In today’s climate, it would no doubt be fashionable to say there is more that unites the motor insurance industry that divides it. But a few soundbites from the Motor Insurance Summit 2017 held at the Waldorf Hotel in London revealed an industry at a crossroads. One after another, leading lights from across the sector went on stage to deliver messages that will have assuaged and alarmed attendees in equal measure.
While most agree that things were changing around them, there was significant discord on how the industry should respond, if it already was responding and, when would be too late if it wasn’t.
“Frequency of claims will fall and then collapse and I don’t think my grandchildren will ever drive a car,” said David Steens, CEO of Admiral. “Ultimately, we are all doomed to go the way of the dinosaur and the dodo.” But don’t worry, he added, most in the room would be enjoying their retirement before that happened.
He added that despite the £1.7b invested in InsurTech last year alone, the technology they were developing was interesting but largely ‘internalised.” In fact, he said the insurance industry had repeatedly shown itself to be able to evolve with the times and the picture of a sector being left behind by technology was a world he didn’t recognise. “It’s not right to say this is an industry fundamentally in need of a fix. People overstate the importance of cost and overstate the extent to which the industry doesn’t meet customer needs.”
In terms of the impact of autonomous cars, which many believe spells disaster for insurers, David Stevens’ long-term forecast was backed up by Ian Currie, UK motor and injury claims director at RSA, who said that, because of challenges surrounding ethics and etiquette, “We’re at least 25 years away from being able to sit in our cars and be driven around by a driverless car, and everyone else being in the same situation.” Taken in isolation, these comments would have sent attendees back to the office feeling a little more hopeful.
However, there were plenty of counter-arguments which would have set alarm bells ringing again. Colin Holmes, CEO of Aviva, said, “The world is changing quickly. The pace of change has multiplied significantly the last five years and what would have previously taken 20 years is now happening in a quarter. Whatever is coming is going to develop quicker than any of us think.”
He added, “Autonomous cars are a reality, and artificial Intelligence is a real game-changer that will make call centres a thing of the past. This is not tomorrow’s world. This is today’s world.”
Steve Treloar, MD general insurance, LV=, was also more concerned than some of his peers about the immediate future for insurers, accusing the industry of being inward-looking and inflexible and saying that simply being aware of outside issues is not enough anymore. He warned, “Some of the things that are going to come along and change our world are hiding in plain sight and are right in front of us. Unless we respond as an industry and unless you respond as companies, you wil not be here. It is that fundamental.
“Maybe we’re not as open enough to the things going on around us as we need to be. How much are we actually doing about the things coming along? We know we need to be aware, but how many times does being aware become something we actively do something about? My concern is we don’t act soon enough. “If we want to be here in 15 years we need new skills, new capabilities, a huge focus on the customer and, ultimately I’d suggest, a little bit of luck.”
Unlike David Stevens, he saw warning signs and potential disruptors everywhere. He said that while some insurers may view rising premiums as a good thing, all it did was make them more attractive to innovators and less attractive to customers, a very dangerous combination. He described as ‘absolutely relevant’ the solutions offered by the likes of Lemonade (technology led insurance), Guevara (peer-to-peer insurance) and Cuvva (time-based insurance), and wondered how insurers would survive if the likes of Amazon and Google suddenly decided to join the insurance game. Steve said, “There are some huge, seismic changes in front of us today and we need to respond to them. As leader of LV=, I can’t afford to discount them.”
One of those disruptors to the market, Pukka, articulated the mindset of the ‘new’ insurer with a presentation that was as far away from the traditional insurance world of infographics and pie charts as it’s possible to get. Instead, CEO Sam White got her message across with an information video of children discussing how they saw the future of the industry.
She said, “When I came into insurance I was frustrated by how rigid it was. It’s very difficult to introduce new products that our customers actually want. I was told customers didn’t want to share data, I think we’ve missed a trick. We don’t understand how the world is viewed by the next generation.”
She pointed to a survey that found 75% of respondents didn’t care about owning a car, 92% were happy to share data anonymously and only 4% of new car buyers purchased insurance at the same time. “I love the insurance industry, but we have to be careful because if we don’t provide the products our customers want, someone else will.”
Her message backed up the comments made by Colm earlier in the day, who said, “Digital is less about technology and more about customers. Customers want simplicity and transparency. We think the companies that will win in the future will be those that put the customer at the centre of what it does. Playing on people’s fear is yesterday’s game. Now they want to know how we’re going to reward them. Making it simple and transparent is how you’re going to win.”
The Internet of Things (IoT) is a perfect example. Not strictly the domain of a motor insurer? That old-fashioned opinion was emphatically consigned to the history books by Matthew Thomas, strategy and planning, Ageas, who identified three options going forward – one where insurers were at the centre, one where they were on the periphery, and a third where insurers were nowhere to be seen.
He described the scenario in which his fridge ordered milk for him before he went to work. On his way to work in a car he didn’t own got a message saying his shower was leaking, but the water had been turned off and a plumber notified. On his way home from work he decided ot have a drink with a friend. His watch told his home, which delayed turning the oven and heating on, while a message was automatically sent to his wife inviting her to join him.
Matthew said, “We need to redefine what we actually do. We think we have a competitive advantage by holding onto customer data, but that doesn’t help them. We need to share data to make their lives easier. That’s what they want. The LoT isn’t about being indulgent and playing with tech. It’s about delivering better choice, more security, and greater access to services.
“It’s an opportunity to wake up and smell the coffee, and realise there’s actually a customer out there who might have slightly different needs to the products we’re so convinced are the right ones.”