Why Brexit is a passport to innovation for the insurance industry

If there’s one indus­try which knows about hedg­ing its bets, it’s insur­ance. No soon­er had the ink dried on the 2016 Brex­it ref­er­en­dum than many firms set about restruc­tur­ing their busi­ness­es and secur­ing new tal­ent pipelines.

While the Asso­ci­a­tion of British Insur­ers (ABI) believes some 35 sub­sidiaries and 29 mil­lion con­tracts were trans­ferred to the Con­ti­nent in the two years that fol­lowed the vote, for oth­er play­ers it was a case of look­ing clos­er to home. 

“Our focus is on our strongest and most strate­gi­cal­ly advan­taged busi­ness­es in the UK, Ire­land and Cana­da,” says Suresh Weeras­inghe, head of Euro­pean Union and Brex­it pub­lic pol­i­cy at Avi­va.

“These are our core mar­kets, where we have mar­ket-lead­ing posi­tions, can gen­er­ate attrac­tive returns and have a clear path to win, and we will invest for growth across them.”

He believes Brex­it offers a good oppor­tu­ni­ty to reg­u­late specif­i­cal­ly for the UK mar­ket, rather than for the EU as a whole, and says the new rules should be tai­lored with this in mind.

With an already-strong inter­na­tion­al pres­ence, the task for Willis Tow­ers Wat­son was to cre­ate a dual-reg­u­lat­ed oper­a­tion in Bel­gium, allow­ing col­lab­o­ra­tion between client ser­vices teams in the EU and UK.  

“So far the trad­ing cli­mate has been main­tained at very strong lev­els thanks to the plan­ning and solu­tions we put in place,” says Nico­las Aubert, head of Great Britain at Willis Tow­ers Wat­son, who is look­ing for­ward to a new peri­od of inno­va­tion and growth. 

Post-Brex­it, the firm’s expe­ri­ence has been “one of con­ti­nu­ity, for our clients, our­selves and our busi­ness part­ners, so there have not been too many bumps in the road so far”, he says.

While reg­u­la­to­ry change is upper­most in firms’ minds, a clear­er glimpse of the road ahead has become more impor­tant than whether the new rules will be tougher or per­haps increas­ing­ly light touch.

Clarity first for insurers

As a high­ly reg­u­lat­ed busi­ness, reliant on what Aubert calls “hav­ing good read­abil­i­ty” from the reg­u­la­tor, clar­i­ty has now become the top pri­or­i­ty, he says, allow­ing firms to “see what the reg­u­la­to­ry envi­ron­ment will be like as far into the future as pos­si­ble and to adapt, pre­pare and main­tain the qual­i­ty of busi­ness oper­a­tions and client expe­ri­ence”.

While con­sol­i­da­tion among large insur­ance hous­es, includ­ing Aon’s pro­posed merg­er with Willis Tow­ers Wat­son, con­tin­ues through­out much of the sec­tor, the inde­pen­dent broking indus­try has proved equal­ly acquis­i­tive.

“There’s an arms race in the UK insur­ance bro­ker busi­ness and despite the over­all num­ber of firms in the coun­try dwin­dling to just 2,000, there’s no sign that this trend will end soon,” says Peter Blanc, group chief exec­u­tive at Aston Lark.

Hav­ing geared up for Brex­it by pur­chas­ing two bro­ker­ages in Ire­land, both with Lon­don branch sta­tus, his own firm has well-advanced plans for fur­ther growth.

“Hav­ing made a deci­sion to sig­nif­i­cant­ly expand our Irish busi­ness, we have invest­ed in lead­er­ship and are now engaged in the dili­gence process around acquir­ing fur­ther bro­kers in the Irish mar­ket,” he says. “What start­ed out as a Brex­it hedge has become a suc­cess­ful and long-term growth strat­e­gy for us.”

With a recent KPMG report, com­mis­sioned by the ABI, sug­gest­ing that reforms of finan­cial reg­u­la­tions could release £95 bil­lion to help boost the UK econ­o­my and tack­le cli­mate change, mod­el­ling work around the man­age­ment, reduc­tion or trans­fer­ring of large client firms’ cli­mate risk is inevitably gath­er­ing pace.

Aviva pledges net zero carbon

As part of a growth plan, Avi­va has announced its inten­tion to become a net-zero car­bon emis­sions com­pa­ny by 2040, a move described by Weeras­inghe as “the most demand­ing tar­get of any major insur­ance com­pa­ny in the world today”.

“The under­tak­ing, which will inform every aspect of oper­a­tions and invest­ment deci­sions, is part of our strat­e­gy to be the UK’s lead­ing insur­er, con­tribut­ing to a sus­tain­able eco­nom­ic recov­ery,” he says. “We have big ambi­tions for Avi­va.”

For Willis Tow­ers Wat­son, which names improve­ments in diver­si­ty and inclu­sion as a top pri­or­i­ty for the busi­ness inter­nal­ly, stay­ing ahead of the game over new atti­tudes to employ­ment is also vital.

“The future of work is also an area that we put a lot of time and effort into,” says Aubert, not­ing the “remark­able resilience and flex­i­bil­i­ty” shown by the firm’s work­force dur­ing lock­down.

“This has been an impor­tant issue for many years, but par­tic­u­lar­ly now as we reimag­ine the work­place of the future,” he says.

While ABI assis­tant direc­tor Car­ol Hall, head of Euro­pean and inter­na­tion­al affairs, shares Weerasinghe’s view that auton­o­my over reg­u­la­tion could augur well for UK firms and con­sumers in the long term, she sees 2021 as pri­mar­i­ly a bed­ding-in year for Brex­it.

Con­tin­u­ing the flow of per­son­al data between the EU and UK for six months was help­ful, she says, and with a deci­sion on the UK’s “data ade­qua­cy” like­ly to hap­pen with­in that time, cross-bor­der claims are con­tin­u­ing to move with­out hold-ups.

As for the long-term prog­no­sis, Hall is cau­tious­ly opti­mistic. “We are out­side the club now and mar­ket access will not be the same, but things should set­tle down in time and it’s clear our sec­tor has not been as bad­ly affect­ed by Brex­it as many oth­er indus­tries have.”

Aston Lark’s Blanc reads the sit­u­a­tion dif­fer­ent­ly. “My long-term pre­dic­tion is that every­one will realise all the pass­port­ing and free move­ment arrange­ments were put in place because they made everyone’s lives eas­i­er, and over time we’ll end up rein­stat­ing these types of arrange­ments under dif­fer­ent names and ban­ners,” he says. 

“Bit by bit, new agree­ments will be reached to stream­line process­es and enable clients to be looked after, and even­tu­al­ly we’ll get back to a sub­op­ti­mal ver­sion of what we had in place pre-Brex­it.”