Applied Systems Exits the UK Insurance Market

Applied Systems is a leading insurance technology provider and their exit will have significant impact in the UK market.

They recently announced their decision to withdraw its broker management system, Applied Epic, from the UK market.

This move reflects broader challenges in the UK insurance sector. Pressiues have been increasing in the market which risks lower choice and competition.

These pressures include competitive pressures, increasingly complex product requirements, and difficulties in aligning with insurers on commercial lines – products.

The decision to exit the UK market has significant implications for the insurance industry, including market competition, innovation, and consumer choice.

Reasons for Applied Systems’ Exit

1. Complex Market Requirements:

• The UK broker management system (BMS) market has intricate product requirements, making it challenging for Applied Epic to compete with established players.
• Applied struggled to deliver a fully featured product that could rival competitors with stronger market positions.

2.⁠ ⁠Financial Losses:

• The company faced a “loss-making business” in the UK due to the high costs of investment and operational challenges.
• Applied Systems decided to redirect its resources to more profitable markets where business results are accelerating

3.⁠ ⁠Strategic Reallocation:

The decision to withdraw allows Applied Systems to focus on areas where they hold a competitive advantage, such as North America and the Republic of Ireland.

What is the Market Impact?

The exit of Applied Systems highlights several broader implications for the UK insurance market. These are impacting competition, innovation and consumer choice.

1. Reduced Competition

• The withdrawal of the Applied Epic platforms eliminates a potential alternative for UK brokers seeking innovative technology solutions..
• Applied’s exit reinforces the dominance of existing players, limiting the competitive landscape.
• As the market consolidates, there are fewer brokers and greater reliance on fewer insurers. Life Markets appear to be leading the changes.

2. Impact on Innovation

• The UK insurance market has long sought innovation in broker technology. Applied’s exit may slow the pace of innovation, as fewer competitors are pushing boundaries in the broker management system space.
• ⁠Consolidation in the market could further discourage innovation, as dominant players may face less pressure to develop new solutions.

3. Consumer Impact

• A reduction in competition could lead to fewer choices for brokers and customers, potentially impacting service quality and pricing. This reduction is accelerating in the motor market.
• ⁠Limited options may diminish the role of brokers, encouraging consumers to seek insurance solutions directly online.

4.⁠ ⁠ Opportunities for New Entrants

• Applied Systems’ departure may create opportunities for new players to enter the market, particularly those offering niche or disruptive solutions.
• ⁠Innovative companies, such as tech giants, could capitalize on gaps left by Applied Systems to introduce fresh ideas and services.

Challenges in the UK Insurance Market

The decision by Applied Systems is not isolated!

Their move overseas reflects broader trends in the UK insurance industry:

• Economic and Regulatory Pressures: Brexit has introduced market fragmentation and regulatory challenges, forcing insurers to establish subsidiaries in the EU to maintain access to European markets.
• ⁠Market Consolidation: Other insurers, such as Aegon and Canada Life, have also exited specific segments of the UK insurance market, leading to concerns about reduced competition and innovation.
• Rising Costs: Increasing claims costs have prompted insurers like RSA and Vitality to exit certain markets, such as motor insurance, further reducing consumer choice.

Conclusion

Applied Systems’ exit from the UK insurance market underscores the challenges of operating in a highly competitive and complex environment.

While this decision may reduce competition and innovation in the short term, it also presents opportunities for new entrants to fill the void left by Applied and other departing providers.

The UK insurance market will need to adapt to these changes to ensure consumer choice and foster innovation in the face of ongoing industry consolidation and economic pressures.