On 31 May 2017, the director of the Association of British Insurers (ABI), James Dalton, gave a speech on changes in the UK general insurance industry.
Dalton commented that cyber will play a very important role in the future of the insurance industry.
One of the biggest challenges and opportunities will be how insurers respond to the digital revolution and to a customer base with changing needs and expectations. For example, mobile technology can help insurers put in place customer solutions in real time. Dalton predicts a greater shift in the industry from being purely about financial risk to being about preventing claims from arising in the first place. He considers this is a reason why the industry has played such a central role in facilitating the use of driverless cars in the UK. Dalton focused on the importance of data protection in light of the European General Data Protection Regulation and stressed that issues such as the WannaCry ransomware attack in May were tough reminders of the importance of effective cyber security. Cyber insurance can assist in managing these risks and insurers are gradually seeing the benefits of collaborating and investing in technology companies in tackling these risks.
Dalton also considered the impact of Brexit. In his view, there are two key challenges for the industry arising out of Brexit. First, the industry needs to address the issue of what to do with existing contracts that have long-term liabilities beyond any phased process of implementation. The payment of a claim can only be legally done if you are authorised to operate in many EU markets. Currently, this can be achieved through passporting. Post-Brexit, insurers could be left in a position where they have contractual obligations to customers in jurisdictions where they are not authorised. The second challenge is dealing with the policy issues raised by the Great Repeal Bill. Due to the complexity and number of issues involved, completing the great repeal process by March 2019 may be tough. There are a number of significant policies to get right, including the need for a standalone prudential insurance regulatory regime and the extent to which this should be allowed to deviate from Solvency II. Finally, the insurance market requires a post-Brexit regulatory relationship with the EU and it is important for regulators to maintain a close and engaged relationship with their European counterparts to bring this about.