At the end of a challenging year that included the FCA test case, the switch to remote working and ongoing problems in classes such as professional indemnity, all against the backdrop of the Covid-19 pandemic, Insurance Times asks the industry what obstacles and opportunities they foresee for the year ahead
Tara Waite, chief executive, Premium Credit
The future is bright for businesses who continue to put customers first. One real opportunity we see for workplaces and working patterns as a result of COVID, is the further enhancement of customer journeys. The move ‘home’ emphasised the importance of simplicity and continuity of service coupled with a strong relationship model. We see advantage in the continued digitisation and automation work we have been doing to remove friction. Having replaced our core platforms and interfaces over the past few years we are focussed on the real value enablers for our partners and their customers.
The evolving regulatory landscape will be an area that raises some challenge. Protecting customers continues to be very high on the FCA’s agenda, especially during these unprecedented times. We will continue to work with the regulator as they shape new guidance to safeguard customers in areas such as assessment of affordability and forbearance.
The whole insurance industry can expect the regulator to continue in this direction well into 2021. This also presents an opportunity. Businesses that offer their own premium finance will recognise the impact of changing multiple systems to meet strict regulatory requirements, and may look to partner with someone whose core business is the compliant and efficient processing of premium finance.
Despite covid and Brexit uncertainty, those who keep their customers front of mind will thrive.
Simon McGinn, general manager, commercial and personal, Allianz
Economic uncertainty and operational adaptations stemming from Covid-19 and Brexit will continue to dominate well into the new year.
Alongside this the commercial lines market is under pressure.
We’ll face challenges as we seek to support business that are highly challenged and adapting, whilst also needing to address the upward trend in recessionary impacts that can be expected such as business failures and claims increases from fires or theft.
However, 2020 has proved the resilience of the industry and demonstrated the versatility of our people and technology.
We’ll continue to work hard to maintain our strong relationships with brokers as we will need to work together to navigate a hardening market whilst identifying new business models and new opportunities for business growth.
It’s also a moment for the industry, government and general population to look to the future and think seriously about future risks such as climate change as well as how we work together to support economic recovery.
How can we start preparing for a future with even more uncertainty?
What role do insurers have in that world? There are real opportunities for insurers and brokers to educate customers and policymakers and to examine products to make sure we’re all fit for the future.
Andrew Yeoman, chief executive, Concirrus
Although Covid-19 impacted our analogue market, the digital version of the insurance market is just getting started as we enter a decade long investment cycle in data and analytics. Even Lloyd’s, a last bastion of face-to-face is embracing this digital future in its latest Blueprint.
However, the true test of this investment won’t be the technology, but the business models that it enables.
We are witnessing the birth of algorithmic powered insurance and much of what has happened to the trading of equities in the financial markets will surely come to the insurance market.
2020 was the ‘end of the beginning’ of this digital cycle - kick started in a way that we could never have planned or imagined - the whole industry turning to remote working.
This has given rise to a more hybrid approach where digital technologies and new operating models are being embraced.
The challenge for 2021 will be centred on the incumbent players and how they respond and adapt. Or will they cede the opportunity, igniting a new breed of technology-driven market entrants.
Andy Rigby, head of technical underwriting, Markerstudy
2021 is shaping up to be one of the most dynamic and unusual years in the history of modern insurance.
With the ongoing effects of Covid-19, the possibility of a recession and large-scale customer behaviour changes across all product verticals, a lot of knowledge and common sense from previous years will no longer be applicable.
The move to increased remote and home working is likely to drastically alter the appetite for different insurance products, for instance potentially lower mileages owing to less commuting, but perhaps an increase in delivery work?
Even within the same product many core customer behaviours will continue to change as a result of more flexible working arrangements. Will we still experience the same spikes in claims calls each Monday?
Looking to pricing and underwriting, we can see a trend where the industry has spent the past 10 to 20 years building ever more complex predictive models.
