Altus Insurance whitepaper spreads - Flipbook - Page 14
Lifting the barriers to
transformation
Chapter Summary
• One of the biggest issues facing insurers is claims inflation and the impact it is having on pro昀椀tability for
home and motor insurance.
• There is pressure on insurers to 昀椀nd new e昀케ciencies, so that they can remain competitive in an
environment where premiums are going up.
• At the same time, insurers are having to adjust to the new Consumer Duty regulations, introduced this
year by the FCA, with claims being a key area of focus for the regulator.
• Insurers embarking on transformation programmes will need to ensure they really understand why
delays and friction in the claims process are occurring, that they are looking at the whole value chain
including suppliers, and that any technology changes are in fact making the process simpler.
• Legacy technology continues to be a signi昀椀cant challenge and barrier to change, but we have started
to see the emergence and maturity of solutions that bridge the gap between the core platform and the
customer experience the industry is working towards.
• The application of arti昀椀cial intelligence is 昀椀rmly on the agenda for boardroom discussions, with clear
challenges in how this technology could and should be adopted, but also signi昀椀cant opportunities that
are likely to take shape.
• Conversely, fraud remains an ever-present risk, and increased use of self-serve technology and AI can
both counter and feed into the capabilities of fraudsters. Fraud management therefore needs to remain
central to the transformation strategy.
Innovating while facing into claims inflation
Arguably the most pressing issue for insurers at this point in time is how to respond to the prolonged period of
claims inflation we have seen in recent years. The table below sets out the combined operating ratios (COR) for
motor and home insurers in recent years, alongside the key causes for the 2022 increase.
Line of
business
2020
COR
2021
COR
2022
COR
2023 COR
(predicted)
Motor
104%
93%
109.5%
108.5%
Home
110.5%
103%
116%
109%
Headline reasons
for 2022/23 increase
• Rising repair costs
• Energy inflation adding to the cost
of each repair
• Parts and material costs
• Second hand car values
• Increasing labour costs
• Prolonged vehicle rentals, due to
increased time taken to repair
• Shortages in labour, fuelling
increasing labour costs
• Increased costs of materials
• Delays in sourcing materials
• Increased costs for alternative
accommodation due to delays
Figure 6: The impact of claims inflation on underwriting pro昀椀tability. Sources: Insurance Times, DataLab, EY
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