Our insurance team explores the trends set to impact the industry in 2018
Home insurance has had a very challenging year and 2018 is set to be equally demanding. Ernst & Young, Deloittes and KPMG have all issued similar reports, with technology, weather and customer retention being hot topics. But what does that mean to the insurance industry and the claims market and how can insurers stay ahead of the competition in 2018?
Chris Edwards, Head of Insurance at leading specialist repair operator Plastic Surgeon explores how the industry is changing.
Whilst new technologies are being grasped and considered, traditional players continue to be challenged and are having to invest heavily to keep up! This alongside rising claims and expensive inflation has created a negative impact on profits with more deterioration expected to come. E&Y are forecasting that home insurers are expected to achieve 101.7% Net Combined Ratio (NCR) in 2018.
It is well known that the insurance industry lags behind others. For too long the sector has been reliant on solutions that have long been disregarded by many other markets. A survey taken in 2017, by Willis Towers Watson (WLTW) showed that 58% of senior insurance executives acknowledge that they are behind other financial services sectors with digital technology in particular.
Like many sectors, the insurance industry must look at their current, more traditional, ways of working to improve efficiency, protect data and meet customer demands, whilst at the same time future proofing against the competition.
However, this is costly and with the reported forecasting for 2018, insurers must look at other ways to assist with the process. One thought is for insurers to look at their supply chain for assistance. Many have a variety of claims management, repair and damage management companies who work on their behalf and who have invested considerably in new technological approaches. Working with them to integrate their technology and approach into their processes is vital.
Independent financial research company – Defaqto has reported that there is intense competition for the home insurance market, with 85% of consumers buying cover on line, with a HUGE increase in the number of products and providers available there is far more choice available to consumers.
This has created a significant challenge for home insurance providers: to make their products and service stand out from the competition to attract and retain customers.
However, in a highly competitive market this is extremely difficult. Insurers must think outside the box to differentiate themselves – identifying how to make their home insurance offering stand out from the competition and how they can cut through the noise of competing products to reach target consumers.
This could be looking at key trends such as sustainability and corporate social responsibility, offering ethical and sustainable products and approaches to customers.
At Plastic Surgeon, our specialist restorers are able to repair a wide range of surfaces including stone, brick, UPVC, wood, glass and metal. We have seen record landfill savings this year up 17% on last year’s figures. In 2017, 3,474 tonnes of waste were saved from landfill and 135,445 items were repaired rather than replaced. This is set to further increase in 2018 and beyond, we know sustainability and corporate social responsibility is key to our customers.
It may seem simple, but insurers also need to provide a simple and straight forward claims process for their customers, ensuring ease of use and complete transparency throughout the life of the claim, keeping it simple not only makes the claims process much easier but it has also been identified as a key factor in customer retention. We have developed a whole suite of solutions including self survey, direct access to our finishers diaries for our customers, real time portals, MI and the use of AI (artificial intelligence) to identify claims that don’t need any human interaction whatsoever.
One in five insurance claims are due to an escape of water and as these claims increase the industry is failing to respond and thus struggling to cope with demand. With annual flood damage costs expected to rise from £1.1bn today to £27bn by 2080, the insurance industry must look at improving the process.
There are several factors causing this increase including: lifestyle choices – the popularity of wooden floors, wet rooms and under floor heating, and the upgrading/extending of properties; the impact of climate change; construction changes – the conversion of commercial properties into residential properties and the popularity of rental properties. The restoration industry is extremely fragmented with little evolution in the last 10 years resulting in long delays for customers and a philosophy of replace over repair resulting in unnecessary costs for insurers and huge delays for customers.
By using market leading suppliers who are innovating this fragmented industry, and by integrating them fully into their notification of loss processes, insurers can ensure that they cut cycle times, improve efficiency and reduce the overall claims costs. This will ensure the sector continues to move forward, improve and innovate.