Chief executive officer of general insurance at Aviva, Colm Holmes confirmed that the insurer is to drastically reduce the number of personal lines products, part of the insurer’s plans to restructure and simplify its personal lines business in the coming years.

Speaking at the Fitch Ratings Insurance Roadshow, he presented Aviva’s business strategy and gave his personal views and expectations about the UK non-life insurance market for 2020.

“There has been a lot of change in Aviva over the last 12 months, including our Capital Markets Day last November during which we unveiled what our strategy would be moving forward.” On that occasion, the firm unveiled a target of 20% GI premium growth by 2022.

Holmes acknowledged that the firm’s personal insurance business had recently deteriorated and underperformed. He advocated a need to “drive efficiency into the business”.

“I have committed to reduce the number of products in our personal lines business from 400 to 40. That is exactly what I did with our commercial business over the last three years and I now intend to repeat it with personal lines.

“Aviva will have much less products in the market and instead will focus on its strengths, such as the claims service and the digital service.”

He reiterated the objective to cut £300m in expenses at group level and noted that the firm “wastes a lot of money; it has got to stop: people are not going to pay for anybody’s inefficiency and nor should they”.

Holmes reminded that businesses had been split. “It is no longer UK insurance; it is now life and general insurance”, he said, putting forward the firm’s heavy investment in digital in the past three to four years.

“I firmly believe that the best insurance companies will continue to be the best underwriting companies. Underwriting is what really matters to ensure profitability in the market, alongside data analytics.”

Holmes advocated for a stronger integration of data. “There is an increasing amount of data available in the market and I am adamant it should be used towards building our products. At some point, regulators will have to focus on this. If you get down to insuring the individual, you do not have an insurance industry, because it does not work.”

UK GI market

Holmes listed three topics he felt will be of particular relevance for the UK GI market in 2020.

He first shared his views on the Financial Conduct Authority’s focus on GI pricing practices. He reminded that the regulator is due to publish its final market study report, along with a set of measures, in Q1 2020. “When exactly, we don’t know”, he noted.

“Aviva is very supportive of what the FCA is doing and moreover, how it is managing the issue. The FCA has engaged with insurers, with the ABI and is recognising is the fact that motor and home insurance are not hugely profitable markets in the UK.

“Anything insurers do to impact the renewal premium of an individual will be felt by somebody else. There is a real risk that unintended consequences of dealing with this too harshly will just mean that certain risks will become potentially uninsurable. That is likely to be felt again by people with low-income housing, older people and younger drivers.

“Thus, I applaud what the FCA wants to do and I believe the manner which it has managed this has been spot on. Its intention is to do the right thing.”

The second element listed was claims inflation. “Inflation has been running ahead of our expectations for the past couple of years, particularly in motor,” he argued.

A rising number of claims involve bodily injuries and are fuelled by poor driving, he suggested, pointing out that there are more and more vulnerable users on the roads, such as cyclists. “We know that cyclists and vans are a poor combination.”

He also said that motor claims were becoming more complex. “We saw this happening in Canada. Injuries that were rarely heard of started to become more common. For instance, mental health related issues are becoming more integrated into claims.”

Another factor contributing to claims inflation is that the technology in vehicles is increasingly expensive, which means that car parts are increasingly more expensive to replace as well. Such as windscreen glass.

Holmes finally listed flooding as a key risk the sector needed to be aware of.

He said: “The two worst years on record for flooding in the UK have been 2013-14 and 2016-17. Anyone who thinks that flooding is not going to continue to be a problem, I would suggest that they are entirely wrong. It is by far the biggest risk we have right now.

“I believe Flood Re has been successful and it was a good solution to the UK market. However, there are people who cannot afford to purchase insurance for their home and this is something we need to address.

One measure necessary to litigate flooding risk would be to stop planning in flood plains. “One out of five houses are still being built on flood plains”, he noted.

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