Articles - As demand for temporary insurance grows data must keep pace

As society shifts in its use of the car , greater industry collaboration is required to build additional intelligence around non-annualised policies (NAPs) for motor insurance, to support underwriting, pricing and reduce fraud. NAPs come in several different forms, but the most common are. Temporary policies that may offer cover for periods ranging from a few hours to many weeks. Subscription policies designed to meet specific needs, renewed on a rolling basis each month as needed. And pay-as-you-go policies. This is car insurance that you pay as you go per mile driven/used or pay upfront for a fixed amount of miles.

 By James Burton, VP product management, LexisNexis Risk Solutions, Insurance U.K. and Ireland
 This need for greater collaboration is the resounding message coming loud and clear from our joint research with Consumer Intelligence. The study revealed that one in three motorists would be interested in buying a non-annualised motor insurance policy (NAP) in the next 12 months with pay-as-you-go policies having the most appeal .

 Considering many consumers are looking for ways to save on motoring costs , including the drastic measure of giving up a car to help cope with the cost-of-living crisis, our findings point to a big opportunity for the motor insurance market to expand its services and cover options.

 Our research was conducted to determine the awareness, experiences and appetite for flexible temporary motor insurance products, including everything from a rolling subscription to a pay-as-you go policy. Happily, recognition of the NAP concept is already high, with 71% of respondents saying they are familiar with NAPs for motor insurance. While the most commonly mentioned reason for using a NAP (38%) is a need to borrow someone else’s car, other reasons cited included a need for additional flexibility and the fact that they were using their car less.

 The results are being shared with the market as the number of people working from home remains high, car ownership is falling, and many households are reducing from two cars to one . Meanwhile, as a third of drivers report that they are driving less to keep costs down, shoppers are also making fewer journeys by car and visiting ‘bricks and mortar’ retail outlets much less often, instead opting for online stores . This is before one even considers the changing nature of people’s attitudes toward car usage and its environmental impact.

 All this indicates that consumer demand for flexible, non-annualised motor insurance policies looks set to rise, but is the motor insurance market ready to match that demand with the data necessary to refine the design, risk assessment and distribution of NAPs to the benefit of consumers and insurance providers alike? Perhaps not right now but change is happening driven by insurance providers’ appetite for this data.

 5.4 million motorists have previously used these products, leaving massive potential for growth, especially when high awareness of NAPs is taken into account. Yet, as with any insurance product be it motor, home or commercial, insurance providers who want to exploit a market opportunity need real-time, granular intelligence on who is using what NAP products and their reasoning.

 Furthermore, 15% of people recently admitted that they have provided inaccurate information to their insurance provider to obtain a cheaper premium . So, it’s clear that data enrichment including quotation data gathered from across the market to understand the possibility of quote manipulation is also required to reduce exposure to fraud in this evolving market.

 Consumers are currently faced with the perfect storm of higher costs related to fuel prices, servicing due to parts and labour shortages and borrowing costs, all against a backdrop of rising inflation and increased environmental awareness. It’s no wonder that many are questioning whether paying for a full-time car is necessary. That’s why it is so important to gather the information needed to meet demand for flexible cover.

 The logical step would be to bring the same level of data enrichment to the risk assessment process of NAPs as that used for annual policies. This will take industry collaboration to share the appropriate data in the same way the market has done for years for traditional policies and as the sector’s data provider, we are keen to spearhead this activity for the benefit of the whole of the market.

 Now is the time to expand on this valuable study and work with insurance providers to explore how industry data on NAP policies can help inform the whole of the NAP lifecycle to safely, fairly and efficiently deliver the flexible policies that motor insurance customers increasingly demand.


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