Digital transformation and technology adoption remain top of the UK’s insurance agenda, offering local insurtechs a good opportunity for expansion, writes Charlotte Koep, CEO Root Platform.
The UK is an attractive market for insurtechs looking to expand beyond SA’s borders, both now and over the next few years.
My team and I have monitored this market since Root’s inception in 2018, and we officially entered in 2023 through a partnership with Admiral Pioneer. There are three reasons we believe it has been a good fit for us.
1. The UK insurance market is growing
The UK is the home of insurance, with Lloyd’s of London - the largest commercial (re)insurance marketplace in the world - established in 1689.
In more recent years, the UK has developed into an insurtech investment hub, and provides perhaps the highest concentration of expertise across the insurance value chain.
The UK is also one of the fastest growing insurance markets in Europe. In 2023 alone, personal lines insurance saw an increase in Gross Written Premium (GWP) of around 13% year-on-year to £36.17 billion, while commercial insurance grew 12.5% to £37.51 billion.
Digitisation has been a significant growth driver for the UK insurance market. Insurtech solutions like AI, automation, and data analytics have improved efficiencies and customer experience, leading to more tailored products.
The result has been faster, more affordable and more personalised services, particularly in areas like motor and home insurance.
2. Personalisation drives change
Recent figures by Global Data show that insurance penetration rates are currently around 10% of the UK’s total GDP. PWC studies suggest that 40% of consumers in the UK want to purchase cover that fits the way they live their lives and use their products - in other words, they want personalised solutions. That’s where insurtechs really come into their own.
Insurtechs that offer API-first, flexible platform technology make it possible to build more personalised products. These platforms lower the barriers to creating customised solutions, by enabling insurers to continuously understand and deliver against their customers’ needs.
3. The regulator is active and embraces innovation
The Financial Conduct Authority (FCA), the UK’s insurance market regulator, is very active. Much of the regulation opens up pockets of opportunity for insurtechs that are able to support increased governance requirements and remain flexible as the rules change.
For instance, the FCA’s 2024-25 business plan aims to deliver improved outcomes by becoming a more assertive, data-driven regulator.
The strategic shift towards data-driven approaches requires insurers to strengthen their data infrastructure to meet regulatory expectations and involves making additional investments in technology and training.
But fairness remains important, which is why the FCA and the Bank of England have set out governance and oversight standards for AI use in financial services. They aim to make sure that AI models used for risk assessments, pricing, and claims management are transparent, fair, and unbiased - more fodder for insurtechs.
Overall, the UK presents a growing and mature insurance market. We’re seeing more insurers embrace digital distribution strategies and see real potential in the embedded distribution space. The UK is a great place for innovation, and now is a good time to invest.
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