Not only are we now entering a space where models built on historical data may no longer accurately predict the “new normal”, but we are also trying to adapt to this at the same time as managing the dramatically new pricing regulations from the FCA.
Described like this, it might sound like 2021 has all the hallmarks of being an incredibly challenging year. In part we expect this to be true, but it is also likely to be a year of unparalleled opportunity.gile
After many years of talking about the promise of machine learning, 2020 feels like the first year when the wider market has started to really derive advantage from these methods.
Similarly, while the changes above will create challenge for some in the market, we expect that they will also provide significant opportunities for more nimble and agile competitors. It should be an exciting year.
Ant Middle, chief executive, Ageas
Companies that have demonstrated their support for customers and wider society during the last year may find more opportunities than their competitors in 2021.
Research is increasingly pointing towards ethical firms coming out on top when it comes to attracting customers and talent.
According to Deloitte, 70% of millennials studied listed their company’s commitment to the community as an influence on their decision to work there, while other research found nearly two-thirds of young people won’t take a job at a company with poor CSR practices.
With this in mind, companies that have excelled in supporting others may find themselves victors in the talent tussle of 2021.
They may also find themselves winning more customers too. Similar research has shown customers prefer buying from brands with strong social values.
Ashwin Mistry, chairman, Brokerbility
The list of challenges is multiple, and my position is very clear. Nobody owes you a living
Against that backdrop, I would rather focus on the opportunities starting with the plain fact that we are all in the same position and it’s your ability to work out a road map which will lead to not only survival, but actually thrive.
Insurance brokers by their very nature are entrepreneurial, fast thinking and if they are tuned into customer behaviour, they will quickly work out practical solutions.
The customer of today (irrespective of size) has access to information, has multiple choices and has become adept at navigating the Internet as never seen before.
They are quick learners and equally are going to be cautious with their cash.
Their thirst for knowledge is obvious and with time on their hands (not travelling as much or at all) they will trawl for the best options.
The insurance sector is suffering from reputational damage but is in fact a necessary evil. Most people and especially Businesses want the ability to transfer risk, for a price. The price has to be right.
There are so many opportunities like, cyber, directors & officers (D&O), employment practices liability etc whereby simple understandable examples will attract attention. The right level of risk management advice delivered in a fashion suitable to potential clients will win the day.
The client of today is now used to self-serve and so do using technology as an enabler will also appeal to the masses.
We have focused a lot on investing in the right areas of our business composition, invested heavily on staff capabilities, all of which are paying dividends. We will continue to innovate, remain relevant and prove business resilience is not luck.
Steve White, chief executive, British Insurance Brokers’ Association (Biba)
The pandemic, PI renewals and market capacity are ongoing challenges on which we will be concentrating to give guidance for members.
Our final exit from Europe will mean changes to the way some clients’ insurances are managed if they are located in or have risks in the European Union.
However, with so much uncertainty around the economic position and the employment market, there is an opportunity for brokers to do what they do best and help customers through these unprecedented times.
As businesses and consumers are changing and adapting to the ‘new normal’, brokers are in prime position to help guide and advise them and demonstrate the value that they can provide.
We have already seen many examples of brokers helping clients to adapt their business models as a direct result of the pandemic and this is the resilience that I’m sure will continue.
Our sector has demonstrated great resolve in living up to the challenge of continuing in the face of adversity but it also has, and I’m sure will continue to, move forward with the opportunities that fast evolving technology presents and will provide innovations to help clients and support them as we continue through into 2021.
Bill Pieroni, president and chief executive, ACORD
The insurance industry has been approaching a critical inflection point in recent years. The challenges and opportunities facing us in 2021 are much the same as they have been—but now accelerated, and finally impossible to ignore. Put simply: the digitisation imperative.
ACORD conducts annual digital maturity assessments of the global industry. In 2020, we found that fewer than 30% of the largest insurers worldwide have truly digitised the value chain.
