Does the rise of InsurTech mean the subsequent fall of traditional motor insurance as we know it? Alan Inskip, Tempcover CEO & Founder, offers insights here.
No. It certainly does not. It is a well-known fact that the InsurTech sector has experienced a major growth surge over the past year. The primary catalyst for this trend is the seismic and almost instantaneous shift in consumer habits, as motorists significantly reduced their mileage by working from home or as a result of being furloughed during lockdown.
This overnight shift in consumer behaviour meant that the large annual insurers were encumbered by legacy systems that did not feature the flexibility or agility to respond accordingly. As a result, consumers reconsidered whether annual insurance was still right for them and increasingly began to explore more flexible options.
Even though restrictions are easing, commuter trends are not expected to return to ‘normal’, as commuters still remain wary of potential health risks posed by public transport . Many motorists also expect to travel less or to car share, and are therefore opting for more flexible options, such as consumable usage-based insurance (UBI) policies for the time and duration that they actually need. InsurTech companies, which provide fully-digital UBI products such as temporary car insurance, have been able to swiftly adapt to market changes and meet new consumer demand instantly. At face value this may paint a bleak picture for traditional insurers, but scratch deeper through the surface and there is an exciting new era of possibility awaiting the motor insurance industry.
Embrace InsurTech, don’t resist it
We know that the large insurers lack the agility to respond swiftly according to unpredictable market trends, and this is where smaller InsurTech businesses can prove to be invaluable partners, as they are at the heart of the digital UBI product revolution.
They have the proprietary technology and skillset to create bespoke digital products for the large insurers, thereby enabling them to keep up with the industry disruptors through collaboration rather than direct competition – all while satisfying ever evolving customer demand at a competitive cost. This ultimately means that UBI products should be seen as a complementary add-on, rather than an outright replacement to the existing annual model, which still has an important role to play.
Of course, it’s a two-way street and InsurTechs can also benefit substantially from collaborating with the large insurers. By partnering with a widened portfolio of well-established underwriting partners, InsurTechs are able to expand their coverage options and acceptance criteria, while ensuring that they offer their customers a comprehensive choice of the most competitively-priced policies in the market.
The InsurTech move from niche to mainstream through aggregators
InsurTech products have traditionally not featured prominently among insurance aggregators, also commonly known as price comparison sites. However, the recent shift in market conditions means that aggregators are paying more attention to the increasingly important role that InsurTech is playing in the greater insurance market.
This represents a measurable growth opportunity for the UK InsurTech industry, as aggregators tend to feature most prominently in online search results, often ahead of individual companies for key search word terms. This provides InsurTechs access to a new pool of potential customers that may have been inaccessible without the support of one or many aggregators.
UK insurance consumers are also recognised as being the most aggregator-friendly in the world, as revealed by a McKinsey report  which showed that UK aggregators captured 55 percent of direct gross written premiums (GWP) in the market in 2019.
By 2024, it is estimated that two thirds of the total value of UK motor insurance premiums written will come from online sales , making online collaborations more important than ever. But it’s not just about searchability, it’s about brand awareness too.
While InsurTechs are undoubtedly revolutionising the motor insurance industry at an unprecedented rate, our products are still relatively niche and unfamiliar to the wider consumer audience, when compared to the well-established annual model. By working in collaboration with the large insurers and aggregators, InsurTech’s move from niche to mainstream will be accelerated.
This in turn will drive the technological advancement of the whole insurance industry, which benefits the entire value chain. Most importantly, customers benefit from the most competitively-priced, fit-for-purpose products that are designed specifically around their unique requirements at any point in time.