There are three key reasons why we must change:
Inefficient processes
Firstly, as an industry we lag behind the rest of the financial services sector in terms of efficiency. The insurance sector is currently faced with the sorts of processing and technology challenges – particularly in our back offices – that banking and other sectors resolved some time ago. It is time we got up to speed with our peers.
Customer expectations
The second reason is an increase in customer expectations. Loyalty is no longer simply a question of the quality or price of a product – brand name and customer experience are just as important. Clients are demanding increased levels of information about what they are buying and from whom and what service they can expect in the event of a claim.
In the insurance sector, we are seeing the rise of increasingly sophisticated insurance buyers. Customers have a better understanding of risks they are faced with and are choosing what approach to take to managing them. They have much more influence in purchasing decisions; and are demanding more clarity in the services they are buying.
Customer surveys carried out in 2005 and 2006 show that there are key areas of the insurance process where customers value good service but feel the market is not delivering. These are the speed of policy documents being issued; keeping customers informed of progress on claims; and the speed of settling those claims. With increased globalisation and competition, we can not ignore our customers’ needs.
Competition
Thirdly there is the impact of competition. London ’s role as the epicentre of international (re)insurance business has been challenged by a number of jurisdictions – not least Bermuda, Dublin, Dubai and Continental Europe. Local markets are increasingly prepared to service the needs of clients without the need to seek specialist services from London .
There is also a clear trend of increasingly ‘less complex’ specialist insurance business staying in local markets. For insurers to succeed, they now have to localise as well as globalise. They cannot sit in London any more and expect the world to come to them.
In addition to this some aspects of insurance and reinsurance are under competitive pressure from alternative methods of mitigating operational risk. As investment banks and other financial institutions seek ways to diversify they are looking for ways to engage in areas that were traditionally the domain of insurers and reinsurers. Equally the global corporate community – faced with increasing risk and a better understanding of these risks – is seeking greater security through increased diversification of risk transfer mechanisms.
So, to summarise: we’re not efficient; our customers are expecting more; and we are faced with more competition. We cannot ignore these facts. If London is to remain the premier centre for specialist insurance we have to work together to resolve these issues. The goal of the Market Reform Group is to ensure that London is the market of choice for insurance risks. |
