Brexit, Insurance and Technology

Britain’s imminent ‘Brexit’ from the EU has thrown many things into a state of uncertainty, not least of which is the future of the financial world, and in particular, the insurance industry. Industry experts are starting to speculate what those uncertainties will mean for UK insurance. In a recent article in Insurance Age, Brought By Many CEO Steven Mendel speculates that the cost of insurance premiums are likely to rise as a direct result of our leaving the EU. The six reasons he cites for this rise are interesting and we’d like to add our opinion on three of them.

First and foremost, the possibility that insurance premiums may rise is a valid one. Market uncertainty is, in the short term at least, a fact of Brexit, and because of this, insurance providers may find that their returns diminish. Lower interest rates will exacerbate this problem. In order to weather this threat, British insurers (and those operating in the UK) will have to manage their risk portfolio more carefully than ever and we see technology as crucial to this effort.

Connected policies offer insurers the ability to utilise the huge volumes of information that are generated by connective technologies and the Internet of Things. With this information comes greater insight into the lives and activities of policy holders; For example, if you know that a driver spends 90% of their time on familiar roads that are well maintained and with a low accident index, keeping within the speed limit, you can probably assume that their likelihood of having an accident is below average. Conversely, if you know that a driver is driving at 49 MPH on a 50 MPH road that they’ve never driven on before, in heavy rain and with plenty of traffic about, you can deduce that the risks are likely to be far greater. And this gives insurers something they’ve never had before — the ability to calculate risk based on real-time contextual information.

With more accurate risk assessment comes the ability to encourage and reward safer driving, thus reducing payouts for accidents and injury. In a post-Brexit world, this may be more important than ever. According to the ABI, motor insurers in the UK currently pay out around £27m in claims every day. The potential for savings is great.

The second point that drew our attention was that gender specific pricing might return. EU legislation dictates that motor insurance premiums for men and women must be set equally, despite the well-known fact that teenage boys are much more likely to have an accident than their female peers, for example. We’d like to take this further and say that we’re about to see the advent of ‘people specific’ insurance pricing. As we said earlier, with the ability to utilise live, contextual data, insurers will be able to offer connected policies that reflect individual circumstances, and this will apply to every relevant variable (be it health, behaviour or any other influencing factor). The customer will be the focal point and insurers will have the opportunity to treat us all as individuals, not merely as ‘male or female’ or as an aggregate of the wider population.

The final point mentioned in the article that we’d like to comment on concerns a reduction of competition as EU-based insurers withdraw their offering from Britain. This may well be the case and with many of the top 10 insurers in the UK being headquartered in mainland Europe, this change in the competitive landscape could allow new entrants to prosper.

Our belief is that within the next five years there will be two types of insurer; those who will have embraced the Internet of Things and built it into their business models, and those who ‘ceased to exist’ because they chose not to adopt these new technologies. This could well result in the emergence of new, challenger players within the insurance industry and Britain is well placed host such a new dawn. Besides ourselves (Concirrus) there are a host of other fintech, leading edge software, blockchain and artificial intelligence companies operating out of London and other parts of the UK. Indeed, according to Business Insider, “London’s pedigree in finance has combined with the booming technology scene of the last few years to turn the UK capital into a petri dish for financial innovation.” So whether or not competition diminishes in the short term, we believe there is a strong likelihood that it will increase in the long term as 300-year-old fault lines within the insurance industry begin to crumble.

To conclude, we don’t doubt that Brexit will bring uncertainty and changes in the near term. But our eyes are firmly fixed on the bigger picture, and the bigger picture is one in which technology changes everything. We were working on it long before Brexit, and we’re going to continue to work on it after Brexit. We also believe that this process can support a healthy, vibrant, world-leading insurance industry that offers its customers a fair and efficient service.