In this article, Sarah Vaughan, Director at Angelica Solutions explores the trade-offs emerging in the insurance market.
In the UK insurance market, we’ve long operated with a fundamental and largely unquestioned principle: insurers have the right to decline risks that don’t meet their appetite.
It’s a cornerstone of underwriting discipline. It protects loss ratios, supports capital efficiency, and ensures that pricing remains broadly aligned to risk. From a purely commercial perspective, it makes complete sense. But it’s not the only way to structure a market.
In at least one European market, recent removal of price caps has come hand-in-hand with a requirement to offer a price to every customer. They cannot simply decline. Instead, they must quote, and quote within defined parameters that prevent pricing being used as a proxy for refusal.
At first glance, this feels counterintuitive. Why force insurers to write business they don’t want? But what is interesting here is that when every risk must be priced, the industry is required to be explicit about its view of that risk. No segment disappears from view because it sits outside appetite. Instead, the true cost of risk and critically, the limits of affordability are laid bare.
In contrast, the UK model allows us to manage this more discreetly. Risks that fall outside appetite are simply declined and the market moves on. For the majority of customers, this works well as natural competition means that the ‘average’ consumer has access to affordable cover. But for a not insignificant minority, it creates a very different experience.
We see segments of society for whom access to insurance is increasingly constrained not because cover is theoretically unavailable, but because no provider is willing to offer it at a price that is considered viable. For example, for older drivers, particularly those in rural areas, the ability to drive is a necessity. Yet rising premiums and tightening underwriting criteria are, in some cases, forcing difficult decisions about whether that independence can be maintained.
The same pattern has existed in travel insurance for a long time, where older customers or those with pre-existing conditions are finding the cost of cover prohibitive. These are indicators of a broader structural issue in that what happens when a market designed around risk-based pricing reaches the point where certain risks are, collectively, no longer considered insurable?
Historically, competition provided the answer. A diverse market with a wide range of underwriting philosophies and risk appetites meant that even higher-risk segments could usually find a home somewhere.
It worked because there were many players in the market. The basic dynamics of supply and demand meant that if one insurer declined a risk, another would often take a different view, whether through a different data lens, a different cost base, or simply a different appetite for volatility.
In effect, the market itself absorbed the challenge of the “uninsurable” customer.
That dynamic is now under pressure. Recent consolidation has significantly reduced the number of distinct players in the market, while distribution has also become increasingly concentrated. At the same time, insurers are operating with virtually the same data, under the same regulatory expectations and optimising to similar financial constraints.
The result is a growing risk of convergence in decision-making. When the market starts to think in the same way about risk, the likelihood that certain segments are consistently deemed uneconomic increases materially.
Alongside this, the regulatory burden has continued to rise. While well-intentioned, it has made it more difficult for niche or non-standard specialists to enter or scale within the market, removing the very players who historically helped absorb more complex or higher-risk customers.
In such an environment the distinction between “unknown” and “uninsurable” can start to blur. None of this is to suggest that the UK should move wholesale to a “quote everything” model. The ability to select risk remains fundamental to a functioning insurance market.
But as we look ahead, there is merit in asking whether the current balance is still the right one, particularly given the role insurance plays in society. In focusing on ever more precise risk selection, we may be unintentionally narrowing access to products that many would consider essential. While insurance is not a utility in the strictest sense, for many customers it functions like one. If we were talking about water, energy or telecommunications, leaving segments of the population without access simply wouldn’t be acceptable and it raises a valid question as to where the boundary should sit for insurance.
At Angelica Solutions, we spend a lot of time helping insurers understand and price risk more effectively. But understanding risk is only part of the equation. The more difficult and more important question is what we choose to do with that understanding.
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