Those in the top tiers of digital maturity outperformed their competitors across every significant financial metric, not only surviving but thriving and gaining profitable share at the expense of laggards. More troubling is that year after year, the gap between the “digital competitors” and “digital laggards” continues to grow.
The global pandemic made digital channels—from remote work to online stakeholder engagement—suddenly not just an option, but a requirement.
Unfortunately, the technical deficit incurred by those who have systematically underinvested in technological renewal is extremely difficult to overcome in the short term.
However, no industry is better equipped than ours to quickly identify, understand, and mitigate risk. Now that it is impossible to dismiss the risk of technical deficit, and the benefits of digital maturity, insurers will increasingly embrace digitization across the enterprise.
Chris Hall, managing director, QuestGates
The biggest positive to take from the past twelve months is how our industry has accelerated its use of technology to facilitate home based working without any detrimental impact on our customers.
When it comes to claims, we’ve used it to triage cases, identify the vulnerable and ensure they are prioritised, manage workflows and supply chains. We’ve settled claims more quickly and reduced costs while at the same time improving staff productivity and customer service.
We have a huge opportunity to continue along this path in 2021 – however, if we forget the human contact that is essential in the management of any claim, then we’re treading on thin ice.
We cannot ditch face to face contact altogether – a machine simply cannot replicate the human empathy that’s required, particularly in severe claims like a fire or flood.
It’s equally true when it comes to our own people.
For me the biggest challenge next year is going to be getting on top of remote working – the novelty is starting to wear off for many and their wellbeing is suffering.
It’s going to take some effort for every business to find a way to maintain their culture and nurture both the careers and mental health of their people. I’m not sure anyone has the answer just yet.
Adrian Saunders, commercial director, Ecclesiastical Insurance
2021 will likely see a further hardening of the market as we move into a period of rising insurance rates combined with increased business risks.
We’ve experienced one of the longest soft markets in memory and the transition to a harder market has been accelerated by the impact of Covid-19.
The impact on the global economy has not only seen claim costs increase and investment losses, but we also predict gross written premium and commission income will be hit hard due to the pressure on clients’ trading results.
On the flip side, there is the potential for pent up demand from clients who have deferred insurance reviews into 2021, creating increased new business opportunities.
Many of our colleagues have never experienced a hard market so a key challenge for insurers and brokers alike is helping their teams understand and adjust to the current market conditions, increasing the importance of timely renewal discussions and lead time to new business, setting realistic expectations.
Going into 2021, a big opportunity for many firms is accepting and adopting digital platforms as the norm and not just a fix for now. Covid-19 has changed the way we all live and work presenting a great opportunity to adapt effectively to this new way of working.
Getting this right will improve collaboration, reduce travel costs and time, and enable brokers and insurers to engage with a wider and more diverse audience.
Alongside this, firms also need to recognise the long-term risks to the workforce of remote working, ensuring they are creating a supportive environment that promotes positive mental wellbeing.
This was a key issue that emerged from our recent broker roundtables and will be a continuing challenge for us all in 2021.
Rodney Bonnard, UK Head of Insurance, EY
There will be opportunities ahead, but insurers are facing a number of big challenges next year. The Covid-19 pandemic, and resultant recession, will continue to have a major impact on the sector as claims relating to event and travel cancellations and business interruption rise, not least now we’ve entered a second national lockdown.
The FCA’s pricing review – which landed this September - will have a cost implication for the sector as it will see many insurers having to overhaul their business and pricing models and could potentially act as a catalyst for M&A.
Although, this should also be viewed as an opportunity to build better engagement and more longer-term relationships with their customers, who are set to benefit in the long term.
Overall, however, the persistent ultra-low interest rate environment will put pressure on profitability, as will the prospect of flat or declining premium prices, and one of the biggest concerns for insurers over the next 12 months will be identifying where growth will come from.
However, there will be some opportunities that firms should look to capitalise on. Progress in digital adoption was accelerated during the first lockdown with the move to mass remote working, and firms should use this momentum to further adapt their business models to the digital agenda.
