Premium Credit insight: Succeeding in an uncertain world

2023: succeeding in an uncertain world

Authored by Adam Morghem, Strategy, Marketing and Communications Director, Premium Credit

As we continue through 2023, enduring financial uncertainty and challenging economic circumstances are faced by both individuals and businesses alike. The war in Ukraine, energy shortages, price inflation, political instability and the ‘cost-of-living’ crisis are daily issues impacting everyone.

Protecting cash flow

The ripple effect from the Chancellor’s Autumn statement will also be felt for years to come as the government drives down the size of the UK's debt, currently about £2.4tn. The Office for Budget Responsibility has predicted a significant drop in living standards, with household incomes forecast to fall by 7% over the next 18 months.

With this backdrop, personal and corporate customers are rightly focussed on cash flow and preserving liquidity. Whether it’s cost savings or using effective forms of credit to buy products and services, every option should be explored.

Using finance to pay for necessities and spreading lump-sum costs is becoming increasingly popular in all markets, and Insurance is no exception.  Our latest Insurance Index (Q4, 2022), shows that 40% of consumers who use some form of credit to pay for one or more insurance policy (some 12.6 million people) have borrowed more than they had in the previous 12 months.

Underinsurance

Underinsurance is another issue in these challenging times and increasingly common.  Whether intended, with consumers choosing reduced cover to afford their insurance premium or simply as a result of increased restoration or replacement costs- both driven by high inflation rates. In either case, personal and commercial customers should consider whether they have the right amount of cover in place at the point of insurance renewal. This will enable appropriate protection to be maintained.

Premium finance is one solution that can help ease this situation and a strong option to consider. It helps maintain the cover needed by spreading the cost in monthly instalments. Premium finance can be used in multiple circumstances, from part of a single insurance policy, to 100% of all insurance policies bought.

Regulation

2023 will see the implementation of the new Consumer Duty rules impacting regulated firms and customers. Consumer Duty is underpinned by the concept of reasonableness and continues the FCA’s drive for regulated firms to put consumers best interests at the heart of their business and purpose. There is much to consider. A recent CII webinar we supported may be helpful

The General Insurance Pricing Practices requirements have been in place for over a year. In this time the FCA has collected data from the insurance market across the board for analysis. We expect that data to drive further deep dives in the sector as the regulator looks for firms to evidence improved outcomes for consumers.

Quality data and smooth customer journeys

The collection and use of relevant high quality data will play an increasingly important role in the delivery of additional value for partners and customers. Similarly, the demand for better customer and partners journeys is a given. Listening to needs and responding with enhancements that improve awareness, speed up or simplify processes will always be in demand by those seeking to achieve the best outcomes- and made possible by the adoption of market-leading technology solutions underpinned by robust cyber infrastructure.  

2023

These are just some of the key factors set to shape the world of insurance in the year ahead. There will be challenges and opportunities but I’m confident that those who remain purposeful, focused on positive customer outcomes and adaptive to changing circumstances, will succeed.