The future of personal insurance in the UK – excellence or irrelevance
Article Synopsis :
There are five key trends in the UK insurance market according to this Oliver Wyman paper, which it says separates the signal from the noise.
Baby, you can drive my car
Auto is still the core product, even if it isn’t the most profitable. The reports of the death of car insurance at the hands of driverless vehicles has proved premature. However, tech is making itself felt through reduced claims as a result of collision-reduction technology.
In this highly competitive market, these benefits will likely be passed back to the policyholder in the form of reduced premiums. Eventually.
From the middle of the next decade, the market is set to shrink as less insurance is purchased by individuals and as protection is packaged with autonomous services with those carriers accepting the liabilities.
This spells the end of the UK’s cutthroat retail market, with a small number of large B2B2C insurers dominating the landscape.
Customer, I love only you
The shift of technology from desktops to the hand is rapidly changing the ways in which insurers acquire customers.
Price comparison sites want to forge deeper links instead of the quickie relationships that have been its staple. Loyalty schemes and cross-category propositions are being used to encourage this.
Fintechs are capturing the more engaged punter and a super comparison site is anticipated from a tech giant before very long.
This makes competing for customers even harder for the non-connected business which will see non-insurers seeking to eat their lunch.
Insurtech may save their bacon, but they’re going to have to get with the programme – and fast.
It costs how much?
Insurers will not be able to continue to reward the savvy switcher while loyal customers experience regular price hikes.
This approach, which relies on exploitation of loyalty and inertia is totally incompatible with the customer centric model being espoused by the digital innovators.
It won’t be long before regulators start to take these businesses to task for the way they treat their customers. It will be up to the industry to work with the regulatory bodies to find a sustainable model. This will mean some big, profitable books, being expected to give something back to a loyal client base. This will challenge traditional pricing structures and make this market more appealing to new entrants and insurtechs that cannot compete with the deep pockets of the incumbents.
Jacks of all trades
There will be fewer businesses seeking to specialise in single areas. The new structures require less infrastructure, so there won’t be the competitive advantage from having built a system, client base, etc that no-one else has access to.
Critical mass is plummeting.opening the door to more companies that can begin to compete in this arena if they have strong data assets and good customer relationships, such as banks, digital retailers, travel companies, etc.
Just like banking, incumbents could create greenfield challengers that stand alone and innovate from (just) outside the organisation.
All the gear, but no idea
The big boys have historic relationships, huge amounts of data, but have struggled to interrogate it and put it to work in their businesses. This creates opportunities for agile entrants to launch new platforms and trading-oriented operating models.
However, scale remains important and those in the manufacturing space require critical mass if they wish to specialise as they cannot do everything and then invest sufficiently in digital processes. This is likely to result in further consolidation among providers.
New core platforms are better and nimbler and if coupled with entrepreneurial skill, will drive commercial success.
However, there will be a place for smaller reinsurer backed MGAs to cut the primary insurer out of the value chain thanks to access to faster and more flexible pricing & underwriting.
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Digital Insurer's CommentsThe UK market is on the edge of digital transformation – whether it likes it or not.
If UK providers do not decide where they can compete – and soon – they may have missed the optimal jumping off point.
Insurtech is making it easier for non insurers to enter the market, snaffling the limelight, punters and market share.
It’s not too late for some to make the most of any embedded value to get fit for the new world order.
Time is fast running out.
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