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Published 1 September 2015
Making predictions about the future of the insurance market is not for the faint-hearted. Our experts have boldly looked ahead at the challenges you may face over the next year and produced 50 focused predictions.
The unexpected election of a Conservative government with an overall majority has thrust the renegotiation of the UK’s terms of membership of the EU to the top of the political agenda. It is now certain that there will be an in/out referendum before the end of 2017. This debate will be watched keenly by the insurance market with major players such as Lloyd’s already speaking out strongly in favour of continued EU membership. Firms will have to plan for a variety of outcomes, however. Reform of the Human Rights Act will also emerge as an issue later next year as the consultation reaches a conclusion and this may include proposals to opt out of European human rights conventions and associated legal processes.
We are entering a dangerous phase in the mergers and acquisitions (M&A) cycle. The wave of activity over the last year has pushed up acquisition costs and reduced the number of obvious targets. This means that finding value will become harder and realising value through synergies more challenging. That will not reduce the pressure from analysts on CEOs to make a big play. Another key factor in the volume of M&A activity will be Solvency II, which will see some firms exit lines with a high capital cost while others diversify so as to reduce their average capital weighting.
Diversity in the boardroom, among senior management and across the entire workforce, will come into sharper focus over the next year. The influential London Matters report published last November highlighted the urgency of the issue for the London Market as it strives to compete with other international insurance hubs. This joins other important initiatives such as iWIN (Independent Women In Insurance) and Inclusion@Lloyd’s in encouraging all firms in the insurance market to address the lack of diversity at all levels. Our own Diversity and Inclusion programme is currently taking a deeper look at how our people think, feel and act, with plans also to capture the views and ideas of our clients.
Insurers in the small and medium-sized enterprise (SME) market could find themselves asked by the Financial Conduct Authority (FCA) to carry out internal reviews to determine whether individual instances of poor claims handling reflect widespread issues within the firm. This follows a thematic review into claims handling in the SME market in which the FCA assessed 25 firms including five insurers, ten intermediaries (including five managing general agents) and ten loss assessing firms, focusing on claims of more than £5,000. The FCA found that the claims service was not consistently working in the interests of many businesses. Among the examples of poor practice were delays in initial visits by loss adjusters, a lack of clarity over which party was responsible for driving claims outcomes, and claimants feeling unclear about how they could minimise disruption to their businesses.
The use of social media by the insurance industry will continue to expand rapidly following the publication of helpful guidance by the Financial Conduct Authority (FCA) in March. Firms will feel more confident in using a wide range of social media platforms to communicate and engage with their customers. The use of social media will also become more sophisticated as firms gain a better understanding of how customers use it and which platforms they prefer. This phenomenon will increasingly cover customer communication in both personal and commercial lines.
