January 2, 2020

2019 Spotlight on the Insurance Market

Choosing the best stories for a 2019 spotlight on the insurance market has not been easy. Each month threw up multiple global news items coupled with examples of new technology applications from across the insurance market. These articles not only interested and excited, they undoubtedly sometimes worried those in the insurance industry. Above all however, 2019 was a year when insurance became newsworthy.

So which stories to pick?

Well, key themes from the insurance market have inspired my choices. Namely collaboration; new insurance business models, regulation, mergers and acquisitions, insurtech and risk. I hope you enjoy this reminder of the stories that hit the headlines in 2019.

Collaboration

This really has been the story of the year. Wind the clock back to 2016 and PWC released research that indicated 90% of Insurers feared they would lose business to a start-up. Fast forward to the present day for a c-change in how the ‘new kids’ on the insurance block are viewed. 2019 was the year when Insurers moved from fearing the insurtech market, to embracing opportunities to collaborate. Research from Capgenini provided the proof in their report Insurance/insurtech partnerships on the rise.

Insurance business Magazine ended the year with this insightful quote on the subject of collaboration, “Both parties need to remember that a true spirit of collaboration will yield the best results – using expertise from both insurer and start-up to truly innovate.” There are also a couple of great examples in their article Insurtechs on personalisation in the insurance sector 

A few other examples of collaboration:

  • Allianz: Allianz partnered with legal service provider Keogh on an automated end-to-end digital hub for Stage 3 injury claims. The Defendant Hub is estimated to cut the time it takes to handle a claim by half an hour. In addition, Allianz  also formed a new partnership with Dinghy, an insurtech that provides insurance to the freelance work force. Nick Hobbs the Director of Broker Markets at Allianz said “With insure-as-you-work solutions expected to become more prevalent, partnering with Dinghy represents a great opportunity for Allianz.”
  • Swiss Re: Swiss Re and Pioneer have collaborated to develop a telematics solution that will be integrated into the Swiss Re telematics App, Colodide The solution was described as a ‘first of its kind’ in the article Swiss Re and Pioneer to launch innovative telematics solution for insurers.
  • RSA Ireland: RSA Ireland has adopted the BAE Systems NetReveal counter-fraud technology.
  • Halifax Home Insurance: Lloyds Banking Group partnered with Trov to launch a renters programme. The Lloyds Group also use Trov’s back office suite. Commenting on this launch, Jeremy Ward, Head of Home Insurance for Lloyds Banking Group said “Working with Trov, we’re taking the hassle out of home insurance for renters, giving them peace of mind that their belongings are covered should the worst happen.”

New insurance business models

Identifying insurance business models that work well for digital consumers was equally important to the market in 2019. According to research by Accenture, customers value integrated propositions and tailored offerings. Their 2019 Global Financial Services Consumer Study revealed that 3 in 4 consumers would share their data in return for personalized services. We explored personalised service models alongside ‘prevention’ models in our blog, The Insurance Business Model needs fixing. Both models gained traction in 2019.

Examples of changing insurance models

  • Aviva: The year started with this insurance giant throwing down the gauntlet of a service model with the launch of Aviva Plus, a ‘subscription-style insurance product’. Initially it was offered to home and motor insurance customers, with a plan to extend the level of products included. In the first place it was designed to make it easy for customers to change their cover as often as they want, without charges.
  • Axa XL: Axa XL started unifying Axa Corporate Solutions, Axa Matrix, Axa Art and XL Catlin into a single entity. The unified organisational structure is a move towards delivering their vision of ‘insurance as a service’. The Axa XL CEO said “This proposed target operating model and organisational structure will help us to deliver the best services to our customers and provide them with the innovative solutions they need to succeed.”
  • Direct Line: The team at Direct Line identified they need to react quickly to changes in the market to maintain their delivery of products and services their customers want. Their response was to invest in technology to enable them to rise to this challenge. This headline says it all, Direct Line builds an Insurtech it can tweak a thousand times a day.
  • Lloyds of London. : In a 2019 Press Release, Lloyds unveiled a new strategy  “that could shape the future of the worlds (re) insurance market.” The new ideas outlined include a platform for complex risk and Lloyd’s Risk Exchange for less complex risks. Together with a next generation claims service, Lloyds also detailed a Syndicate-in-a-Box.
  • HSBC launch Select and Cover: HSBC created a big industry buzz as they launched an insurance by subscription product. Reginald Warlop, their Global Head of Wealth and Insurance, said this product is in direct response to increased demand for flexibility and personalisation.

Regulation

A 2019 retrospective would not be complete without mention of regulation. The Association of British Insurers (ABI) issued a paper identifying the Trends facing Insurers towards 2020. Regulation was one of the key themes of the paper, with this conclusion: “Regulation will form an even bigger and more complex part of insurers’ operations than at present, with the potential to redefine not just operational norms but available markets and customer liabilities.” In the same vein, research from Allianz revealed Regulation poses the biggest risk to UK SMEs.

