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THE FUTURE NOW REPORT – UK MOTOR – Innovation Group

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Article Synopsis :

The UK motor insurance industry is going through an unparalleled period of upheaval and change. Four key areas – regulation, economic conditions, technology and customer behaviour, have all, more or less simultaneously, thrown the industry into a state of flux.  In “THE FUTURE NOW REPORT – UK MOTOR” the Innovation Group  articulates the current state of these four challenges and explores their future  impact on the UK insurance market.

 The Digital Insurer reviews Innovation Group’s Report on THE FUTURE NOW REPORT - UK MOTOR

Premiums on the squeeze in the UK Motor market 

Key observations:

  • Regulation: Solvency II, set for implementation in January ’16, has had a difficult gestation. Aimed at simplicity for consumers, the reality is added complexity for carriers in the areas of capital requirements, governance and risk management, and reporting and disclosure.  LASPO, intended to simplify the claims settlement process and reduce legal expenses, has had the opposite effect, with increases in litigation and massive cost inflation around the volume and level of disbursements.
  • Market Competition: Digital brands (e.g. Google) often have the cash, data processing insight capabilities and digital skills that insurers do not – which, coupled with low barriers to entry, make the insurance market ripe for the picking. It’s highly likely that fresh entrants will begin to cannibalise the motor insurance market over the next half decade. Burdened by rigid legacy systems, most carriers are effectively data rich and information poor.
  • Economic Conditions: Economic uncertainty has a chilling effect on consumer optimism, which has a chilling effect on business optimism. This atmosphere inevitably leads to risk aversion. Coupled with drives to improve cashflow, carriers cut extraneous spending and postpone significant capital expenditure projects in new product development, technology solutions, customer experience and service delivery. Innovation is crimped in key areas.
  • Changing Consumer Behaviours: Consumers are changing the way they shop for and buy all kinds of products – and motor insurance is no exception. Yet advances in technology, that are increasingly connecting cars to communications networks, will perhaps have a more significant impact on future buying behaviour, fundamentally altering the relationship between consumer and provider – and even motor manufacturer. Digital transformation has had a seismic effect on insurers, and will continue to do so.

The report highlights the need to adopt omni-channel distribution and leverage UBI telematics, big data analytics and IoT to remain competitive and relevant in the fast changing digital landscape.

Link to Full Article:: click here

Digital Insurer's Comments

It’s a brave new world for UK insurers, one that is suited to organisations that operate with agility, i.e., those able to harness digital skills, expertise, software and flexible business approaches. As the industry undergoes significant reshaping over the next few years, this challenge is, of course, a significant opportunity for those able to move fast enough.

As premiums inevitably come down through fewer, less expensive claims (driven by technology not necessarily regulation), insurers need to fend off the threat of new digital entrants and falling revenues by delivering more value and products to consumers. This can mean adopting the tactics of digital businesses, just as those digital businesses seek to move into insurer’s markets.

As technology companies move into insurance, insurers need to think and act more like technology companies.

Link to Source:: click here

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