The Group intends to continue to build on its competitive strengths to deliver profitable and controlled growth over the longer-term through its focus on the following strategies:
Continue to deliver market leading underwriting performance throughout the UK motor insurance pricing cycle
The Group achieved the lowest average combined ratio in the UK private motor insurance market over the 10 year period to 31 December 2015 and aims to continue to achieve this outperformance going forwards through:
- maintaining its simplicity of focus on the UK private motor insurance market;
- maintaining its disciplined and actuarially driven pricing strategy to prioritise the delivery of the Group’s target combined ratio;
- continuing to develop its proprietary and agile pricing model to evolve pricing sophistication across the risk spectrum;
- expanding its extensive and proprietary dataset through additional underwriting experience and the use of new data enrichment sources;
- utilising its diversified multi-channel distribution strategy to broaden its underwriting footprint and drive growth; and
- maintaining its robust and effective claims management process and counter-fraud capabilities through continued investment in training and capacity.
Maintain a conservative approach to risk management
Central to the Group’s strategy and continued success is a conservative approach to managing its risks, which is achieved through:
- a simple, low risk investment strategy focused principally on capital preservation to support the Group’s profitable underwriting activities;
- the use of excess of loss reinsurance to limit the Group’s exposure to large insurance losses, whilst also reducing the volatility of the Group’s loss ratio, earnings and cash flow;
- a continued consistent approach to both reserving and claims management; and
- an intention to operate with a solvency coverage ratio of between 140% and 160% over time.
Target controlled attractive growth
The Group has a track record of controlled and attractive growth through prioritising the delivery of its target combined ratio ahead of growth or increasing the number of in-force policies. The Group intends to pursue high single digit growth in GWP over the medium term and further profitable growth over the longer-term driven by the following:
- continued expansion into all risk segments through further investment in data enrichment and continued research into identifying relevant risk characteristics;
- potential expansion into adjacent insurance products (for example, pay as you drive cover and temporary learner cover) and areas within the Group’s product range that are relatively unexploited by the Group (for example, van and taxi cover);
- the ability to reduce pricing whilst still seeking to achieve the Group’s target combined ratio; and
- taking advantage of technological developments in the insurance market (for example, the focus by insuretech competitors on distribution and customer interaction), which, the Directors believe, the Group is well placed to capitalise on given its expertise in underwriting and claims handling and a willingness to subsume its brand behind those of distribution partners.
Maintain a streamlined operating model with appropriate use of third party providers
The Group intends to continue to use its streamlined operating model, based at its single site including by:
- undertaking appropriate growth in staff using available space at its Dorking, Surrey site;
- retaining in-house functions where the Group has significant expertise; and
- continuing to outsource to third parties those functions where the Directors believe third party providers can provide effective variable cost control and high quality customer service, whilst improving efficiency and allowing the Group to leverage such third party provider’s experience and scale.
Enhance broker relationships and continue to develop the Direct Brands
Underpinning the Group’s diversified route to market is its distribution strategy which benefits from long relationships with specialist motor insurance brokers and optionality provided through the Direct Brands. The Group will look to enhance its distribution strategy by:
- further strengthening existing broker relationships;
- assessing new distribution partner opportunities;
- continuing growth in the direct channel as the Direct Brands mature through the enhancement of marketing initiatives; and
- further improving its customer proposition.