With 2024 underway, over the next few weeks our insurance experts will offer exclusive insight on what the year ahead will bring for the industry as a whole. Up first: personal lines.

Inflation and the resultant squeeze on household finances is predicted to continue this year, driving consumers to shop around for the lowest premiums in the market. Insurers bringing customer-centric offerings can attract and retain customers without damaging margin. Here are three customer-focused trends our insurance experts expect to see come to the fore within personal lines in 2024:

  1. Personalised and flexible insurance products: Although not new to the industry, expect to see insurance offerings, such as ‘pay-as-you-go’ vehicle insurance, enter the mainstream in 2024 as consumers look to limit their outgoings. The average car or van is in use for just 4% of the day in the UK and cost-conscious consumers are demanding the option to pay for time on the road, not time in the driveway.
  2. Insurance bundles: While it’s common practice for insurers to offer product discounts to existing customers, the propensity for consumers to shop around for a better deal in 2024 serves up an opportunity for insurers to acquire customers across multiple lines through the bundling of products. By offering combination deals to insurance shoppers for home, motor, travel, gadget, pet and more, insurers can win new business across multiple lines at a low cost of acquisition.
  3. Partnerships and rewards: Providing customers with more than just insurance is a great way to attract and retain, without compromising price. Sky and Zurich’s smart home insurance offering, which comes with £250 of smart home technology including leak sensors and doorbell cameras, is a really good example of a customer-centric insurance offering that sweetens the deal for consumers. Expect to see more innovative partnerships like this one, driven by the demand from consumers for more than just insurance in 2024.

Read on for exclusive insights from Partner Ben Gower, Principal Tom Swift and Principal James Tapper on other notable trends for personal lines this year.

Replacing monolithic systems with flexible ecosystems

We’ve seen two waves of transformation in the insurance industry over the last couple of decades.

First, a swathe of insurers undertaking large system changes to put in the big monolithic systems. Driven mostly by having large volumes of personal lines products, these firms started their transformations around a decade or so ago, with some being more successful than others. Since then, they’ve gradually added tools and capabilities to meet their needs and those of their customers on top of these core systems. They’ve also tried to stretch those systems across more complex sectors. It’s created a tangled web of systems for many…

The other tranche of insurers are those that didn’t take part in the first big transformations – many because their focus lay on the commercial and specialty side. But now, these organisations are seeing the need for major transformations.

Whichever tranche they are in, insurers are now wrestling with the extent they can create an ecosystem; the ability to plug in and unplug tools and systems with a relatively flexible architecture built around a solid data model, with the goal of being more nimble, faster to market, faster in the market, all while at lower costs to serve.

The race is on to see which tranche will be able to shift to the ecosystem approach faster – those that made big investments in their systems over 10 years ago based on monolithic infrastructure, or those investing afresh, looking to create an ecosystem from the outset.

A much bigger focus on risks related to climate change

From broken freezers (too hot) and broken pipes (too cold), to major flooding, coastal erosion and wildfires, the impacts of the climate crisis are really starting to bite for homeowners and their insurers. The cost of insured natural catastrophe events has doubled to £135bn globally in the last decade alone and those costs are showing no signs of tapering. To date, insurers have priced this risk into premiums and added more and more exclusions for at-risk customers. However, insurers will need to find a more sustainable approach in order to continue to provide a safety net to these home owners without becoming prohibitive. Here are three alternative options organisations should look to explore in 2024:

  1. Adapting risk modelling to better assess climate risks so that customers aren’t being unfairly penalised by out-of-date models (e.g. updating question sets to ask more detailed questions about climate risk for a specific property)
  2. Incentivising customers to adopt climate prevention measures by reducing premiums for those that do (e.g. installing anti-flood doors or early warning systems)
  3. Forming industry-funded research bodies to better understand climate risks and to develop innovative prevention measures, as the industry has so successfully done with Thatcham Research and vehicle risk research

Using AI and analytics to predict and prevent

With the cost of materials and labour increasing rapidly over the last two years, this has inevitably led to an increase in the cost of property and casualty claims, which in turn is being passed on to customers through their premiums.

Rather than relying on the policy holder to notify the insurer of an incident, the explosion of data availability has enabled insurers to either minimise a claim by identifying it early, or preventing the loss ever happening. Add to this the availability of low-cost internet of things (IoT) devices, such as moisture and noise sensors, and you have all the components required to move from a “repair and replace” approach to one that “predicts and prevents.”

The challenge then becomes how you separate the information from the data, how you develop a culture of trust in the data, and the level of automation and transparency you allow in the decision-making.

From creating flexible ecosystems to effectively implementing AI-enhanced solutions, ensure your organisation is leading the way within personal lines insurance this year, and beyond:

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