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Motor insurance UK – QBE’s Jon Dye on the "perfect storm"

Motor insurance UK – QBE’s Jon Dye on the "perfect storm" | Insurance Business UK

Motor insurance UK – QBE’s Jon Dye on the "perfect storm"

Given the vast amount of people who rely on motor vehicles, whether for work or personal purposes, it is unsurprising that the auto industry is a regular fixture in media headlines. And between the COVID-19 lockdowns, the surge of interest in electric vehicles (EVs), and the budding realisation that self-driving cars could well represent the future of driving, auto insurance is really having its moment in the sun.

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As QBE Europe’s director of underwriting, motor, Jon Dye (pictured) has a better field of vision than most of the “perfect storm” of changes buffeting the commercial motor space at this point in time. His team supports a vast range of businesses, he said, including everything from SMEs to multinational corporations, and underwrites in excess of £300 million across a portfolio which spans the UK and Europe, but also includes some North American business.

“Across the commercial motor space, not just from an insurance perspective but also from a customers’ perspective, we’ve seen unprecedented change across the market,” he said. “Specifically in relation to managing fleets and how we, as an insurance industry, provide solutions to our customers, there have been so many changes that have taken place over the last 12- to 18 months.

“From the point of view around the pandemic, we’ve had to adapt as insurers and as businesses to the new environment that we’re working in. That has had a significant impact on how we use vehicles, though that’s probably more so in the retail space than the commercial. In commercial business, where we’re insuring companies that are transporting goods and services, a lot of that needed to continue, particularly as things like shopping moved even more online.”

The pandemic represented a significant change in how people use their vehicles and insurers are adapting to that, Dye said. At its heart, insurance is about risk transfer and understanding risk and clients’ exposures and so it’s the responsibility of insurers to understand any changes to how vehicles are used, how often they’re used and their risk profile when on the road. And carrying out that responsibility in such a fluid and ever-evolving environment certainly adds complexity.

Further muddying the waters of the auto insurance space were regulatory shifts such as the whiplash reforms that came in a year ago. Before those reforms were implemented, he said, everybody was anticipating what those changes were going to look like, what they would mean for the market and how insurers would need to adapt to them in order to pass on resultant savings to their customers.

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In addition, he noted, it was also about communicating the positive impact these reforms could have in terms of providing some more structure and a more efficient process around how the industry deals with low-value, soft-tissue claims.

“So, we had the pandemic, we had the whiplash reforms and then we had challenges around the supply chain in its broadest sense,” Dye said. “It’s hard to identify what is driving some of these supply chain issues. Yes, you’ve got specific events – a fire in a factory in Asia that produces X billion semiconductor chips every year, for example – but then you overlay that with the impact of the pandemic.

“During COVID, car manufacturers were not selling cars because the demand had dropped. Using semiconductor chips as an example, there was a drop in demand [from car manufacturers] but increased demand from laptop manufacturers so suppliers then shifted that supply and their focus to that industry and away from motor. And that just put strain across the whole supply chain.”

Brexit is another example of this, he said, and it’s incredibly difficult to accurately pinpoint to what extent Brexit has impacted the UK economy and supply chains compared to the myriad of other factors at play. The current status of the supply chain and its knock-on impacts on the commercial market and commercial customers who operate fleets is clearly an inflationary one. And so parties across the insurance value chain are having to actively work to determine how they can continue to contain costs around repairing vehicles and settling claims.

The supply of labour is another pain point for commercial fleet, he said, and post-Brexit there is a question mark as to whether the market has the same supply of labour and the right skill set within the available workforce. This is a pressing consideration, in addition to ongoing concerns about the cost of paint and parts going through the roof amid rising energy prices.

“There’s an intrinsic link to all these factors,” he said. “And then you start to consider that from a technology perspective, with things like autonomous vehicles or EVs… If you look back 10 years, the number of different materials going into the build of a car was infinitely less than it is now. What this means is that when there is an accident, the repair, the repair methods, the time to repair and the complexity of the skills required are just completely different to what they were five-to-10 years ago.”

The new technology and advances in car manufacturing have been fantastic from a protection standpoint, Dye noted, but they are also adding complexity in the event of an accident. Even outside of the pandemic, the general trend of the last 10 years has been a downward movement in the frequency of accidents – aided by these new safety systems – but the costs involved with claims are going up.

“From an insurance market perspective, I do think all these [factors] are contributing to a perfect storm in the sector,” he said. “You’ve got a lot of things changing and there are lots of unknowns, and we’re all just trying to assess the impact of these multiple and, I would argue, unprecedented changes.”