We are only a few weeks into 2020 and it is already proving to be a disruptive year in terms of political change, Australian wildfires and impact of Brexit. Alex Barnes, BDO Insurance partner, looks at 5 insurance trends to watch in 2020.
Brexit – more certainty?
Boris Johnson’s recent election win has ended any potential for a further Brexit delay and has clarified that a deal will be in place in time for 31 January. If they have not done so already, insurers and brokers will be pushing on with Brexit solutions, and making sure their Brexit solutions do actually work in practice. Next will be the transfer of staff, implementation of Part VII transfers and actually looking to strategically take advantage of new locations.
However at this stage the long term consequences of Brexit on the market are unclear. For instance some European insurers may be retracting from the UK market, and likewise some UK insurers and brokers may be unwilling to set up new operations in the EU, so will retract from the EU market. There will be opportunities that arise from this.
Technology to improve efficiency
Certain areas of the insurance market continue to hold on to manual processes, legacy systems. Technology and systems improvements have the potential to radially improve the effectiveness and efficiency of the insurance market. The Lloyd’s Blueprint, issued last year, highlights Lloyd’s determination for the market to improve processes and efficiency. The primary objectives are to reduce cost and to ensure that the market can stand the test of time. In 2020 we expect insurers to continue to unlock the operational benefits that technology can provide and start to explore the use of tools such as blockchain and robotics as well as better integrated underwriting & pricing platforms.
Technology & data as an enabler
Technology & data are becoming a great enablers for the insurance market. The more data insurers have, the more it can be manipulated to help identify, risk assess, price and sell services. Last year we saw a great deal of M&A activity from insurers wanting to use technology and data skills to harness this potential. We expect this to continue. Many of these developments will also be able to take advantage of R&D tax credits and other tax incentives, which should not be ignored.
Rates & claims
It has been a long winter on the rates front, but at last rates have been hardening. However the story is not entirely straight forward. Overall capacity in many areas of the market is still high. In other areas, particularly where Lloyd’s carried out their decile 10 review, capacity is much more limited. At the same time the nature of claims is continuing to change.
Risk and opportunities with climate change
NASA recorded 2019 as being the second hottest on record (second only to 2016). So it seems that extreme weather events, such as the Australian wildfires, may be the new norm. This naturally leads to both threats and opportunities for the insurance market. The role of the market in protecting people, businesses and property is going to be essential. However the stakes (and possibly the water levels) may well be higher.
If you’d like to have an exploratory conversation with me or an opportunity to simply share your thoughts, the team and I would be delighted to help.