There is little doubt that 2019 was a year of dramatic change, with a broad range of factors influencing the market in their own unique way. The uncertainty of Brexit and the withdrawal of capacity by some UK Insurers caused a number of businesses to be more cautious with their strategic plans. However, this was countered by significant growth for those firms willing to take advantage of conditions like a hardening of some markets, new start-ups / MGA’s launching, Insurtech firms creating innovative solutions and increased M&A activity.
Private Equity continued to have a significant impact on the market in 2019, not least with the Goldman Sachs investment into Aston Lark giving their first major foothold in the UK Insurance market. This is something we expect to see increasing over the next 12 months, as relatively flat interest rates are creating poor returns from the usual markets, making the insurance sector an attractive prospect for foreign investors. This resulted in a number of new MGA’s being launched to capitalise on the increased demand for specialty lines, especially as Lloyd’s clamps down on certain lines. Finally, a number of high-profile changes at C-level within Insurers & Brokers in late 2019 will most certainly have an effect over the next 18 months or so.
2019 Recruitment stats
Over the last 12 months, the number of individuals available on the market has remained static, despite the availability of jobs decreasing by 51.9%, further exacerbating the “war for talent”. To attract the best candidates, companies are adapting their workplace policies to create a more flexible working environment that provides a better work/life balance and generates better efficiency, as well as ensuring competitive packages keep their talent engaged.
Being aware of innovations in 2020 is going to be a key focus for the industry. However, being able to implement these innovations is nearly impossible without talented and skilled staff. Human intellectual capital is essential in 2020, if insurers don’t want to get left behind. Younger candidates tend to be showing little interest in venturing into insurance and retaining staff is a concern based on levels of customer satisfaction. Therefore, an insurtech partnership may provide added value, enabling insurance companies to position themselves as dynamic and even disruptive. Being part of the development of innovative technologies could assist in employee attraction and retention.
Lloyd’s of London are accelerating their plans to transfer EU contracts to a Brussels subsidiary, as the possibility of the UK leaving the EU without a deal becomes increasingly likely. This is actually a preferred solution for Lloyd’s, to protect their EU clients, who make up 15% of their contracts.
Although the outcome of the negotiations is uncertain at present, the insurance market can expect a minimal impact regardless of any agreement. This being due to the market’s solid foundations in the UK and establishment of Lloyd’s in Brussels. With Solvency II as a guide, there should be room for flexibility in cross border traders and the ability to create a bespoke model. For the insurance sector, it is likely that there will be many benefits from exiting the EU. However, they will need to be prepared for years of negotiations before the benefits come into play.
The complications from Brexit for Brokers is still uncertain. Some scenarios may include that Brokers in the UK will continue to operate under FOS rules, or that the UK drops out of the current EU/EEA arrangement and cannot operate under FOS rules. There could be a partial agreement whereby the UK can have some access to the EU/EEA markets. As it is impossible to predict what the outcome will be, Brokers should be focussing on the best and worst case scenarios, to prepare.
Key Insurer trends for 2020
Over the past decade, customer needs and expectations have expanded considerably. So, the insurance market needs to be prepared to adapt to customers’ demands in order to retain their customer base. When choosing an insurer, 45% of customers feel that offering a non-insurance product is the most important factor. Another key trend is a different approach to growth. Insurers need to change their roadmap to growth as the traditional approach of selling protective products is not enough to take them to growth in the future. We may be seeing that service-based models, innovative products and emphasis on prevention is where growth will come from.
Organic growth will not be enough in this highly competitive environment. Those who can forge alliances with innovative start-ups and ally with Insurtech will see the advance to growth. Unprecedented deal-making skills will be a key focus for 2020. 73% believe M&A will drive at least 50% of industry growth in the next 5 years.
We know that technology is ever evolving and it’s no different for the outlook for 2020. Insurers should be looking to use technology such as, analytics, blockchain and cloud to get ahead of the curve of their competitors. 95% expect an increase in the use of analytics in the next 3 years.
What can Broker's expect in 2020?
If you are thinking about starting up a brokerage, you will need to consider some of the following challenges: your technology partner, a liquidity partner and CRM system. Once you have created a cost-effective solution and have your technological needs taken care of, you can focus on marketing and trading. It is no surprise that you will face challenges as a new start up and this is no different in 2020.
In terms of retaining clients and encouraging active trading, Brokers will need to continue to provide fair yet competitive conditions and avoid large markups and allow for flexibility. Ensuring that you are meeting your trader’s needs is a key focus in 2020, as they won’t need to have accounts with different Brokers if you are providing sufficient solutions.
Some headwinds that Brokers should be aware of for 2020 include being aware of your surroundings. There will be constant changes in regulation and reporting, which Brokers will need to be alert for.
Make your next General Insurance move with IDEX.
2020 is set to be a big year for the General Insurance market, with a job-rich, candidate short ecosystem that puts power in the hands of jobseekers. Find your next General Insurance job here or speak to us about how we can help your organisation fulfil your recruitment requirements. For more insights on what’s in store for the General Insurance industry this year, take a look at our 2020 UK General Insurance Salary Guide.