What’s next for the UK insurance industry

Change. The market knows it is happening at an unprecedented rate and that more is to come. It has to respond but is it equipped to meet the challenges and exploit the opportunities that will open up?

The UK insurance market has spoken: it is confident and well-placed to thrive amid the global tide of technological and economic disruption.

But another UK insurance market has also spoken: this one has severe doubts about its efficiency, its diversity, and its cultural and technological fitness to face the future.

DWF is delighted to bring you our future of insurance report, highlighting the results from our survey of insurance executives. Join us as we look into what the market is focusing on right now and scan the horizon to see what the market expects to be its focus in five years' time.

Our aim in commissioning the survey was to gain a clearer view of how insurance market participants envisage the evolution of their marketplace. The report reveals strongly held and clearly articulated views, but also apparently irreconcilable differences and some perplexing inconsistencies with widely reported trends.

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34% respondents regard their culture and resistance to change as the number one obstacle to achieving their strategic goals.
61% who cite culture and resistance to change as one of their main barriers, believe they can overcome this by increasing the diversity of their workforce.
"Firms show a strong appetite for greater government lobbying, especially in order to manage the costs and claims exposures from legal and regulatory change."

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1.

Culture: The road to renewal

The greatest threat to insurance firms as they embark on the transformational journey they know they must take is their own culture.

"The Insurance Industry has to address the fears that lack of diversity is holding the industry back and denying the energy and creativity it needs to meet future challenges"

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34% cite the culture and mindset of the organisation and resistance to change as the top barrier to achieving strategic objectives

2.

Distribution and causes for concern

The focus of concern on the costs of distribution is evenly spread across the market with brokers very aware of the need to control them.

"It is not clear if anyone inside or outside the market has been able to determine how the various forces in play relate to the high and rising cost of distribution."

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57% of respondents view increasing the chargeable value of existing services to other market participants as the principal strategic priority

3.

The tech conundrum

The potential inconsistencies, if not conflicts, between respondents' perceptions of the risks and opportunities in technological change give the impression of a lack of clarity for the market as a whole around the current and planned investments in different technologies.

"Alongside customer apps, the big opportunities are expected to emerge through a greater use of the Internet of Things, Artificial Intelligence and big data."

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62% of those surveyed think there will be more employees in specific areas or types of business in the insurance market in five years' time

4.

The regulatory challenge

One of the greatest threats that insurance executives see to their careers in five years’ time will be personal regulatory sanction in respect of their firm’s compliance breaches, although the threats of redundancy or consequences of poor financial performance are also significant concerns.

“ Firms show a strong appetite for greater government lobbying, especially in order to manage the costs and claims exposures from legal and regulatory change.”

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61% of the insurance market sees changing the claims landscape as a way a firm's claims service strategy will change

5.

The brokers' perspective

The brokers perspective

On many issues, brokers seem to take a different view of the future of the industry.

“While every sector takes a predictably optimistic view of its ability to exert influence over the others as the market changes in the next five years, brokers have the most robust view of their ability to influence change.”

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62% of brokers aim to overcome cultural challenges and resistance to change by partnering with other entities

6.

The end of the boom for MGAs

One of the key trends in the UK insurance market over the past decade has been the significant growth of the MGA sector. As the numbers have grown so has the range of risks they seek to intermediate. Could this boom be about to come to an end?

“The overwhelmingly number-one strategic priority for MGAs is reducing overheads. This is also a challenge other market participants are facing but to nowhere near the same extent as MGAs.”

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93% of MGAs say their number-one priority is reducing overheads

7.

Lloyd's: Specialism to the fore

Lloyd's: Specialisms to the fore

Lloyd’s managing agents take the view more strongly than insurance companies or brokers that intermediary remuneration and transactional transparency will be the biggest change in the insurance market over the next five years. As a sector dependent on the broker market, this has clear implications for their business model.

“Asked which out of a selection of product lines the London Market will be a global leader in five years from now, energy risks is the line most favoured by Lloyd’s managing agents.”

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62% of respondents say innovation and entrepreneurialism is what the London Market will be known for in five years' time

8.

Where customers fit in

‘The customer is king’ is an oft-quoted mantra of marketing gurus. In a subscription market with a complex supply chain, there is often a difference as to who is the customer of whom from commercial, legal and regulatory perspectives. Nevertheless, the ultimate policyholders must necessarily fit into the picture.

“It is the anticipated investment in technology that will empower consumers because it will give them greater control over their data. Wherever you look, data is a key battleground.”

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49% of respondents see more transparency about where gross premium is allocated as the key area where commercial policyholders will be more influential

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What's next for the UK insurance industry?

Report Highlights

Key Themes

1.

Culture: The road to renewal

2.

Distribution and causes for concern

3.

The tech conundrum

4.

The regulatory challenge

5.

The brokers perspective

6.

The end of the boom for MGAs

7.

Lloyd's: Specialisms to the fore

8.

Where customers fit in

Key statistics from report

Key contacts

Claire Bowler