Market Trends and Challenges: The Floow’s Thoughts on 2021

The Floow - February 18th, 2021

Road with the words 'ahead only' on it

The last 12 months were extremely significant for the car insurance industry as the COVID-19 pandemic further changed mobility and accelerated the need for a clear understanding of driver behaviour through valuable and in-depth insights.

COVID’s impacts have changed the way many think about insurance and how it should work, as consumers demand propositions such as pay-as-you-drive rather than paying for a standard yearly policy with set mileage estimates. So how will this, and other factors including developments in technology and legislative changes, impact on insurance and mobility throughout 2021?

Following on from our recent blog where we set out our business priorities for 2021, we continue to look forward and highlight some of the key market trends and challenges that we think will be significant for insurers over the next 12 months.

Market trends


Changing behaviours towards mobility


As mentioned, the COVID-19 pandemic has been the driving force behind changes in mobility patterns over the last 12 months, and although motor insurance is constantly evolving, it is the rate of these changes that is highlighting the tangible need for insurers to develop a comprehensive understanding of actual mobility and driving behaviour patterns.

In March and April 2020, as many countries entered their first lockdown, there was a significant decrease in mobility levels with the number of trips being undertaken dropping by at least 40-50% across the US, Europe and South Africa. As these markets continue to be severely impacted by COVID, insurers are continuing to deal with implications such as reduced vehicle usage, with the number of trips undertaken still 10-20% below pre-pandemic levels.

Rebates based on estimates were given to policyholders in April/May 2020 to compensate for their reduced mileage, but as the pandemic continues many consumers now have a better understanding of their mobility needs, and what they require from an insurance policy. As a result, consumers are increasingly looking for products which better suit their requirements, and they are also expecting a much more dynamic approach to policy pricing. 

We’re already seeing changes in consumer behaviour in the US with an increase in insurance shopping rates fuelled by COVID-driven behavioural changes. Our Chief Insurance Officer, Steven Brown, explains the impact of this; “While some insurers are poised to accept this new and more volatile trend, many are not and will expect to see reduced new business, pressure on renewal rates and lower average premiums. Many experts expect this fundamental change in consumer behavior to persist well into the future.”


The demand for digital


Meanwhile, the demand for digital insurance products continues, as our Chief Operating Officer, David James, explains; “Consumers will demand services which are delivered digitally, in line with other areas of financial services, such as banks where online banking is a key part of everyday financial management.” 

This is something which McKinsey recently reported on, as they saw customer demand for digital products increase from 38% to 54% in just a couple of weeks at the time when the pandemic became widespread.

The success of online banking showcased the power of the smartphone as it became a vital part of our lives by helping us manage our money wherever we are in the world. The move to online was inevitable for insurance and disruptors, such as Root and By Miles, are now starting to ramp up their challenge on the insurance market with innovative product design and customer experience. This will need to be matched by established insurers across all markets, or market share will be lost.

As pay-as-you-drive, or pay-per-mile, solutions become increasingly popular, it is the tech-savvy disruptors and the industry leaders – able to quickly pivot and/or invest – who are taking advantage of these significant changes in the market, while small and mid-tier carriers struggle to catch up. 

These mileage-based solutions provide consumers with the cost flexibility that they are demanding. As they are delivered digitally, they also provide insurers with a great opportunity to communicate directly with their policyholders on a regular cadence, and create the brand-customer relationship so often lacking in traditional insurance policies.

With each year that passes the pool of connected cars on our roads continues to increase. As this increasing percentage of ‘OEM connectivity enabled’ vehicles make their way onto insurers’ books of business, there are growing opportunities for insurers and OEMs to experiment with data models and we are seeing an increased desire from insurers to mine this data – starting with mileage data.

Looking further forward, technology and data-centric companies, with access to large amounts of consumer data, are likely to start developing products to expand into the motor insurance market. Due to the data they have available and their ability to quickly adapt and evolve, they will become serious competitors offering fully digital solutions, driven by insights into consumer behaviours, which can fulfil the needs of the market. 

It is also becoming apparent that there is an increasing group of consumers who are prepared to share data in return for better insurance propositions – something which has not been the case before. Central to this data sharing approach is the collection and analysis of telematics data, insurers will need to increase their activities in this area to maintain and grow market share.

For large carriers with established telematics programs in place, this means continuing to drive the evolution from collecting data to leveraging insights, pushing forward in areas such as FNOL, claims and the overall customer journey. For medium and small insurers, this requires investment in these solutions, and using the insights to engage with and acquire new business, otherwise they will find themselves struggling to remain competitive.

At The Floow, we believe that even greater value is added when mileage data is combined with driver behaviour insights, allowing insurers to gain that all important understanding of actual mobility and driver behaviour. Our focus for 2021 will be to help insurers develop these propositions which provide them with a rounded view of a policyholder’s driving and that provide them with the tools to deliver engaging and useful solutions, through driver feedback and coaching, rewards schemes and crash detection services. All of which have been designed to help policyholders gain control over their insurance policy, and help insurers quickly and efficiently manage policies.

Challenges for insurers


UK – Financial Conduct Authority (FCA) market conduct review 


During 2021, UK insurers will also have to adapt to the outcomes and recommendations of the review which the FCA are currently undertaking into price walking. It is likely that the ability to price optimise by tenure will be prevented, meaning that a customer on an insurer’s book will be guaranteed to receive the same price at renewal as they would have if they had approached the insurer as a new customer with the same information.

Our Chief Actuary, Andy Goldby, believes that this could drive a fundamental shift in the market as new pricing strategies will have to be implemented to bring prices into line. “It is likely that insights from telematics data will become even more important as a result of these FCA changes. Driver behaviour and mileage data from telematics may become the only additional things you truly know about your customer at renewal. Therefore, telematics could be used as a way to ensure the most accurate pricing for customers based on their risk profile.”


US – An interesting year ahead


While in the US, insurers will be working to turn around the market after a difficult couple of years which has seen some of the worst results for a decade, including a 109% combined ratio for commercial auto, and injury costs increasing by 14% in 2018-19 despite accident frequency falling by 1.2%. 

There were further very significant reductions in claims frequency in 2020, but the challenge for insurers in 2021 is to understand whether this drop is short term (due to COVID), or if it can be sustained in the medium to long term with changes in mobility patterns, ADAS features etc. This combined with changes in legislation and the continued rise of autonomous features will make for a very interesting year for US insurers.


EU – Mandates for new vehicle technologies


From 2022, all new cars in the EU will need to be equipped with advanced safety systems following an agreement in the European Parliament in March 2019. These systems, which include intelligent speed assistance, alcohol interlock installation facilitation and event data recorders, are designed to make driving safer by utilising autonomous technologies. 

This will inevitably have an impact on insurers, as our Chief Innovation Officer, Sam Chapman, explains; “As assistive and safety features will be mandated in the EU from 2022, new vehicle technologies will become more widespread across the market. This will have an effect on how vehicles move and avoid risk, providing insurers with further uncertainties around risk and how it is identified for each policyholder on their book of business”

Whatever 2021 holds, we have the solutions and expertise to help insurers deal with the rapid changes to mobility and prepare for the future of motor insurance. If you have any questions, or you’d like to talk more about the future of insurance with one of our experts, get in touch at

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