Simon Collings, managing director of national broking & placement, Gallagher
There are a myriad of challenges facing Retail brokers in 2021. One of the biggest is the continuing reduction in insurers appetites for certain lines of business. Classes that are particularly tough include property, professional indemnity and D&O where insurers are looking to de-risk their portfolios.
Lockdown fatigue’ is also an increasing issue.Relationships plays a big part in our industry and without the levels of interaction that brokers and underwriters are used to, coupled with the challenges we are seeing in capacity, it’s getting harder to get risks placed and we are seeing more risks being referred for central approval.
To help counteract this we are starting the renewal process earlier so we can iron out any issues well in advance and are striving to provide a more complete and extensive level of information.
Conversely, and connected to both of the challenges outlined, I think the talent and skills in the industry will really come to the fore in 2021.
In the current market conditions, to get programmes completed, we need real underwriting technical expertise and experienced brokers who will work hand-in-hand to get clients cover.
Keith Stonell, managing director, EMEA, Guidewire Software
Even before the rigours of 2020, insurers were already integrating public, hybrid and private cloud into their operations to lift and shift legacy applications.
The next step for insurers is consolidating this progress by adopting cloud native technologies and core platforms. This goes beyond being a means to running core business processes.
Those insurers that integrate with digital interfaces, take advantage of analytics capabilities, and integrate data from any source, will accelerate their innovation, ensure technical currency, and deliver products and services that satisfy, or even exceed, customer expectations.
Our recent Love, Hate, Indifferent report showed that 73% of consumers rated insuring their digital identity as a top priority following the onset of the pandemic, likely spurred by the increase in fraud and cybercrime.
With cryptocurrencies increasing in value amidst economic uncertainty, activity such as cryptojacking and ransomware is also likely to rise in 2021. Insurers must make cover available for potential damage to servers and critical systems as well as the risk of wider losses from data breaches.
2021 is likely to see more atypical insurance providers infringe more aggressively on the market. The FCA ruling to prevent preferential pricing levels the playing field for new entrants, and retailers such as Ikea and John Lewis have made significant strides in this regard. Where business will be won and lost is on customer service and brand perception, with insurers having to demonstrate their human qualities and their understanding of pressing societal issues.
Remote working is undoubtedly here to stay, regardless of the pandemic. For insurers, the challenge is whether they can make it work for everyone in their organisation.
My experience with my own broker highlighted to me how many in the industry are working in less than ideal circumstances. Insurers cannot abandon the office yet and they must invest in a combination of technology and resources to ensure staff feel supported as part of a hybrid workforce.
James York, deputy chair, Insurtech UK
2021 should be a hugely promising year for the UK insurtech sector. 2020 brought the biggest challenge facing businesses and the economy in a generation, but insurtech proved its resilience. It has emerged from the pandemic in a good position to support the wider economic recovery and help drive technology innovation.
There are several things which could work in the sector’s favour next year. The FCA’s general pricing measures could disrupt the power that aggregators have over the insurance market and might lead to consumers looking for alternative insurance solutions. Additionally, we are hoping to see more insurtech businesses scale, perhaps even seeing the first UK insurtech unicorn. Greater governmental awareness and support for the sector will really help maintain this momentum.
However, the year will no doubt come with potential challenges.
The impact of Covid-19 on long-term investment into the sector is unclear, and it remains to be seen whether the pandemic becomes the true catalyst for more wide scale digital transformation within insurance - we must prevent indecision hampering the progress.
Overall, I am positive for what 2021 brings; there will be bumps on the road but the sector must capitalise on the opportunity to drive more wide scale change within our sector.
Mike Crane, managing director, LV= Broker and chief executive, Legal and General, GI.
The simple question of looking ahead to next year can present quite a challenge when you consider how 2020 turned out, but I think there are some key areas of focus and clear opportunities to grasp.
In the personal lines sector the year ahead is likely to be dominated by the FCA Market Study and the impacts for insurers and brokers will be significant.
