Basic Information:

  • Population: 66.9 million
  • Location: Europe
  • Primary Language: English
  • Capital: London

The UK’s Insurance Industry

Quick Summary

If you’ve ever wondered why some English insurers have such interesting names (Scottish Widows, we’re looking at you), it’s worth it to go back to the beginning, and by ‘the beginning’ we mean the beginning of insurance as we know it today.

According to a study by Swiss Re, the UK is considered the birthplace of the modern insurance market. The first fire, accident, and life insurance companies were established in the UK during the 1700s and laid down the framework for the global insurance market to come. They were successful for many of the same reasons modern day insurers are: they were supported by private capital, profit-driven, and used an actuarial approach to underwriting.


Major Players

As of 2018, here are the top players in the UK insurance market.

  1. AIG (American owned, based in London)
  2. Aviva (UK owned, based in London)
  3. RSA (UK owned, based in London)
  4. UK Insurance (UK owned, based in Leeds)
  5. Chubb (Swiss owned, based in London)
  6. Bupa ((UK owned, based in London)
  7. AXA & AXA PPP (French owned, based in London)
  8. Allianz (German owned, based in London)
  9. XL (acquired by AXA (French owned), based in London)
  10. Ageas (Belgian owned, based in London)

Regulation

The UK insurance industry is regulated by a number of governing bodies, including the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and the European Insurance & Occupational Pensions Authority (EIOPA). The legislative committee responsible for the UK insurance industry is the UK Treasury Select Committee (TSC).

The FCA serves as the conduct regulator for 58,000 financial services firms and financial markets in the UK. The PRA is a part of the Bank of England and is responsible for prudential supervision, insurance oversight, of authorized UK insurers. It’s also conducts independent market evaluations and maintains the ‘rulebook’ for insurance practices. 

The EIOPA is responsible for supporting financial system stability, market and financial products transparency across Europe. The latest supervisory framework affecting the UK and European insurers and reinsurers, Solvency II (SII), went live in 2016. UK regulators, including the TSC, are now working together to ensure SII will still work effectively under Brexit.

In the UK, insurance regulation includes strong privacy laws, enforced by the Information Commissioner’s Office (ICO), an independent authority upholding information rights, promoting transparency by public bodies, and data privacy for individuals. 

Insurtech in the UK

The insurtech market in the UK is one of the most diverse and active on the planet. According to a 2019 report from KPMG, the UK insurtech market saw over $1 billion in investments through 2018, which bucked an otherwise downward trend in insurtech investment globally.

“Clearly, the UK has a thriving insurtech sector,” says Simon Ranger, Head of Insurance, KPMG UK. “We are seeing the market mature as fewer, but bigger, deals take place.”

Major Players

The UK boasts hundreds of insurtech startups in a wide variety of insurance markets. In the 2018 Insurtech100 List by Fintech Global, for which a panel of analysts and industry experts review research on thousands of insurtechs globally, the UK nabbed 20 spots on the list, second only to the US’s 39. 

“The impact of the most innovative InsurTech companies will be measured in billions of dollars over the next few years,” says FinTech Global director Richard Sachar. “InsurTech 100 companies offer solutions that enhance functions across the entire insurance value chain, including marketing & distribution, underwriting & risk rating, claims and customer retention, and they incorporate the latest technologies, such as big data analytics, blockchain, artificial intelligence, the internet of things and bot-assistants.”

Here are a handful of the innovative insurtechs dominating in the UK market right now.

  1. Wrisk is single app solution, providing insurance for everything from gadgets and cars to jewellery and furniture. Wrisk customers can cover multiple items under one provider rather than numerous vendors. 
  2. Homelyfe is a one stop app to secure and manage home insurance, providing a seamless process that takes less than four minutes to complete with minimum work on the user’s side. 
  3. Spixii provides an end-to-end solution for insurers and their customers, automating and personalizing insurance services through integrated chatbots. 
  4. Digital Risks provides commercial insurance solutions and services for startups and fast growth digital innovators. 
  5. Canopy creates win-win solutions for renters and landlords through a service called Deposit Free, which eliminates the need for expensive security deposits by providing insurance against property damage and late rent payments. Canopy recently won the B2B Insurance Start-Up of the Year award at the 2018 Insurance Times Tech & Innovation Awards.
  6. ThingCo provides telematic technology to address many of the technical, practical, and regulatory challenges facing conventional models. Drivers’ data, collected and organized by ThingCo, can be used to access cheaper insurance, reduce losses, and change road safety records.
  7. Laka is a community-based model for bike insurance. Each policy comes with no excess, 60 days of travel insurance, a new for old replacement policy, and roadside support.
  8. By Miles delivers fair and flexible car insurance for low mileage drivers. Aside from a fixed annual cost to cover your car when it’s parked, each policy is paid by the mile.


Reception by traditional insurers

The UK is the birthplace of the modern day insurance market, and the market’s incumbent insurers demonstrate an eager interest in funding and being involved with the insurtech community. 

Not only does the UK insurtech market attract an impressive amount of funding, it has significant, organized representation through Insurtech UK, an industry alliance of over 40 insurtechs, insurers, and brands. These partners and associates include Lloyd’s of London, Holloway Friendly, Polaris, Hiscox, Altus, and more, and it’s constantly welcoming new members.

It’s stated goal is “to use technology to improve insurance and risk management for customers, and make the UK the best place for innovating insurance in the world.” The alliance also works with government in order to smooth the way for new innovations and digital change in the market. 

At a recent panel hosted by Insurtech UK, Alexander Milne, head of insurance, capital markets and trade for the Department for International Trade said, “We’re really glad Insurtech UK has come together because we want the community to help the government understand what it can do to support the growth of the sector, whether that means helping overseas or attracting investment into the UK.”

The UK is also home to a number of accelerator hubs, including Startupbootcamp Insurtech London and Lloyd’s Labs, an insurtech innovation hub at Lloyds of London.

Insurtech Highlight: Laka

Laka is a revolutionary new way for cyclists to insure their bikes through ‘crowd insurance.’ The London-based startup raised $1.5 million in seed funding and won awards for ‘Best Newcomer,’ ‘Best Cycle Insurance Provider,’ and ‘Innovation of the Year’ in the Insurance Choice Awards 2018.

Laka provides users with bike insurance against theft of damage without any premiums or upfront payments, it only makes money during the claims process through a small fee. At the end of each month, customers split the cost of their collective claims as a ‘premium,’ with the maximum being the ‘market rate.’ If there are no claims, there are no premiums. On average, users save roughly 61 percent on bicycle insurance through Laka than they would through a traditional insurer.

 “Customers join without paying any upfront premiums. When there is a claim, we settle it with working capital we borrow from our insurance partner in exchange for a fee,” explains Laka co-founder Jens Hartwig. “At the end of the month, we total up all claims we have settled, add our fee on top, and split the bill on a pro-rata basis. Thus, we pay out first and then ask customers to pay us back the expenses incurred.”

Laka is backed by Zurich UK, which acts as a reinsurer whenever the total claims goes over the ‘market rate’ per person. Zurich provides a stop-loss agreement, for which Laka pays a small fixed fee per policy, per month, ensuring any customer exposure above the cap is absorbed by Zurich.

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