Andrew How, Senior Sales Director, delves into the highly competitive world of commercial SME and motor insurance in Part 1 of this two-part series exploring the opportunities and challenges facing insurers in the fast-paced commercial lines market
The landscape of commercial lines insurance has undergone significant changes in recent years, presenting both opportunities and challenges for insurers. In this ever-evolving market, it is crucial for insurers to stay ahead of the curve, understand industry trends, and address the pain points in insurance product development. In this blog post, we will focus on two specific segments within commercial lines insurance: SME (Small and Medium Enterprises) and motor insurance.
Both are high-growth sectors – the global SME Insurance Market is projected to reach $26.6 Billion by 2030, growing at a CAGR of 5.8% from 2023 to 2030. At the same time, the global GWP generated by commercial motor vehicle risks is estimated to increase from $150 billion in 2021 to more than double by 2028.
Let’s start by examining the challenges faced in the commercial motor insurance segment. According to Munich Re, a proportion of the forecast growth is driven by a shift from retail to commercial motor insurance. While the market is still dominated by business-owned fleets, new transformative fleets such as car subscriptions and ridesharing continue to emerge, and an increase in direct-to-consumer business models fuels this growth further.
With the rise of the gig economy and the increasing popularity of ridesharing platforms, there is a growing need for specialised coverage for drivers. Commercial motor insurers have the opportunity to provide additional coverage beyond what the rideshare platforms offer, providing tailored coverage that meets the unique needs of these drivers.
Additionally, auto telematics has emerged as a valuable tool for insurers to assess the driving risk of large fleets. By tapping into the wealth of connected motor data, insurers can gain insights that enable them to underwrite and price policies more accurately.
Demand for flexibility across commercial lines
Similarly, in the general SME commercial insurance segment, there is a push towards automation and self-service capabilities. SME business owners desire the same level of convenience and minimal data entry experience they enjoy in their personal lives when purchasing insurance. However, it’s important to note that despite the demand for self-service options, agents still play a critical role.
Research indicates that a significant percentage of customers choose to complete their insurance purchase with an agent when binding coverage. Therefore, finding the right balance between automation and personalised service is key in this segment.
Flexibility in product development is a crucial factor for multi-line insurers who cover various commercial lines segments. They must be able to adapt quickly to address the diverse needs of different businesses. This is where modern policy and rating engines come into play.
A modern rating engine and policy administration system provide insurers with the capabilities they need to bring a wide variety of products to market rapidly. These systems enable efficient underwriting and pricing, and they offer the flexibility to make product changes quickly and easily through low-code development.
By employing an “inheritance model,” insurers can set up base products for different commercial lines and regions, creating reusable components for differentiated hierarchies. This approach streamlines the product development process and ensures consistency across offerings.
Open ecosystems are essential
In addition, an open ecosystem is essential for seamless data integration and a streamlined purchasing experience. By leveraging pre-filled data about vehicles, properties, driver history, and other relevant information, insurers can enhance the efficiency of the buying process for businesses. Flexible APIs enable insurers to distribute their products directly, through brokers, or via embedded channels, catering to the varied preferences of customers.
Commercial insurance, with its vast amount of data from diverse sources, poses a unique challenge for insurers when it comes to modeling, pricing, processing, and servicing policies. The complexity of large-schedule policies, which can include thousands of line items, further complicates matters. Legacy systems and manual processes simply cannot keep up with the pace of today’s business. Insurers require a modern solution that can handle volume, complexity, and constant change.
Duck Creek Technologies as the leading provider of insurance software solutions, supports some of the world’s most prominent commercial insurers. Our rating engine, policy administration system, and industry content library are specifically designed to address the challenges faced by commercial insurers. By leveraging our robust and flexible on-demand SaaS platform, insurers can achieve key business objectives such as accelerated product launches, enhanced claims management, and streamlined billing processes.
Read Part 2 of the thought leadership article on commercial lines insurance here.