Motor insurance... but not the way we know it!
We are all aware that intense competition squeezes margins, increases customer price sensitivity and makes it harder to sustain inter-brand differentiation. This phenomenon is especially true of the modern motor insurance market where, as the product has matured and new delivery methods e.g. the aggregators have come to the market, the core product has become more and more susceptible to the forces of commoditization leading to horrendous and unsustainable underwriting losses across the industry.
There has to be a better way? There is still plenty of opportunity for differentiation around availability, delivery, payment terms, underwriting methods and all the other services that accompany the core product e.g. service. However, senior management must use their imagination more if they want to succeed in the motor insurance market of tomorrow. As the saying goes: "There are no mature products, only mature managers".
Is new technology the answer? After all, it is new technology, via the aggregator sites, that has lead to greater brand transparency and allowed competition drive pricing to an unsustainable level. What about embracing new technologies such as telematics, automated traffic law enforcement and even Google's self-driving car? Could these lead the way in forcing a change in the age-old pricing methodologies and restore the economic balance between insurer and insured?
If these technologies are widely embraced by consumers, or better still mandated by law, the net effect could be a dramatic reduction in traffic accidents, fatalities and insured vehicle losses. Concerns raised by the insurance market that such new technologies will only reduce premiums further misses the point. Isn't the goal of insurance to better understand and price risk as accurately as possible? Wouldn't technology facilitate this?
As George Bush famously misquoted; "fool me once shame on you, fool me twice, shame on me". If you are an insurance company, and all or, a substantial part of your book of business is motor insurance then you need to look at taking a radically different approach to how you assess and price motor insurance for tomorrow's Facebook-generation of road users. Those that do will be rewarded with that ever-elusive goal of profitable market share. Those that don't, or are simply unwilling or unable to embrace change, might as well put up the "for sale" sign.