Insurtech a ‘double-edged sword’ set to impact insurance

Insurtech a ‘double-edged sword’ set to impact insurance

The insurance industry faces a double-edged sword in the form of insurtech as it presents a host of challenges and opportunities, an expert has said.

A new report compiled by technology services’ provider TAS has found that one in two industry leaders are concerned about the rapid rate of change currently gripping the industry thanks to disruptive innovation.

Shane Baker, CEO at TAS, said that through compiling the report, which is based on interviews with industry leaders, a clear theme emerged regarding insurtech.

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“More and more of these organisations are now making a strategic decision and investment in either working with external insurtech organisations or bringing those capabilities in-house to be able to start responding technically very quickly,” Baker told Insurance Business. “They are challenged by the fact that they are seeing shrinking margins but also seeing smarter technology almost eat their lunch.

“I don’t think I can say precisely from what came back from the report whether it is ‘do or die,’ but the theme that came back is if they don’t respond it could have an impact on their business and it could be dire.”

The report also found that 20% of those surveyed saw how to innovate as a challenge as the industry tries to futureproof itself.

Encouragingly, the report found that industry executives are taking insurtech seriously, with nine in 10 placing innovation high on the boardroom agenda. More than half of those are looking to internal innovation to help improve customer focus and 61% of those surveyed noted an increase in spending over the next year.

Baker noted that the industry has now passed the tipping point on insurtech as firms have come to the realisation that they have to do something to respond and remain relevant.

“The reality is it is a tipping point, it has tipped now and they realise the need to respond,” he said.


Progressive Unveils Online Homeowners Insurance Comparison Shopper

Progressive announced a new tool called HomeQuote Explorer, an online platform designed to enable homeowners to compare home insurance quotes from multiple carriers.

The insurer says it takes 15 minutes or less to get most quotes.

“This might sound familiar because it’s the formula we used to put the power of comparison shopping in the hands of auto insurance customers in 1996,” Progressive CEO Tricia Griffith said in a statement. “We think HomeQuote Explorer will compel a lot of homeowners to take a few minutes to make sure they’re getting the right coverage at the right rate.”

The platform pulls in publicly available information on a property automatically, and has a series of prompts to help the user enter other required information, according to Dan Witalec, the insurer’s customer acquisition leader.

Progressive writes homeowners through its subsidiary ASI that it acquired in 2015.



Cigna makes move into UK life insurance market

Cigna makes move into UK life insurance market

Specialist insurance provider Cigna has announced plans to make a strategic move into the individual UK life insurance market during 2015.

At the moment Plymouth-based Cigna Insurance Services provides specialist insurance and affinity marketing solutions.

Susan Stevenson, Cigna’s chief executive said: “Cigna’s UK individual life insurance proposition will be to collaborate with affinity partners to unlock the enormous potential.

“Together, we will breathe new life into the industry, bringing innovative, affordable and accessible solutions to the stagnant UK life insurance market.

“Our offering will leverage Cigna’s considerable global expertise in affinity marketing and life insurance to offer our partners products for their customers that are simple, easy to understand and easy to buy.”

She added that it was Cigna’s goal to make life insurance accessible to the broadest possible market.



Uncertain future for embedded values in European Insurance

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Milliman announced the availability of a new report detailing embedded value (EV) results for 19 major insurance companies in Europe. The report examines trends among the companies reporting EVs as of year-end 2016, comparing practices adopted and discussing reporting issues following the implementation of Solvency II in Europe and the move toward the global adoption of International Financial Reporting Standards (IFRS).

 “The future of embedded value reporting in Europe remains uncertain – although there has been increased alignment between EV and Solvency II reporting, we have continued to witness a gradual reduction in the number of firms reporting on an EV basis,” said Philip Simpson, a principal and consulting actuary in Milliman’s London office. “And with Solvency II disclosures via the SFCR lacking information around new business or analysis of change, for example, there is potentially a void appearing in the level of granularity of financial information reported.”

The release of the final IFRS 17 standard in May 2017 could signal an alternative reference point for Market Consistent Embedded Value (MCEV). And with substantial disclosure requirements involved, this may allow a sufficient amount of information to be obtained about the profitability of the business. However, the preparation of accounts under IFRS 17 gives rise to a different interpretation and timing of profit and loss compared with an EV basis which will need to be considered. Ultimately time will tell whether companies use Solvency II or IFRS 17 as the reference point for MCEV.

