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EY Seren’s outlook on General Insurance for 2022

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The new battleground for the General Insurance market is evolving quickly. It is no longer enough to outperform competitors with low rates; insurers must re-imagine their propositions and develop their ecosystems to enable sustainable and purposeful growth. We believe that growth will come through differentiation, with insurers adapting their propositions, distribution methods and brand messaging to remain relevant and meaningful to their customers.

We’ve seen five main expanders in the market:

1. Price is no longer the key differentiator it once was

While price is important, especially in the current climate of prices rises, Insurers will need to find a way to convince consumers of the ‘value’ of their product. The FCA General Insurance Pricing Practices regulation for Home and Motor insurances introduced in January 2022 removes the dual pricing which often meant new business customers were getting a better price than existing customers. Customers renewing their home or motor policy will now be charged the same price as a new customer. With greater parity on pricing for new and existing customer, insurers need to think beyond discounted prices and differentiate themselves by developing new service propositions that help retain existing customer and attract new ones.

How you can respond:

2. Intentional Consumerism is a key driver of change

The recent UN Climate Change Conference 2021 (COP26) has created strong pressure from investors and insurers to consider ESG (Environment, Social, & Governance) in their risk management and underwriting. At the same time, consumers are increasingly making purchase choices based on ethical and sustainability considerations. Customers are looking for insurers who reflect their values and engage in more sustainably driven initiatives. In a recent EY survey, 60% of respondents say they are likely to switch to brands that are more environmentally friendly and 43% said they would be interested in products that offer discounts or rewards for lower emissions. 1 In addition, customers are increasingly driven by ‘intentional consumerism’, where their purchase decisions are based on the values they hold, such as diversity & inclusion and sustainability. 2 This is particular the case with Gen Z. The EY Future Consumer Index has recently shown that 43% of global consumers want to buy from businesses that benefit society, even at a higher cost. 3

How you can respond:

3. Ecosystems are creating connected experiences

The market has seen a rapid expansion of ecosystems and partnerships in recent years. Indeed, more than 75% of global insurance executives view digital ecosystems and other partnerships as essential to creating competitive advantage, according to 2019 research 4 from Swiss Re. That number is likely to be even higher today. Ecosystem leaders are deepening customer relationships by offering richer connected experiences, new products and services, and more compelling value propositions. We estimate that as much as 75% of the value 5 in established ecosystems is in the customer relationship. Existing ecosystems in insurance and other sectors are already demonstrating the potential for exponential growth resulting in a 90% increase of products-per-customer, or share-of-wallet for successful ecosystem players. Through these ecosystems, insurers are creating more value for their customers than they could individually. Insurers that innovate with ecosystems will be able to increase their revenue and share of wallet with more flexible products.

How you can respond:

4. Vulnerability, financial security and long-term wellbeing

The impact of the pandemic has been felt psychologically, emotionally and economically by many customers. The pandemic has also led to more financial vulnerability in customers. In addition, the cost of living rises for households across the UK can disproportionately impact those on lower incomes and at higher risk of vulnerability. The new FCA vulnerability guidance is asking financial services to go further to help vulnerable customers. Entering one vulnerable situation can trigger a cascade effect so early identification of vulnerabilities is key. Insurers will need to respond to changing consumer needs by developing simple and transparent solutions that strengthen their financial well-being and instil trust and confidence.

How you can respond:

5. Digital transformation and self-service capabilities.

The COVID-19 pandemic has presented a new era of challenges and opportunities. EY research reveals that customers are now more open to interact and buy in new ways, for example, subscriptions models and micro and extended payments, rather than traditional yearly premiums. 6 Insurers will need to innovate their product sets and optimise their digital distribution channels to meet the increased demand for self-service capabilities. Digital first insurers will need to build trust with customers by creating a strong brand and reputation, supported by authentic dialogue and actions.

How you can respond:

How can EY teams help?

EY Seren is a specialist design and innovation consultancy. Together with our EY colleagues, we solve the genuine problems that matter for customers, employees, and society at large. Our work is rooted in helping businesses make better choices and solve their most pressing problems. EY wide-ranging team of professionals work collaboratively to focus on transformations including digital claims technologies and systems, data and analytics, operational transformation and execution, customer experience, future visioning and new proposition development, ESG, workforce advisory, actuarial and risk consulting.

For further information, please contact , Insurance Sector Lead.

Additional contributor: Tobias Misera

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.