In late December, the expert underwriters and executives at ERS held their annual Live session, inviting broker partners from across the country to learn about developments at ERS and in the wider motoring industry, as well as providing an in-depth look ahead at what we can expect as we enter into 2023 and beyond.
You can watch the whole session here, or read on for a summary of the key discussion points and crucial take-out information on how ERS will continue to support its broker partners in the year ahead.
Why ERS?
The expert team reminded our brokers why they should choose ERS. They highlighted the importance of ERS' A+ rating, emphasising that it is more important than ever to have a consistent, valuable, and trustworthy panel member – as well as highlighting ERS' experience and heritage in the industry, together with the breadth of specialist products that ERS offers.
ERS's agile underwriting approach, together with the company's teams of experts, has led to our enviable online reputation (ERS is rated 'excellent' on TrustPilot).
Introducing IQUW
The panel was joined by Richard Hextell, Group Chief Financial Officer and Head of Strategy at IQUW. ERS is now part of IQUW, a new property and specialty (re)insurer at Lloyds and is poised to play an essential role in IQUW's growth strategy. Indeed, by providing revenue diversification and stability to the group, ERS is expected to represent over a third of the Group’s portfolio
Richard explained how the relationship expands the group's offerings and discussed the strategic alignment between ERS and IQUW. As Richard stated, "ERS already shares our vision of providing a responsive, agile, great user experience for its broker customers."
IQUW was established to embrace the future of underwriting, combining human expertise with intelligent data use to underwrite risks. The IQUW team combines recent thinking with decades of experience in underwriting, finance, operations, and investing in the re/insurance sector.
2022 in Review - UK Motoring Market Trends and Key Drivers affecting the Market
The impact of inflation
During an informative session, the ERS team examined trends in the motoring industry, noting that road usage has returned to pre-pandemic levels, and accidents have also returned to pre-Covid levels. There has been a slight decrease in the number of incidents during peak rush hour, possibly reflecting the shift in office hours in the new flexible work world.
Inflation in the UK has been a concern for the motor insurance industry, significantly impacting the cost of servicing claims. And, while inflation in the UK overall had hit 10% at the time of the presentation, the percentage increase does vary within the specific elements of claim servicing:
- 12% windscreen costs (60% of production costs down to energy)
- 9% repair costs
- 10% credit hire
- 20% care costs
- Car parts cost increase by 14%
- 15% paint prices
- Shipping container costs increase by 4x
The extraordinary increase in repair inflation is driven by multiple factors such as energy prices, manufacturing capacity, and increased operating expenses. Many body shop technicians took early retirement or left the market during the pandemic, leading to a labour shortage and wage inflation– and expensive shipping also contributed to the rising cost of repairs. Energy costs have increased the cost of manufacture and delivery of parts, and naturally garages are looking to pass on their rising costs.
Declan O'Mahoney, Head of Claims for ERS, explained that the global shortage of semiconductor chips has impacted the availability of new vehicles and increased the price and popularity of second-hand vehicles. Second had car prices have increased by 30% due to shortage of new cars, and while car production has increased in the last quarter, it remains one-third lower than pre-pandemic levels. Light commercial vehicle production also fell by 18% in October 2022.
In light of the inflation concerns in the UK motor insurance industry, it's important for companies like ERS that we can help brokers navigate this challenging environment and continue to provide the best service possible to their customers. During the webinar, the ERS team reiterated its support for partners across the supply chain through increasing labour rates for its network of garages.
CORE and FNOL
Many motor insurers are facing a difficult financial situation and according to recent data from EY, the average Combined Operating Ratio for the UK Motor market is expected to reach 115% in 2022 and 114% in 2023. Their view is that in 2023, for every pound an insurer receives in premium, they will expect to pay £1.14 out in claims, expenses and commissions, making many motor insurers unprofitable and inevitably leading to increased premiums.
One way of providing insurers with greater control over the costs of claims is for brokers to ensure that claims are reported promptly so assessment and handling of the claim can begin. This can help insurers to reduce the overall cost of claims, which in turn can help to keep premiums low.