Key insights from the European report include:

There has been an ongoing, though moderate, reduction in firms reporting on an embedded value basis in 2016 compared with 2015.

An amendment to the European Insurance CFO Forum Market Consistent Embedded Value Principles© (the MCEV Principles1) was issued in May 2016 which permits the use of the projection methods and assumptions for market consistent solvency regimes (e.g. Solvency II) in EV reporting. In light of this, during 2016 companies continued to change their approaches, with a continued trend to align EV and Solvency II reporting.

The CFO Forum members (that disclosed their embedded values at the end of 2016) reported a combined embedded value of GBP 263 billion (EUR 308 billion) at the end of 2016 compared with GBP 246 billion (EUR 288 billion) at the end of 2015. Experience amongst the companies studied was mixed, with around half of companies experiencing an increase in embedded value compared with 2015.

Overall, results for new business were fairly positive for the majority of companies in the report. The total value of new business (VNB) written by the current CFO Forum members (that disclosed their values of new business at the end of 2016) was GBP 11.3 billion (EUR 13.3 billion) in 2016, compared like-for-like with GBP 10.1 billion (EUR 11.9 billion) in 2015.



Home owners in flood-risk areas handed lifeline by launch of ‘Flood Re’ scheme

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Home owners in flood-hit areas are being urged to check whether their home insurer can offer them cheaper cover after the launch of a government-backed scheme on Monday.

The scheme – called Flood Re – will help insure the extra risk to homes in areas prone to flooding.

The Association of British Insurers said home owners might not realise that their options for insurance had widened following the introduction of the scheme. Previously, many home owners in these areas would have been paying high excesses or have had insurance that did not cover flooding.

Flood Re, announced in June last year, is intended to ensure that home owners in flood-hit areas can afford to insure their homes.

The scheme is partly funded by a charge to insurers for each policy passed to the scheme and a levy on all UK home insurers.

Flood Re said that it expects 350,000 properties to be put into the scheme.

What do insurance companies pay out for?

Buildings and contents cover will provide just that – protection for your home and possessions. Some policies provide new for old replacement of items, while others pay only the current value, taking into account wear and tear. Many insurance policies will include extras such as the cost of alternative accommodation.

What is the typical excess for a flooding claim?

For properties that are considered to be at a low risk of flooding, the excess is usually between £100 and £250. This rises to around £2,500 for properties at moderate risk and can reach up to £25,000 for those with a history of flooding.

How do insurers know if my home is “at risk”?

Official figures suggest one in six homes are at risk of flooding. Insurers use flood-mapping technology which is supposed to pinpoint at risk areas and even individual properties. But these systems can fail to take account of newly installed flood defences and the elevation of land and properties.

What about Flood Re?

Flood Re is a not-for-profit fund designed to ensure that homes at the highest risk of flooding can receive affordable cover. Due to launch in April 2016, it will cap the cost of flood insurance for around 350,000 homes.

It works by insurers passing on the flood risk element of policies for homes in at-risk areas to the scheme and paying a premium to do so.

This means that home owners should not have to seek out a particular policy, but should contact their insurers to check whether they are part of the scheme and seek out a lower premium, particularly if their policy is up for renewal.

More than half of the home insurance market has signed up to Flood Re and the ABI said others were expected to follow suit in the next few weeks. It is estimated that at least 350,000 homes could eventually benefit.

Huw Evans, director general of the ABI, said: “It is important that as many people as possible have access to home insurance so they can get the money and expertise they will need if the worst happens.

“Insurers have worked flat out to design and fund Flood Re specifically to address the problem of high home insurance premiums. April 4 marks the start of a process that will re-energise the home insurance market in flood-prone areas and help ensure as many people as possible have access to effective, affordable cover for their properties.”

For those at risk of flooding, the scheme should mean cheaper quotes for insurance, through lower excess amounts and premiums.

Aviva, the country’s largest insurer, will offer quotes for new policies that reflect the change from Monday. Renewal quotes will be available from May 5.

Lindsey Rix of Aviva said: “The Flood Re scheme will allow home owners who’ve been flooded or who live in high-risk flood areas to shop around as well as benefit from lower excesses.  “We’ll be able to provide customers a price for their insurance, regardless of the flood risk.”