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London Calling: A Perspective on Insurance Innovation from the U.K. and Europe

Insurers everywhere are embracing innovation, but there are important differences among the U.K., U.S., European, and other markets

By Jonathan Rusby and Tony Ferguson

As one of few insurance technology companies with a global footprint, Duck Creek Technologies knows well that industry opportunities and concerns held by insurers in the United States are different from those in Europe and here in the United Kingdom.

Insurers everywhere are embracing innovation, but for some, “legacy” extends beyond technology. In the U.K., for example, the history of insurance dates back to the seventeenth century at the Lloyd’s coffee house. Underwriting philosophies, tools, and processes at U.K. firms are deeply established, posing formidable mental and technical obstacles to the incorporation of insurtech methods and philosophies into existing businesses.

Insurtech startups are no less prevalent in the U.K. than they are the U.S., but given the perceived compatibility challenges in the former, there’s a greater emphasis on innovating within insurers’ own walls. Generally, the idea is for the incumbent to understand how the smaller, nimbler insurtechs develop business models and technologies quickly, and combine those lessons with the insurers’ capacity to integrate scalable backend systems or a broader cohesive landscape – something by which insurtechs are challenged.

Frequently, separate business units with their own leadership run these innovation ventures. MS Amlin has its Edge digital incubator; Aviva has the “Aviva Garage;” XL Catlin has XL Innovate, its sponsored venture capital initiative; and Munich Re has its Digital Partners business, which scouts and invests in startups. All of these initiatives help existing carriers better understand and even partner with the next generation of ideators in the insurance space.

In the U.K., insurers also are beginning to become more advanced in terms of the way they sell, which, for personal lines, is through aggregators, and with a greater emphasis on direct-to-consumer business through insurers’ online portals. Something like 60 to 70 per cent of all personal lines business here in the U.K. is now written directly or via an aggregator, according to Accenture.

Whilst some parts of Europe, such as Germany and France, are still very agent-broker based, in the U.K. the trend has been toward “low touch;” getting insurance products underwritten without human intervention. While this has reduced the broker and agent communities significantly, they, too, have been reinventing themselves, looking for higher-value products and entering different areas of the market.

Becoming Digitalised from Front to Back
One of the most important similarities among insurers worldwide is the near-universal struggle to become digital organisation-wide. Many insurers say they’re digital. They have a website and mobile app, after all, and the take-up rate for telematics and third-party external data is much more mature in the U.K. and Europe than in the U.S. In fact, however, most aren’t.

Digitalisation is not just about selling on a mobile phone or website or even being more responsive to customers. Digitalisation involves insurers actually reinventing their business processes and operating in different, more efficient manners that accelerate internal procedures that lead to better customer outcomes. To delay or defer these sorts of decisions, regardless of your geography, is to be consigned to suffer from adverse selection.

In the U.K., the U.S., Europe, and elsewhere, insurers are beginning to crack this puzzle and do business very differently. The UK Post Office is an outstanding example of a very traditional business that has embraced digital technology to gain competitive advantage and achieve significant new product sales across multiple channels

Today’s leading software providers understand that global insurance challenges cannot be addressed with one-size-fits-all solutions. They succeed because they understand, appreciate, and accommodate regional differences – whether goals, approaches, technological maturity, business lines and models, history, or geography.

For your consideration, in the U.K., E.U., the U.S., and everywhere else, I offer Duck Creek’s Future Playbook, in which we offer our perspective on the economic, technological, and social forces that are driving the insurance industry, and how even the most traditional insurers are now plotting a course for their digitalised futures.

The Future Playbook was devised with U.S. examples, but the competitive, macro-economic, and sociological trends it addresses translate globally, though perhaps with different emphasis, such as those we’ve presented above. In all, we believe there’s never been a better time to embrace change, and we’re truly excited to be part of the digital transformation of this industry.

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