A recent broker poll found that there was overwhelming sentiment that the changes will be positive overall – but there is also recognition that the transition will not be without its challenges.
Looking to LV= Broker, our strong focus through 2021 is on successfully bringing together the L&G and LV= business and strengthening our proposition for brokers.
As we continue to adapt our ways of working it’s also important that we maintain the level of support we’ve given our colleagues and brokers throughout the year.
We have learnt a lot about what can be possible and will continue to improve how things can be done remotely whilst dreaming of the days ahead when we may be able to meet again, not only face-to-face but maybe even in groups of more than two.
Alistair Fraser, chief executive, UK corporate, Marsh
This year has undoubtedly been one of the most significant for the insurance industry. Everything from operations to culture has had to be put on trial and tested for relevancy. We are in a period in which failing to implement changes would be a missed opportunity.
The pandemic has thrown up a range of challenges and changes for most UK businesses.
While the insurance industry has needed to adjust rapidly as well, we also have the opportunity and a responsibility as an industry to step up, support and help our clients come through the other side.
With many of our clients having to change their business models, becoming more agile and digitally driven, we have a duty to adapt and innovate in order to meet the needs of their changing risk profiles. We must also ensure that we encourage and support the entrepreneurial spirit the pandemic has spurred across the globe.
Over the next year, there will be a chance to strengthen our relationships in new ways, not only with our clients and colleagues but also with the market. Brokers must continue to champion those they serve and remain committed to constructive dialogue with insurers. There will be hurdles such as a heightened and more complex global risk landscape, but we are working towards an environment of more diverse workforces where we can develop new skills to deliver even more value for clients. This is something we can, and should, embrace.
Guy Goldstein, chief executive and co-founder, Next Insurance
Despite the economic uncertainty brought on by the pandemic, insurtech players like Next Insurance, along with Lemonade, Hippo and Root, have all had a banner year of growth, significant investments and notable milestones (IPOs).
In 2021, I predict we’ll see an equal rate of growth at the same pace, but on a much larger scale. Therefore, it will be key for insurtech companies to master the delicate balance of operating businesses at this new accelerated level while mastering the art of scaling.
It’s easier to grow revenue figures from $10M (£8.35m) to $20M (£16.70) versus from $200M (£167m) to $400M (£334m) or foster a tight company culture with five employees versus 500.
Scaling business growth to meet increased customer demands, recruiting needs, investor expectations and delivering a high-impact company culture, all during a remote work environment, is a balancing act and will be an ongoing challenge in the new year.
There are two aspects that I think will lend to the success of scaling in 2021 – leveraging the technologies necessary to increase and ensure positive digital and online experiences. As well as prioritizing a chief executive’s role in maintaining a strong and highly productive company culture.
Paul White, chief executive, Sedgwick International UK
2020 showed the importance of being agile and this trait will continue into 2021. Quickly responding to a changing environment and providing flexible solutions to support clients is essential as we continue to live with coronavirus.
Digital products which allow us to automate the claims journey end-to-end have been introduced this year and provides a great opportunity to bring customer-centric innovation to the claims process. Our digital capability means we’re currently processing a significant number of business interruption claims, and we very much expect this to continue into 2021, whatever the outcome of the judgment.
Living through a pandemic has meant that mental health awareness has increased which is one positive to take from this. Supporting vulnerable customers has been a significant area of focus for Sedgwick this year.
We’ve been working with Behavioural Scientists to adapt our communications and processes, as well as training colleagues to spot the signs of vulnerable customers so that we’re in a strong position for 2021.
Our focus on mental health also extends to colleagues. We’re increasing awareness training and continuing our mental health first aiders and wellness action programme.
Peter Blanc, group chief executive, Aston Lark
As I write this towards the end of October we seem to be on the cusp of further lockdowns - if that happens then getting a haircut will shoot straight up the priority list.
Seriously though, it’s hard to look past covid as it overshadows all of our lives, both personally and professionally.
