use may lead to the potential exclusion of some segments of the customer base, price-discrimination, and even competition issues.
Greater use of data means cyber-risk concerns are elevated and demand for such products is increasing across the region.
Demand for on-demand insurance products is also growing, from enhanced life insurance when associated with extreme sports, to coverage when using car-sharing services.
Complaints are also rising
While there has been growth in demand for insurance products, the number of complaints has also increased across all non-life insurance products.
Travel insurance related complaints grew by 85% in 2017, mainly driven by claims’ related issues.
Sales related complaints also experienced significant growth, with investigations showing poor practices in the sale of certain investment products.
This extends to pension sales where disclosures are sometimes weak, though this is likely to be addressed by IORP II coming into force in 2019.
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Digital Insurer's Comments
While Europe is considered to be a mature insurance market, it should be remembered that certain states – in particular the more recently joined nations – have low levels of insurance penetration.
Greater connectivity can increase customer engagement. It can also amplify weaknesses in the customer experience, and this may be behind some of the rise in complaints.
Claims handling is considered by some to be the most important element of insurtech deployment. This is because an individual’s satisfaction appears to be directly correlated to the simplicity of the claims handling process.
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