Briefing: Uncertainty - The new insurance buzzword

By Matt Scott

Insurance is an industry built on risk and uncertainty. There’s uncertainty around claims expectations, renewal rates and investment returns, to name a few.

But in today’s shifting economic and regulatory landscape, uncertainty in the insurance market has reached unprecedented levels.

No one, for example, could have anticipated a newly instated prime minister and her chancellor introducing a seemingly unreviewed economic plan that sent the markets into meltdown, only for that same chancellor to then be removed from office amid a plethora of fast paced U-turns.

Equally, no one had properly anticipated nor prepared for a global pandemic that could ground the world to a halt. Or for war to once again return to Europe following Russia’s invasion of Ukraine in February 2022.

There has also been the flurry of different crises that have swept across the front pages of the nation’s newspapers.

There’s been the supply chain crisis, which still continues to dog insurers’ repair network up and down the country. There’s the cost of living crisis and the energy crisis too, all set against the background of rampant inflation that is driving up claims costs as well as premiums.

And in the insurance industry itself, regulation has reached heady new heights of oversight following the introduction of the FCA’s general insurance pricing practices and fair value in January 2022. And, of course, Consumer Duty, which is due to come into force next year.

Coping with change

It was only last week at Insurance Times’ Broker CEO Forum that broker chief executives gathered to discuss the key issues that were affecting their businesses.

Throughout the whole day, it was uncertainty that was at the heart of each of the discussions - whether focused on the economy, MGA capacity or the future of broker M&A activity.

All of this uncertainty is creating a shifting market dynamic that insurers and brokers are having to react to on a seemingly daily basis.

Their changing strategies then create a domino effect as other brands and companies subsequently change their approaches too and the whole cycle begins again.

Observe, react, repeat.

To get ahead of the game, insurance companies from across the value chain need to become more proactive to the changes being experienced – learn from the market trends and what the data is telling them and act quickly and decisively.

Easier said than done, I know, but being proactive to these market developments is the only way to get in front of that constant cycle of change.

Of course, not everyone is going to get things right on the first attempt. That’s just the risk of doing business in insurance in today’s uncertain world.