What is Happening in the Insurance Industry UK?

Unlock critical insights and dynamics within the UK general insurance segment, including historical and forecast market data.

The PRA has recently tightened up its scrutiny of insurers’ resilience. It expects firms to develop and test their ability to operate under various severe but plausible scenarios; further, it wants to facilitate easier exit processes for small insurers.

Car registrations are on the rise.

Economic expansion often increases car numbers on the roads, positively affecting industry revenue. Unfortunately, however, UK car insurance market revenue has been negatively impacted due to various factors, including decreased driving tests and higher financial strain on families that have reduced demand for new and upgraded vehicles.

The market has also been affected by the COVID-19 pandemic, which led to significant behavioral change among drivers resulting in reduced road accidents and thefts and an increase in pay-as-you-go policies – driving up GWP from now until 2020 but expected to decline after that gradually.

Longer-term challenges come from changing demographics that alter the insurance sector and increase minority ethnic customer penetration. This allows insurers to use their strengths to provide relevant products and services for these consumers.

This report offers in-depth historical and forecast market value data from 2014-2022 for UK general insurance. Additionally, it includes critical insights and dynamics of this segment as well as profiles of top general insurers operating within this space; legislation impacting them; market structure explanation; lines of business deployed, and distribution channels used within it – everything to provide an in-depth view into UK general insurance market dynamics.

Consumer trust in the industry is eroding.

As interest rates, premiums, and investment returns stagnate, the insurance industry faces increasing pressure to earn customer trust. Consumers increasingly favor insurance providers that uphold higher ESG (environmental, social, governance) standards which promote ethically sound business practices.

Insurers should aim to maximize their strengths while mitigating weaknesses. Alongside providing transparent product disclosures, adopting cutting-edge technologies like artificial intelligence and predictive analytics may help enhance customer experiences while increasing profits.

However, the insurance industry continues to struggle to recruit young talent. According to the UK Insurance Census, Black and Minority Ethnic employees only represent 10% of its workforce – which compares poorly to broader UK population statistics. Therefore, insurance firms must strive hard to implement diversity-driven recruitment strategies to secure future skill sets for themselves and maintain market leadership.

Concerns exist in the life sector regarding the growth of bulk purchase annuity (BPA) deals, where defined-benefit pension schemes offload their life risk to specialist divisions of life insurers. The Prudential Regulation Authority has conducted a thematic review to examine if BPA providers treat customers fairly and with discipline when offering prices; perhaps bringing this market back to shore could improve consumer outcomes.

The ‘Great Resignation’ has spread.

Insurance firms have reported difficulty recruiting and retaining staff due to both coronavirus crisis-induced employee defections and their industry being perceived negatively by young people – one reason insurers must do more to promote themselves and opportunities within their sector.

The industry fares well in employing entry-level women; however, these numbers decrease significantly as one moves upward in an organization. London’s insurance market stands out for underrepresenting Black and Minority Ethnic (BME) professionals due to its legacy of racist practices.

The industry is also currently confronted with rising claims inflation caused by natural catastrophe losses, increased repair costs, and medical/social inflation – something which could cause more rate movement at treaty renewals and could even impact primary markets.

The good news is that an increasing number of insurance firms in the UK recognize they must become more inclusive, actively striving for more diverse workforces and building trust and loyalty with customers by better reflecting the demographics of the UK population and being better prepared to adapt more quickly and efficiently to changing customer demands.

Insurers need to focus on the experience of employees

Insurers need to focus on revamping their talent acquisition and development processes to recruit diverse candidates, which will enable them to be more innovative and adaptable to market requirements, as well as strengthen relationships with both customers and employees and rebuild the trust lost during the pandemic outbreak.

Insurance industry stakeholders must strive to change public perception of insurance careers. Insurance is often perceived as dominated by white, middle-aged men with little diversity among entry-level positions, although female representation increases as you advance.

There is an obvious need to address this issue and attract more young people into the sector. Investing in digital skills may prove effective, and providing career advancement opportunities will undoubtedly be advantageous. Still, most importantly, the industry needs to show itself as welcoming of Black, Asian, and Minority Ethnic (BAME) workers.

Insurance carriers are facing increasing challenges with pricing in light of rising natural catastrophe losses and claim inflation, potentially triggering rate movements at reinsurance treaty renewals as buyers push for more cost-effective coverage options. US and Bermuda reinsurers’ increasing reliance on longevity reinsurance will only add pressure for insurers trying to adapt quickly enough while meeting regulatory demands.