Dual Pricing is arguably the biggest single issue on the regulatory horizon as we approach the New Year (ignoring Brexit!). The FCA published an interim report following their review on the General Insurance pricing practices. In summary, they found that competition “is not working well for all consumers”. The final report is due for publication in Q1 2020. Watch this space.

Mergers & Acquisitions

According to an article from The Actuary, Insurance M & A Activity hit a four year high during 2019. Quoting a report from the law firm Clyde & Co, there were 222 M&A deals in the first half of the year. In the light of the sheer volume, it would take too long to list them all, so here are a couple of notable examples:

Examples of M & A Activity

  • Allianz: This insurer was the giant of acquisitions in 2019. The headline, L & G sell their insurance arm to Allianz for £242 million announced one of their two massive purchases. The other concerned LV=GI, an equally well known brand in the UK. LV= revealed that Allianz had become the 100% owner of LV=GI in this 2019 press release.
  • Arch Insurance Group of companies: The Arch Group were also active in 2019. They had completed the acquisition of The Ardonagh Group’s UK commercial lines business and part of its Geo Underwriting operating segment back in January and continued their acquisition spree in the UK adding both Axiom Underwriting and Obelisk Underwriting to the group.They also invested in  Archipeligo, a tech driven personal lines Managing General Agent (MGA). Finally, Arch Group ended the year  with the announcement that Arch Capital Group finalises acquisition of Barbican Group Holdings. 
  • PIB: PIB is another company on the serial acquisition trail. They started the year with their 19th acquisition with the purchase of Optis Insurances Limited (‘Optis’), a Managing General Agent based in Ireland servicing the Irish SME sector. They finished the year on a similar note adding Cooper Solutions to their stable. In between, PIB also added  the COBRA Group of companies, CMR Solutions and Sue Smith to their Group.
  • Lloyds: In an interesting move, Lloyds invested in one of the participants of the first cohort of the Lloyds Lab: This investment in the US based start-up Layr underlines Lloyds commitment to their new digital strategy (outlined above). Layr is a cloud based commercial insurance platform for the small business market. It reportedly uses a “proprietary price and appetite prediction engine to match business with the right policies from the right carrier at the right price…”

Insurtech

In 2019, there have arguably been more written about insurtech than any other area of the insurance market. It would be impossible to cover all the exciting possibilities offered by the multiple applications of new technologies for insurance. We have however covered a few under the ‘collaboration’ section. In addition, each of our published monthly insights shines a spotlight on the latest insurtech headlines. However, for this edition we thought it would be useful to look at just two articles. Firstly, a glimpse of the future with a prediction piece. Think Advisor ended last year with 4 Insurtech Trends to watch in 2020. The article concluded that a focus on people will become the most important trend of the coming year. Secondly, as a reminder of the diversity of this sector, here are the top ten insurtech Companies according to FinTech magazine:

Top 10 Insurtech companies

In the first place, these were picked for their potential to “influence, change and even disrupt the global insurance market in the future”:

  • Zhong An – Marketed as “China’s first complete online insurance company”. Although this heads the FinTech list, the drop in share price underlines the challenge for new start-ups to break into profit
  • Acko General Insurance – A digital insurance firm based in India
  • Oscar Health – This American firm aims to be a health insurance company centred around the patient
  • Lemonade Although founded in 2015 and so now relatively mature, this company still keeps making these lists. The company uses artificial intelligence and chatbots to deliver insurance policies and handle claims for its users on desktop and mobile.
  • Shift Technology – A Parisian based company that offers a Software-as-a-Service (SaaS) solution to detect fraud
  • Neos – A UK based firm specialising in home insurance and smart technology. This listing came alongside news that Neos aims to conquer the US by a partnership with American Family Insurance.
  • Trov – An on-demand insurance platform
  • Slice – Provides pay-per-use insurance with offices in the US and London
  • Quantemplate – A London based firm that offers machine learning, data transformation and analytics solutions to the insurance industry
  • BIMA – This Swedish based company aims to promote financial inclusion by offering insurance and mobile health services to low-income families

Insurance Risks

No insurance market review would be complete without a look at risk. After all, insurance is all about protection against potential risk. In 2019, Allianz released their eighth Global Risk Barometer. Cyber incidents were neck-and-neck with Business interruption as top business risks globally. However, climate change was one of the biggest climbers. In the light of the current news of record breaking high temperatures and terrifying bush fires in Australia, this is a trend certain to continue.

So, that’s a wrap for the 2019 retrospective. Not only were there some interesting developments, we also witnessed some brave innovations. Now we get to do it all again. So here’s to a positive and exciting 2020.