Articles - A deeper understanding of vehicle risk is overdue

The first three months of 2023 saw used car sales climb to a level last seen in 2020 . Given that car buying is a key trigger for purchasing motor insurance, insurance providers have been busy on the quoting front. The industry is, however, well-equipped to deal with a greater volume of enquiries: after all, motor insurance providers assess risk and produce swift quotes for drivers and their newly acquired vehicles all day every day, but along with increasing volumes of enquiries they are also working out how to fine-tune their pricing and underwriting to compete more effectively in a very challenging corner of the market.

 By Tom Lawrie-Fussey, director of automotive, U.K. and Ireland, LexisNexis Risk Solutions

  A deeper level of actionable data on the vehicle itself could be the answer. Accurately assessing the risk of a vehicle and the proposer, plus any named drivers, has always been a matter of calling on data from multiple sources to validate and enrich the information provided in the application, to create a rounded view of the risk. But with the rising cost of vehicle repairs, increasing regulation around pricing and product suitability, as well as the constant threat of fraud, motor insurance providers have been looking for more insights on the specific vehicles they are insuring.

 It makes sense; two vehicles of the same make, model and year of manufacture can have totally different histories that can affect the value of the vehicle and risk of a claim. For example, one owner will act on an MOT advisory while another may not, depending on their attitude to risk. One car is driven less than 5,000 miles a year and the other is closer to 25,000. One vehicle has had one previous owner from new, and the other has had five owners since it rolled off the production line.

 The problem is that to date, the level of granular detail on the ‘metal’ that goes well beyond make and model, has been difficult to obtain. As such, a comprehensive assessment of motor insurance risk has been very challenging.

 That problem has become all the more acute as insurance providers are now faced with a number of diverging trends. The cars being driven on the U.K. road network are now the oldest on average than they have ever been , rising to over 9 years old.

 Research also suggests car maintenance undertaken by owners has been foregone in the cost-of-living crisis . Plus of course, we need to consider that new cars now feature increasingly sophisticated safety technology which may make them safer to drive, but more costly to repair. There is also the slow but steady increase in electric vehicles on the road which have their own claims considerations given concerns over battery damage and their weight compared to cars with petrol, diesel or hybrid engines.

 Ultimately, insurance providers need more detailed and more accurate information on exactly how a vehicle has been used and looked after, from production to present day, and the impact this may have on its value. Accessing that knowledge up front is not only better for the customer experience, but insurance providers can more accurately predict claims, as well as the cost of repair.

 A single source of accurate, real-time information on a vehicle’s status, value and history, including how well it’s been maintained, is coming to the market which should vastly improve risk assessment and enhance the customer experience from quote to claim. As well as telling insurance providers more about the risk of the owner/driver based on the car’s maintenance records, this data enrichment solution for the ‘metal’ will also confirm accurate valuations in a way that is transparent for the customer to help support a smoother claims experience.

 One look at the case studies on the Financial Ombudsman Service (FOS) website reveals that many of the vehicle market value complaints stem from the condition of the vehicle in question, or its mileage at the time of claim . The job of the claims professional could become so much easier with real-time valuations data at their fingertips.

 Indeed, the more information an insurance professional can capture about the vehicle at point of claim, from valuation and MOT history to its mileage, the better the customer outcomes are likely to be.

 It's when data on the history or back story of the vehicle is combined with LexisNexis® Vehicle Build, a VIN-level ADAS fitment solution, along with data on the driver such as their policy and claims history that the risk comes into sharp focus. This will put the U.K. insurance market in a far more informed position to support their customers based on the most comprehensive view of the vehicle.

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