Counteracting inflationary pressures
One positive development in the industry is the recent implementation of whiplash reforms, which has led to a reduction in low-value third-party injury claims. The reforms established fixed tariff awards for whiplash injuries and limited the fees that lawyers can charge, resulting in a decline in claims. This has helped to alleviate some of the challenges facing the insurance industry and counteracted some of the inflationary pressures seen elsewhere.
However, to remain competitive, insurers will need to streamline their claims processes and find cost-effective solutions for servicing claims while maintaining customer satisfaction.
ERS has responded to market changes and is well-equipped to support brokers in navigating an evolving market. By offering innovative solutions and a focus on customer service, ERS is poised to meet the needs of its broker partners and their clients.
A look ahead – what to expect in 2023
1. Price corrections
Premiums are increasing in all areas, including consumer motoring, agriculture, and the taxi market, in response to inflation and returning to pre-pandemic levels – and following a long period of Covid-fuelled price drops, price correction is expected to continue into 2023. The ERS team noted that its team and its broker partners have a pressing job to do in the year ahead - to educate policy holders alike on why prices are increasing. We will be hosting the first of our Pitstop webinar series’ in February to continue to provide market insight and expert knowledge in each of our product areas.
Key messages for brokers are:
- Motor risks have been underfunded through 2021 and 2022, some insurers have to increase rates considerably to re-align with post-Covid economic conditions.
- Inflation is impacting rates and covers:
- Vehicles repair costs increasing
- Long term cost of care for those that have been injured in accidents
- Increased costs of second hand vehicles
- Increase costs of car hire which occurs when vehicles are being repaired for longer
2. Managing the shift to EVs
Another trend that will continue throughout 2023 and beyond is the shift towards electric and hybrid vehicles, as well as further progress in alternative fuels like hydrogen. In the EV market, ERS has the ability to support very specialist applications. We have insured electric, hybrid, and hydrogen buses and coaches, as well as EV supercars such as the renowned Lotus Evija hypercar. We also cover a range of EVs in the commercial space, from large haulage trucks to electric Tuk-tuks and milk floats, and we can cover a fleet of vehicles on one policy.
3. Short term cover
We have also supported a number of brokers in their proposition for on-demand and short term insurance cover, and we are looking to expand this offering in 2023. This includes coverage for couriers and taxis. We expect to see more demand for shorter lengths of coverage beyond traditional annual hire, and we are here to support this trend.
4. Schemes and Affinities
Niche, difficult to place risks are part of our core DNA and our dedicated team of experts are here to provide a flexible and tailored approach for those out of the ordinary risks. For groups of people with non-standard motor risks that cannot be easily quoted on the open market, ERS are looking to work with more of our brokers to provide their Schemes and Affinities customers with the cover they really need.
5. Delivering digital services
Investment in a leading-edge data science platform is allowing us to test and learn quickly and efficiently. This enables us to make rate changes live in under 24 hours, providing our customers with the most competitive prices in the market.
In 2023, ERS will continue to be a leader in the digitisation of specialist underwriting in the motor industry. We will use data analytics, supported by our 2022 acquisition of a leading data science platform, to deliver accurate pricing quickly, while our team of expert underwriters will ensure a thorough understanding of risks. We will also use digital platforms to continuously update our view of risks and the market, allowing us to increase our appetite and broaden our coverage, and helping brokers to find – and support - more customers.
This data science platform resulted in us widening our everyday car product appetite, ERS Car, seeing half a million ERS Car quotes every day online. In early 2023, we are making it possible for brokers to obtain complex products such as Prestige, Enthusiast, and Collections online for the first time. Our eTrade platform allows for full cycle trading with a guarantee for a faster response from underwriters when referral is needed, compared to quotes submitted manually.
Ultimately, ERS is leading the way in the adoption of technologies that will streamline the process of issuing and renewing insurance policies and provide real-time data and insights to brokers and customers. By embracing the latest digital tools and technologies, we’re able to improve efficiency, reduce costs, and enhance the customer experience for brokers and their customers - good news all round.
Open for Business
During the session, the ERS team provided brokers with insights on the trends and developments expected in the coming year and how ERS is adapting to continue supporting its broker customers with the speed, flexibility and complex cover they need. For more information, visit ers.com/openforbusiness.
