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As 2019 draws to a close and 2020 looms on the horizon, it is time to reflect on the challenges that lie ahead.
It is two-and-a-half years since the UK voted to leave the European Union and in the last two years two deadlines for Brexit passed without a deal being agreed.
The Conservative party’s general election victory this month gives Prime Minister Boris Johnson a majority in the House of Commons that delivers certainty for the insurance profession that Brexit will now be pushed through on his terms.
Aside from Brexit, 2020 presents greater challenges and opportunities for the insurance profession due to rule changes.
Underwriters and claims professionals are preparing for the Whiplash Reforms that are set to be introduced in April 2020. The Whiplash Reforms are a package of measures introduced by the government to reform the way low-value personal injury claims arising from road traffic accidents are handled.
According to the Ministry of Justice the reforms will “reduce insurance costs for ordinary motorists by tackling the continuing high number and cost of whiplash claims.” Underwriters need to make sure they are on top of the changes plus work to report the savings these deliver for consumers.
The reforms will reduce the financial compensation for injury by setting a fixed amount payable for injuries lasting less than two years and reduce the amount an insurer must pay in costs by increasing the small claims track limit from £1,000 to £5,000 for road traffic accident related claims. For employer’s liability and public liability the limit is lifted to £2,000. Claims valued below the new limits will no longer result in costs recovery.
This could create a far greater number of litigants in person, bringing with it the need for more time spent per case in explanation and communication.
In early 2020 the FCA is also expected to produce a final report on dual pricing outlining any new rules.
Actuarial techniques to measure the lifetime value of a client result in pricing to offer sometimes substantial discounts in the first year, recovering the effective ‘losses’ in later years if the policy renews.
If this practice is outlawed this will result in an end to the discounting that people who shop around benefit from.
The Chartered Insurance Institute’s public trust index shows action does need to be taken to tackle dual pricing to improve the perception of our profession.
The CII’s public trust index surveyed 1,000 consumers about their experience of motor, buildings and travel insurance and 1,000 small and medium-sized businesses about motor, buildings and employers liability policies in October 2019. More than eight out of 10 consumers reported they were satisfied with the performance of insurance providers but they expect to see action to address dual pricing if an insurer wants to keep their business.
Consumers and businesses were asked to rank the importance of a variety of factors from one - meaning it was not important to their insurance decision - to seven - meaning it was key to which provider they choose.
According to the poll, the biggest opportunity for insurers to improve their performance is in relation to customer loyalty, which ranked above price as a decision driver when it comes to picking a provider.
So, regardless of the outcome of Brexit, 2020 will present many opportunities for the insurance profession to improve the way it is perceived in the eyes of the public.
I am confident that the profession is capable of uniting to face what stands ahead – as it demonstrated in 2019 with the support for our Insuring Women’s Futures initiative and the commitment of insurers to pledges to improve female financial futures.
I am sure the insurance profession will rise to any challenge the next 12 months has in store in order to deliver great outcomes for consumers.
