Product Innovation in General Insurance 2007
Introduction
This brief discusses product innovation in the UK, covering telematics and eco-friendly insurance products. It also discusses a number of foreign insurance products that offer features not commonly offered in the UK, and evaluates the advantages of introducing such features in UK products.
Scope
Information on developments in telematics and eco insurance products in the UK Examples of product features from abroad to introduce to the UK market
Highlights
Eco-friendly policies are easy to set up and add to an existing business line. The low barriers to entry are demonstrated by the speed with which others joined CIS's launch of an eco product. It is therefore likely that others will also launch eco-friendly motor insurance products in the near future.
Reasons to Purchase
Gain insight into the development of telematics and eco insurance products in the UK Learn about the potential of introducing agreed value car insurance, combined products for young people, and much more to your UK product offering
Overview 1
Catalyst 1
Summary 1
Product innovation in the UK 2
Introduction 2
Telematics motor policies form the most innovative product development in the UK 2
Norwich Union launched Pay As You Drive motor insurance in 2006 2
The product gives people control of their insurance spending 2
More Th>n launched a trial telematics motor product in 2006 3
The product is aimed at young people and provides incentives to avoid driving at high-risk times 3
Others are likely to follow suit, though the product is not currently easy to replicate due to technological barriers 4
The product has a number of potential benefits which could lead other companies to develop their own telematics products 4
BIBA has already announced that it is looking to create a telematics system that can be used by brokers 5
Others may follow but there are significant barriers to entry 5
Several insurers and insurance providers have developed green motor insurance products 6
Eco-friendly motor products take two main forms, with some providers offering both features with their policies 6
One way of making a motor policy eco-friendly is to offer discounts for green cars 6
Another way of making a policy eco-friendly is to offer to offset its carbon emission 6
Others are likely to follow suit and launch their own green products, although low customer awareness currently limits growth 8
The innovation could easily be transferred to travel and household insurance policies, but low consumer awareness and low profit margins are current barriers 9
Potential product innovation - Lessons from abroad 11
Introduction 11
A number of features offered with motor and household policies abroad could prove useful for UK insurers 11
A Danish product offers transport to doctor and hospital as part of a home emergency product 11
Companies with extensive home emergency operations could add this extra cover to their offering 12
An Austrian product offers compensation if thieves use the insured's phone or internet during a break-in 13
Catchy extras could also help sell policies in the UK, but insurers need to identify the right ones 13
An optional extra on a premium content product from NZ covers matching sets of carpets and curtains 14
Few UK companies offer matching sets cover, but more could choose to offer this as an optional extra 14
A Norwegian insurer offers to pay for reconstruction of photos and data files 15
UK insurers could also cover such expenses, although a clear limit would have to be set for the cover 16
In New Zealand the option of insuring a car to an agreed value rather than its market value is common 16
In the UK, agreed value policies are common for vintage or modified cars only 18
The appeal of agreed value car insurance for normal cars in the UK is likely to be limited to a certain type of consumer 19
Young drivers can get part of their premium back if they drive without making a claim for five years, or until the age of 25 20
A similar arrangement could be introduced in the UK, which could improve retention rates 21
Norwegian insurer If offers a product for young starters combining contents, travel and personal accident cover 21
A similar product might help sell extensive cover to young people in the UK 23
APPENDIX 24
Methodology 24
Further reading 24
Ask the analyst 24
Datamonitor consulting 24
Disclaimer 25
List of Figures
Figure 1: Norwich Union offers Pay As You Drive Insurance 3
Figure 2: More Th>n offers DriveTime, a telematics product aimed at young drivers 4
Figure 3: Climatecare offers both motor and travel insurance that offsets the CO2 associated with the insured car or trip 8
Figure 4: ETA's calculations of the prices of emissions offsetting shows that such features could potentially be introduced on travel and household policies 10
Figure 5: TopDanmark's Tophjælp Privat policy includes cover for transport to a doctor and psychological crisis help, among other features 12
Figure 6: Examples of things covered by Generali (Austria) under Premiumschutz cover 13
Figure 7: AMI offers matching carpet cover as an optional extra on its advanced contents cover 14
Figure 8: Saga's contents cover plus offers matching sets cover as standard 15
Figure 9: Norway's Sparebank 1 will pay for expenses for reconstruction of manuscripts, photos, data files and similar items as part of its content insurance 16
Figure 10: Consumer.org.nz explains how an agreed value policy works 17
Figure 11: The AA in New Zealand offers a fixed agreed value on its comprehensive car policy 18
Figure 12: Fiestaturbo.com explains how modified cars can be insured to an agreed value 19
Figure 13: Gjensidige will pay back part of the premium paid to young drivers making no claims for give years 21
Figure 14: If Start's contents insurance includes cover for theft of backpack, bicycle and PC 22
