What will the insurance industry look like post COVID-19?
Quote Goat founder, Michael Foote discusses what’s in store for the UK’s insurance industry post coronavirus…
The modern insurance industry began life in London during the 1700s, when the first fire, accident and life insurance companies were established. Fast forward 400 years and you have an industry according to the Association of British Insurers (ABI) that manages investments of 1.7 trillion and employs over 300, 000. This makes it the largest in Europe and the fourth largest in the world.
Prior to COVID-19. the industry’s main concern was Brexit and the uncertainty of a no deal? threatening the UK’s position as a global hub for insurance services. Another was the impact of IT failures, and breaches arising from cyber-crime over the past few years. This led the FCA, PRA and Bank of England in December last year to demand that firms ensure their operational resilience by undertaking costly and time-consuming mapping exercises.
It is unfortunate this activity was not carried out sooner as only three months later the whole of the UK would be placed under lockdown as a result of the pandemic, testing the resilience of the UK’s insurance industry like never before.
An industry under fire!
Restaurants, pubs, hotels and gyms were just some of the non-essential? businesses forced to shut down as a result of Government measures to prevent the spread of coronavirus. Many thought that their business Interruption Insurance would cover their financial losses, not realising this might not necessarily be the case. This has resulted in accusations that the insurance industry mis-sold its policies and demands that they be amended retroactively.
Rightly or wrongly the reputation of the industry has been tarnished and needs to be addressed to restore consumer confidence, especially as the economic damage from the pandemic continues. The Chancellor RishI Sunak stated recently that the UK is already in “significant recession” given the economy shrank by 2% in the first three months of 2020. A slow recovery is more likely to limit insurance companies? revenue growth and lead to a fall in demand for products and services.
A brighter future is in reach
If the insurance industry is to return to anything like business as usual, companies within it will likely have to adopt a strategy that prioritises slimming down, restructuring and the use of technology to make efficiency savings.
In the first instance no one wants to talk about job cuts, but the industry has always been a bloated one. Unfortunately downsizing? is a quick way to reduce expenses and was already happening before the pandemic. For example companies like Aviva announced around 1800 jobs were to go last year and Direct Line stated 800 people would be laid off in February. Such decisions will have to be made as part of a process realigning company portfolios in order to understand which parts of a business are driving value, in order to remove or readjust the parts that are not.
Michael Foote is the founder of Quote Goat, a money-saving site for personal and business customers, offering leading comparison solutions in finance, energy, and insurance. Michael has over 13 years? experience working in the finance, insurance and currency sectors and is a self-taught expert in all things SEO.