Although commercial insurance in the UK is an extremely competitive environment, the recent round of 2014 results has shown there are both winners and losers. Some commercial insurers are gaining market advantage with improved performance compared to the previous year, while others are losing ground. The latter group of insurers are struggling to operate efficiently and failing to secure opportunities for profitable growth.
So what are the winners doing differently? Perhaps more importantly, how can the losers turn their performance around? How can they identify successful new markets and products, deliver great service, increase efficiency, minimise costs and drive up their profitable growth?
I believe the single biggest difference between winners and losers in the commercial space is technology. Pulling the technology lever provides a turbo boost, which accelerates commercial insurers’ profitable growth strategies, enabling them to leapfrog the competition. Technology has been the main driver of innovation across the personal market, and we are now seeing a marked increase in the adoption of innovative technology within commercial lines.
So if technology is an enabler, what exactly does it enable for the successful commercial insurer? In fact, it offers a wide range of capabilities, including:
- More sophisticated levels of data enrichment
- Agile rating and pricing
- Identification of application fraud
- Greater access to a wider range of profitable products
- Higher levels of customer service
- Visibility of risk maps
- Fleet telematics
- Connected commercial premises
- Data-driven insights
All these capabilities separate the winners in the commercial lines space from the losers. They lead to better rating and pricing, the ability to win more successful business and exit unprofitable segments, improved levels of agility and efficiency, enhanced risk management, lower costs, more profitable growth and, most important, happy customers.
One area of commercial lines where the impact of technology is particularly evident is the increased trend towards commoditisation in the SME space. More and more SME products are being traded electronically through broker e-trading portals like SSP Marketplace.
Such trading portals and sophisticated rating and pricing engines, such as SSP Intelligent Quotes Hub, provide greater opportunities to win new profitable business. Insurers can develop products for particular niches far more efficiently, enabling them to meet changing consumer requirements and grow their market share quickly.
Although technology is the great enabler, robust data is the critical key to success. Successful commercial insurers use sophisticated data analysis to provide the insights necessary to make effective management decisions and allocate their books of business into three key segments: grow, maintain and exit.
Using detailed data analysis, insurers can identify profitable areas of their business and work to grow these. When books of business are bordering on profitability but need an element of remedial action, insurers should develop a plan of action to turn these around in a set timeframe. Finally, when the data is telling insurers their books are unprofitable, they should exit.
This sounds simple, but without detailed data analysis, many insurers find it difficult to allocate their books of business into these three segments.
All this demonstrates that there are a number of ways in which commercial insurers can use technology to win in their chosen market. With an understanding of the opportunities and challenges facing commercial insurers, as well as technology designed specifically to meet these needs, SSP is well placed to help them achieve their goals.
About the author
Neil Thomson is the Global Head of Insurer Propositions at SSP. He has a solid understanding of the current challenges faced by insurers across both personal and commercial lines, as well as deep insight into the trends and future capabilities required for next generation insurance.More content by Neil Thomson