Five Trends Affecting the Insurance Industry

Five Trends Affecting the Insurance Industry

Whether it’s changes in behaviour caused by the pandemic, innovations in technology or initiatives to support climate change, we take a look at five emerging trends and how they are affecting the insurance industry.

The Growth of Cycling

Since the beginning of the pandemic cycling has grown significantly, increasing by over 200% at the weekends. Sales of bikes have climbed, one report revealing a 45% increase, and more than 3.1 million bikes sold last year.  It is predicted that a further three million bikes will be purchased this year.

This had led to an increased demand for bike insurance, especially as some bikes and e-bikes can cost thousands of pounds. The demand hit a five year high in the first quarter of 2021, up 130% on 2020.

Many people insure their bikes on their home policies, though some have a limit that wouldn’t cover many bike models.

There are more and more bike-specific policies appearing on the market, managed by well-trained bike specialists.  Although these can be little dearer, they offer bespoke packages tailored to cyclists’ needs, such as covering all accessories and including more accident scenarios.  

The Electric Car Evolution

There are currently more than a quarter of a million pure electric cars in Britain plus over 500K plug in models. More than 175K electric vehicles were registered last year, 66% more than in 2019, and more than 6.5 million households have said they are planning on buying an electric car in the next five years.

Electric cars have a much lower carbon footprint than petrol models, with one car estimated to save around 1.5 million grams of CO₂ a year. With the government’s drive to hit zero emissions by 2050 the electric vehicle market is expected to boom. This will be a huge shake up for the car industry and for motor insurance.

Research from the AA provided some insights into concerns of electric car drivers, with 69% worried about damage while connected to a public charge point and 65% wanting insurance to cover the main drive battery, and damage to cables when cars are connected to them.

Insurance products are being tailored to cover the needs of electric car drivers and work will continue to better understand the various risks associated with this new way of driving.

The Pet Boom

The first lockdown of 2020 saw a big spike in pet ownership across the UK, with 3.2 million households having bought one since the start of the pandemic. The pet insurance industry is also expected to grow, the Gross Written Premiums market rising from £1,171m in 2019 to £1,310m in 2024.

The industry is having to adapt to this unexpected new demand, with recent figures suggesting that less than half of pet insurers offer cover over £1000 if a pet goes missing, but the average cost of a puppy is now approaching £1900. Another consequence of the demand is that there has been a sharp increase in dog thefts and dog theft claims, up 250% since March 2020.

At the same time, innovation in pet trackers, which monitor animals’ activity and overall health, may start to play a greater role in the pet insurance market. Not only in reducing theft, but also by policies being based more on data.

Increase in Smart Tech

The last decade has seen great growth in smart home technology, with 74% of people in the UK currently owning at least one smart home device. Smart TV is top of the list, with smart speakers coming in second. UK consumers are also using smart themostats, wi-fi routers, lighting and security.

This growing trend is transforming home security, which is starting to have implications for home insurance. Lower premiums for households with tech installed are already on the table and it is likely that policies will become more focused on risk reduction and prevention.

Contents, health, motor and life insurance are all starting to change, with insurers using apps to quote and scanning for connected devices that might affect the premiums.

Real time camera feeds, leak detectors, window and smoke detectors can offer enhanced security, and a more preventative way of managing home risks by quickly alerting homeowners to problems. There is no doubt that insurers will be keeping a close eye on the evolution of this type of tech.

A More Remote Workforce

The appeal of country living includes more open space, less pollution, peaceful surroundings, better value housing and a calmer pace of life, and it seems that more and more people are seeking more rural locations to settle down.

With people able to work more remotely, searches for country homes have doubled since lockdown began, and according to Rightmove a third of homebuyers are now looking for something rural.  In some parts of the country people looking for a village property have increased by over 200%.

A movement away from city living affects the insurance industry.  Premiums for urban properties are higher due to the risk of theft and burglary.  With more people at home, the number of claims for burglaries in general have dropped, the number of certain types of accidental damage claims have increased, and contents insurance is likely to see a boost with more people working from home with tech equipment.

It will be interesting for the industry to see how these trends change as the country progresses towards the new normal.

FS Partnership

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