Evolution and revolution in insurance
Insurance has been through two evolutions over the last 30 years, and whilst both were undoubtedly significant, neither compare to the scale of the revolution that we are currently experiencing.
At Direct Line Group, we were at the heart of the first evolution; in the mid-1980s we were the original disrupter in the insurance market. We took the market by storm with a simple proposition – one direct telephone call - and in doing so, made the high street insurer a thing of the past.
The second major evolution came in the early noughties, when the internet led to the birth of the price comparison websites, opening up the ‘shopping around’ market with price-driving consumer choice.
However, these two evolutions have focused on the channels that people use to access insurance rather than the structure and nature of what they buy. The revolution we are experiencing now isn’t just about distribution – we are looking at a fundamental change to the kind of insurance people will want and need in the future. And whilst this is a challenge, it is one that we are fully embracing. We may have led the first evolution in insurance, but we are not standing still. We also want to lead the charge of this revolution.
So what are we facing in order to achieve this?
The first thing driving change is, of course, technology.
We have seen an enormous shift in the availability and use of data in insurance, alongside developments in autonomous technology. We were one of the first insurers to offer discounts on the adoption of autonomous emergency braking systems, and telematics have now become mainstream for our younger drivers. Our early investment in telematics innovator, The Floow, has enabled us to give young drivers instant feedback and reward them for driving well – and it is a source of immense pride that this five-year partnership has already saved young drivers over £50 million in car insurance premiums. We have also developed our Shotgun app, which is designed to stop new driver deaths in the first 1,000 miles after passing their test.
We understand that it is now a question of when rather than if cars will become fully autonomous. As the level of autonomy in a car increases, we face the challenge of how to price for the different risks. By working with car manufacturers, we are gaining a better understanding of this technology to enable us to develop the products that people will need in the future. And whilst autonomous cars will be safer, they will cost much more to fix when things do go wrong, so we have also invested heavily in improving our capabilities through ownership of our own repair centres.
Artificial intelligence and machine learning have a huge role to play in the insurance revolution, and we are starting to really utilise this technology. It is helping us to recognise fraud more quickly, and enabling us to develop new pricing approaches that predict who is going to claim with far greater accuracy.
Personalisation and competition
Alongside the disruption that technology is bringing, insurance is seeing a major shift towards personalisation and the development of bespoke products. Our lives are more complicated now than they were 20 years ago, and so consumers demand more and are less willing to accept a ‘one size fits all’ offering from their insurers. Through our ‘Direct Line for Business’ service, we are transforming the SME market by offering bespoke insurance for a whole range of businesses, - such bed and breakfast owners or hairdressers - who would previously have had to take a ‘traditional’ policy but can now chose one that only covers the things they need.
Insurance is also increasingly appealing to new competitors. We have seen Google enter and leave the market, and there is a lot of buzz about what Amazon is looking to do in this space. And we are seeing a whole host of start-ups come through to find new ways of providing insurance. All of these factors are influencing how insurance develops and what it will look like in the future.
What won’t change
However, whilst many things are changing, it is important that we also understand that one thing will never change. Regardless of the developments in technology and the many opportunities this brings; however different the products we are offering look; and in spite of the increased competition we face, we must never forget that insurance is first and foremost a people business. We are selling the safety net to protect people if things go wrong.
Amongst all of the disruption, we have not lost sight of the fact that, ultimately, people buy insurance to give them peace of mind. Our customers want a high quality, empathetic service if things go wrong so they can get on with their lives. And it will take more than a revolution for us to change that.