The challenges will be helping clients navigate a hard insurance market whilst many are struggling financially as a result of lockdowns, recruiting and training the next generation of Aston Lark staff using remote working tools such as Zoom and Teams, making sure that we complete the deals that need to be completed before the next budget in April – there are quite a few and helping our staff to get the best outcomes for clients during these challenging times.
Meanwhile, the opportunities on the other hand are plentiful, including:
- Winning more than our fair share of new business by having the right facilities in place at the right time - D&O, PI and property are all vitally important right now
- Helping our staff to develop the holistic mindset to ensure that we’re doing everything we can for our clients across commercial, personal and employee benefits insurances
- Developing our London market placement skills using our new acquisitions to help our retail business to win more clients
- Using the experience of home working in the pandemic to create whole new structures of work throughout the business - creating true flexible working propositions for our staff where appropriate
- Improving our client service using Zoom and Teams to make us more accessible, whilst also being more efficient with our time. Face-to-face is still vital, but many clients are very keen on the Zoom alternative
- Finding further brokers keen to join the growing Aston Lark family. We have a unique approach centred around clients and staff and would love to hear from like-minded brokers looking for their succession solution.
Peter Gregory, director of broking, SSP
The uncertainty we’ve all felt since March has already started to create opportunities and will continue to do so even more rapidly into 2021. Digital strategies will need fast tracking to align with new buying habits, and insurers and brokers will have to quickly alter the ways they interact with customers to facilitate an on-demand style of service.
The pandemic has led to a re-evaluation of spending with many deciding to cough up a little more for tailored and relevant products. This is a real opportunity to change how pricing is done, aligning with new FCA regulations and the consumer expectation of fairness.
A large business shift may not need to happen here – a simple digital step change such as truly utilising data by using a tool to decipher and read it could be all that is required to open new demographics. Data is no longer a minefield; with savvy insight, it’s a perfect opportunity for growth and for people to set in motion how insurance will look for the next decade.
John Keppel, chief operating officer, Zurich Insurance UK
2021 will doubtless be another year of disruption. Why? I see the demand for new skillsets in insurance continuing - well beyond next year.
As an industry, we’re locked in a constant fight to stay ahead and evolve for the benefit of our customers – which is absolutely right. And add to this, the understandable desire to harness the best talent to try and fill the gaps opened by technological disruption.
Therefore, if a clear picture of the 2021 global landscape feels uncertain, then it is of paramount importance that our employees’ jobs are future proofed. Consequently, next year represents a clear opportunity, not a threat. We must use 2021 as the foundation to factor future skills requirements for the industry into all our processes.
In our case this is money can be diverted towards evolving our newly formed AI team, scaling our Automation and Data academies as well as launching new academies in DevOps, customer and innovation; and leadership.
Graham Wright, UK lead of P&C personal lines pricing, Willis Towers Watson
The FCA’s long-awaited final report into GI pricing practices has been published, and largely welcomed, however considerable uncertainty still surrounds its full implications. There also remains the potential for limited change and clarification following the consultation, with the final rules expected to come into effect by the end of 2021.
Alongside the proposed introduction of new product governance and pricing rules, that may require substantial development to comply with, there is also a substantial requirement around evidence and governance, such as enhanced customer value rules for all products, including additional products and premium finance. Everyone involved in the insurance distribution chain will want to consider whether they should contribute to the consultation.
As with any new regulation there will be winners and losers. Those insurance providers with lower cost, simpler businesses and strong brands have a greater chance of being amongst the winners and this change may present the opportunity to remove undesirable complexity.
This move by the FCA may also hint at the direction of travel in 2021 and beyond. Only time will tell whether the industry will continue under a relatively principles-based approach or if the FCA will put more, and possibly stricter, rules in place.
The Big Question January/February 2020: Will the LiP portal empower personal injury claimants?
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The Big Question December 2020: What challenges and opportunities do you expect for 2021?