One thing the London insurance market does not lack is enough events where those involved in the market get to meet up and hear from senior and knowledgeable market practitioners. It is always a good idea to take time out, look outwards, network, pick up new insights and ideas. As well as gaining insights from the events, it is also quite reassuring when the insights and messages serve to re-enforce a lot of what you kind of knew already.
What has the market been telling us at these events over the last 6 months?
Here is a snapshot picked up at some events from C-level executives at multinational insurers:
Climate change has meant a regular flow of natural catastrophes. Combined with man-made disasters, this has contributed to a £1bn market loss / 104.5% combined ratio in 2018.
Low rates now seem to be the new normal. The catastrophes have not had the anticipated upward impact on rates. Combined with low interest rates and alternative capital sources, the market has an abundance of capital that helps keeps competition for business high and supresses rates.
Changing demographics of an ageing population means that how customers are engaging with insurers and the products they want from insurers are changing.
Expense ratios are too high to be sustainably competitive in a global market. Ratios of 40% for Lloyd’s, 31% for global insurers and 27% for global reinsurers need to come down.
Market inefficiency is well-documented. The London Market Target Operating Model and the ideas outlined in the just-released “Future at Lloyd’s” strategy seek to address this area.
Consolidation is likely to continue through more M&A activity, as it increases the distribution capability, adds to portfolios and growth / market share in what has been a suppressed market.
Back to basics approach is being advocated – focus on the specialist underwriting capability that the market is known for and exercise caution in areas such as emerging markets.
Value-add services need to be enhanced to focus more on the customer and the customer experience. Improving the claims process and using data and analytics to take a customer-centric view are key areas.
New opportunities primarily in cyber, non-physical assets and government risk / debt. Cyber in particular comes with the challenge of assessing an ever-changing risk with limited data.
Technology / InsurTech offers potentially great opportunities. It will likely disrupt the insurance chain through use of big data, IoT, blockchain, AI, robotics. Insurance processes can be more automated, quick and lower cost.
As a long-standing provider of technology solutions to the London Market, Northdoor recognises all of these points from engagements and discussions with our clients. We can’t stop the tides, or turn back time, but we can help with the evaluation, architecture and adoption of technology solutions to drive efficiencies, better customer experience, competitive differentiation and growth.