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After the shock - insurance in 2021 and beyond

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After the shock — Insurance in 2021 and beyond 3 There are moments in history that mark significant turning points for an industry. We are coming towards the end of one of those moments. If 2020 was defined by a single, global market shock (that of the COVID-19 pandemic, in case you weren't sure) then 2021 – in a business sense – will be defined by how organisations respond to the 'new normal'. The 2008 financial crisis is the most recent example of a similar shock; the financial services industry must learn lessons from the aftermath of this event. In the years following the crisis, financial service providers were so pre-occupied with recovery and compliance to new regulations that they took their eyes off investment in new technologies that could have provided a competitive edge. Many commentators attribute the rise of FinTechs to this event; with banks and insurers distracted, a gap opened in the market for high-tech financial service propositions. We saw this trend occur within the insurance vertical, as the InsurTech revolution accelerated. The lowest hanging fruit was personal lines – providing the digital experience that customers demanded and incumbents weren't providing – but as the years have passed, we have seen InsurTech start-ups emerge in the SME and commercial lines space, too. As we enter 2021, insurance – like most other market segments – will be coming under significant pressures that did not exist 12 months ago. As consumer confidence falls, businesses close, capacity exits the market and interest rates fall worryingly close to zero, insurance companies must look for new and innovative ways to gain a competitive edge over their rivals. We will have to wait and see whether the industry has learned its lessons from 2008. An economic shock has the capacity to create winners and losers; insurance companies that want to be on the positive side of this fence must fight the urge to pull back on technology investment, and rather increase their focus on digital transformation. Initial outlook is positive, though; COVID does appear to be acting as a catalyst for technology investment, accelerating transformation. In this report I hope to show where the competitive advantage lies within each segment of the insurance market – personal lines, SME insurance and commercial lines – by highlighting the key trends and direction of movement of each. I will also touch on MGAs and Underwriting Agencies, Big Tech in insurance and the high-level technology trends we are seeing in the market. It should be noted that there is a UK bias towards some of the data used to evidence the trends that I am seeing within the market. This is because I am based in the UK and thus have greater access to UK-specific information. However, whilst the data may be country-specific, the trends are not. In my role at SSP I speak to insurers across the world and from the conversations that I have had with these executives, it is evident that the insurance market is moving in the same direction globally. Of course, the specific manifestations of these trends will differ by region, and some countries will be further along the journey, but my hope is that by highlighting the direction of travel I can help in your strategic planning for 2021 and beyond. The market is challenging, but the possibilities are huge. I wish you the very best in navigating the path to success in an insurance market that is finally loosening the shackles of its reputation as a 'boring industry'; I genuinely believe it to be one of the most exciting markets to work in. Executive Summary Stephen Richardson Market Consultant at SSP stephen.richardson@ssp-worldwide.com

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