Let’s start with the themes.
- It’s getting expensive
Absolutely everything points to a substantial increase in the input costs of insurance across the board in 2022. In 2020/21 general insurers benefited from reduced claims due to COVID, but there is a bounce back cost increase that is now feeding through. Whilst some have said that this cost won’t be passed on to customers and that we won’t see premium inflation, I say it isn’t a question of whether we see it, but how much we see.
There have been whispers in the market of a potential premium increase of up to 30% in 2022, and I can’t say this isn’t going happen. I can see lots of reasons why it could. However, I personally I think that the increase will be lower than that, though double digit, almost certainly.
Along the way I think we’ll see new entrants will come into the market and begin to pick up business. Usage based insurance will be a huge thing - it might be telematics, it might be more fractional, but it’s going to be a thing. This will likely come in waves, not everyone is going to dive in immediately. Some will hold back for the first wave to crash and then wade in. This will make it difficult for incumbents to get a real sense of how all of this is affecting them until the middle of the year.
- The great backlash begins
With prices increasing and the economy opening up there is a real chance that there might be a huge consumer backlash against insurers, stoked by the media. Everywhere will be increasing prices next year, let’s be clear, but you can’t pick on retailers or hospitality because they have had it hard. But you can pick on insurers (and financial services in general - mortgages will be going up after all) and the media like a story about consumers being picked on. Even if it’s inaccurate it makes for good column inches.
But there could also be another story, a second wave. People who see large jumps in premium with their existing insurer and would like to switch but can’t get a cheaper price. They become rate-trapped, making them irritated and disloyal. They will fuel a further backlash.
- The regulator gets an itchy trigger finger
Someone recently said to me “all insurers have got this wrong” in reference to the General Insurance Pricing Practices, which was an interesting observation. You will be delighted to hear, I don’t agree.
Now the bad news. I speak to a lot of insurers that think that the FCA is only interested in the difference between new business and renewal prices. That is wrong. They have been saying loudly and repeatedly, that this is about providing fair value and it doesn’t apply only to home and motor.
In 2022 the FCA is going to have to stop sending people letters and get it’s red-line marker out. Those on the wrong side of the line will be fined. It’s the only way to make the point. And the fines won’t be small, they will be large.
The FCA has been hiring data scientists, they have all the data and they will be asking firms to produce the evidence to explain their decision making. If your evidence reveals decisions were primarily based on protecting profit and shareholders, rather than championing customers and providing them with fair value, this will not be looked upon kindly.
“So, what is that 1 word?”, I hear you ask. It’s simply “dynamic”.
When I pitched my word of the year to some of my friends and trusted advisors out there in the market they almost unanimously wanted me to change the word to “chaos”. But I don’t really believe in chaos. Google defines dynamic as:
- (of a process or system) characterized by constant change, activity, or progress.
"a dynamic economy"
- (of a person) positive in attitude and full of energy and new ideas.
"a dynamic young advertising executive"
I think 2022 will be a year of constant change, activity and, most importantly, PROGRESS!!! Those that do well next year will be those who approach it with a positive attitude, full of energy and new ideas. We are entering a new world of insurance and it is exciting and exhausting in equal measures.
For our part, we see the change as positive and we can see that those who embrace it will not just survive but blossom. We are excited, we are positive for you and we hope that we can help bring energy, ideas and confidence to you in the year ahead.
Track the market in response to the general insurance pricing practices directive
In response to the FCA's general insurance pricing practices (GIPP) directive, we’ve developed and launched a unique new service that has been specifically designed for insurance brands to track changes across the market and help inform product proposition and pricing strategies.
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