How to win in Commercial Insurance

30 September 2019 DueDil TeamCommercial insurance , Digital transformation , Industry insights

DueDil hosted an Insurance Unplugged event recently where our Chairman, Alan Millard, has shared insights on the latest industry trends.

Here is what we’ve learned from Alan Millard.

There are three key aspects that have to be considered.

First of all, it is about understanding the nature of a business. It is really hard to find out what activities a business actually undertakes. Categorising and understanding the true nature and activity of SMEs can hugely aid an insurer, giving them comprehensive insights into the businesses they insure.

Secondly, to correctly price the risk, the insurer needs to know the context in which business operates. Most SMEs are part of a group of holding companies or owned by other companies. Normally, entrepreneurs would have a number of companies registered under their name. Directors could have a portfolio of companies with profiles that vary significantly. DueDil’s Business Information Graph (B.I.G.) links businesses and the people behind them. Denis Dorval, our COO, explains how the B.I.G. works in this video here.

Last but not least is understanding who the beneficial owner of a business that’s being insured is. Here you are dealing with a moral hazard since people behind the companies are the ones who make the decisions and take risks. These risks could significantly enhance or, on the other hand, reduce the performance of a company.

It is hard to innovate in insurance.

The insurance industry moves very slowly.  When we look at AI and automation, underwriting is at the top of the list with an 80% chance of being automated. However, this process of automation might take a long time.

SMEs are 99% of UK businesses. Over 745,000 new businesses were started in the last 12 months. SMEs are in an active growth stage even at these uncertain times. On average, there is a 25% growth across SME businesses and the North East of the UK is leading the way. These hyper-growth businesses are highly attractive to insurers as there is a direct correlation between the size of the business and an increase in their premium.

It is important to note that SMEs take risks with 12% of SMEs ceasing to exist in the last 12 months. This represents a significant jump of 3%, in comparison to the 9% on average in the last 15-20 years, showing that SMEs have started taking more risks. Hence, it is crucial to monitor financial sustainability of businesses.

43% of companies purchase insurance through digital channels.

The need to automate processes across the insurance industry is constantly on the rise with the customers leading this change and expecting a seamless digital experience. Most of the insurers have some presence online and work on improving customer experience. However, the key objective of being online for an insurer is to reduce referrals.

60% of insuretechs are focused on enabling incumbents with a view to partner with insurers and be on the front line.

Nowadays, one of the key aspects of insurers’ strategy is to increase automation, in particular, in relation to underwriting. There is an assumption that the Insurtechs are looking to take over from the existing insurers, while insuretechs look to partner with insurers. Insurtechs want to be on the front line as it gives them the opportunity to provide a friendly, easy front end that attracts customers online. Insurtechs have to be backed by an insurer. It is hard to enter the insurance business as you have to have the capital, follow the regulations, have the insight and the depth behind it. The front line is a lot easier and that’s where the entrepreneurs and innovation look to support incumbents.

Brokers still control 77% of the insurance market, down just 4% in the last 7 years.

Direct businesses are hard. Brokers provide great value. They know exactly what they are doing and they will be around for a long time. Even if insurers go direct and have a strong presence online, brokers are still an important part of the ecosystem.

If you would like to continue the discussion about the upcoming insurance trends keep your eyes open for more takeaways and video snippets from the event.  You can follow us on LinkedIn for the latest updates.