Insurance, insurers and consolidation

The UK market is going through a period of insurance provider consolidation. Again.

The recent news that Ageas is acquiring Esure follows hard on the heels of Aviva adding Direct Line Group to its offering (Commission scrutiny pending). Surely more to come?

My esteemed colleague Matteo Carbone has long espoused the challenging environment, business torpor and necessary dependency on insurtechs as a proving ground for improved loss ratios. So, what contribution can consolidation make? Size, economies of scale, efficiencies and consequent growth in revenues and profit are the usual expectations from shareholders and investors. I have been a part of numerous acquisitions and have experienced other confounding factors to successful consolidation:

• Strategy – starts as ‘do what you’re doing’ then ‘review’ then ‘align’ then ‘here’s where you’re headed’. Takes time.
• Culture – they’re inevitably different. Especially if smaller private to larger public. But even for big fish. Joining ways of working, communicating, addressing (I was part of EMI Music / Virgin deal; EMI surprised that Virgin phone directory alphabetical by first name!), socialising and rewarding all takes effort and time to sort out.
• People/roles – maintaining, retaining, and motivating valued talent is a must. But fraught with risk when efficiencies are sought. Needs a holistic approach across HR and functional departments and leaders to provide as human a response as possible.
• Planning, action, results – lastly, how about getting stuff done? What does business as usual mean in this environment? Businesses will have different planning processes and cycles, and arguably different ways of reporting results of actions, and then managing iterative efforts. In turn this can hamper the vital doing piece!

We must wait and see. Clearly seasoned senior managers are at the helm(s). But is this consolidation the secret sauce to fix loss ratios? Matteo opines the smarter use of data. Especially telematics data – me too of course! I fear that executing the four points above will delay that broader positive deployment of telematics and connected data for a little while longer.