Nitesh Palana, financial services regulatory expert at PA Consulting Group is quoted in an article in a Raconteur special report on the future of insurance in The Times, which looks at how insurance companies operating in an increasingly competitive market must innovate to prosper.
The article states that the insurance industry is broken and in need of a shake up, but that neither companies nor customers like it.
Examining the profitability of the industry, Nitesh says that: “the ‘three-year model’ – when the policy makes a loss in the first year, breaks even in the second and only becomes profitable in the third year – underpinned the industry long before the likes of GoCompare and Money Supermarket turbo-charged price sensitivity in the industry.”
He goes on to say that: “More than any other industry, insurance companies will have to innovate if they are to return to profitability and remain profitable in years to come. Insurance products will have to become both more user friendly and better tailored to individual circumstances.
“It’s only through innovation that the industry will survive. Insurers will either innovate and retain customers or lose out to new companies that do innovate.”