Articles - Consumer Duty and the role of data in improving outcomes

As insurance providers face the task of meeting the new FCA Consumer Duty LexisNexis Risk Solutions examines how improved data enrichment can help them meet the challenge. With a matter of months to go until the Financial Conduct Authority (FCA) Consumer Duty rules and guidelines become effective, aiming to put customers at the forefront of financial products, many insurance firms will be well on the road to compliance.

 By Martyn Mathews, VP, personal and commercial lines, LexisNexis Risk Solutions, Insurance, UK and Ireland

 After all, ‘delivering good outcomes for retail customers is already front and centre for much of the insurance market, not least the broking community which excels in delivering a great customer experience. Let’s not forget the industry’s claims acceptance rates - 99% for motor, 81% for domestic property according to the ABI. That means nine out of 10 home and motor claims are paid.

 The implementation of any new rules and guidelines though, will encourage businesses large and small, insurers, brokers, MGAs and intermediaries, to re-examine their practices including their use of data to better understand their customer’s needs.

 One of the factors the FCA will be measuring is whether consumers are paying a price for products and services that represents fair value, including premium payment options and interest rates charged. Meanwhile a second factor up for scrutiny is ‘suitable products and services’ – making sure that customers are sold and receive products that have been designed to meet their needs .

 To meet these requirements, brokers may need more insight on the customer or proposer, at the point of quote using public and proprietary data, including policy history, quote behaviour, claims and No Claims Discount (NCD) data shared by the industry itself.

 In practice however, the data enrichment playing field has been very uneven. Larger insurers and intermediaries often have access to a host of data enrichment solutions to validate the customer and build a more granular picture of their risk and needs from an insurance perspective. Comparatively, small and medium sized brokers have largely not enjoyed the same level of access to data.

 It is not only the forthcoming FCA Consumer Duty rules and guidance that bring the value of data enrichment to the fore. Their insurance partners now often expect brokers to conduct basic verification checks and risk assessment at point of quote, to limit their exposure to fraud and claims losses. ‘Is this person who they say they are?’ ‘What is their No Claims Discount history’? ‘Are they likely to cancel their policy?’, and ‘can the customer afford the monthly instalment payment?’ are just some of the questions brokers and their insurance partners want answered.

 The pandemic played its part in accelerating digitisation in insurance broking. Many brokers left paper-based proof of No Claims Discount (NCD) behind in an instant following a swift switchover to digital NCD proof in order to automatically validate a customer’s NCD history based on industry-wide contributory data. This seems to have whetted the appetite for more of the same and with growing pressures from all-around it is easy to see why.

 It is therefore with good timing there has been a seismic shift in data enrichment solutions for the broker market. No longer must brokers dig deep for data from a myriad of sources, wait for that information to arrive and then manually evaluate it. Today, solutions such as Broker Intelligence from LexisNexis Risk Solutions, provide a single point of entry to high volume, real-time data enrichment at point-of-quote. This can be data can be accessed via all major software houses, direct or via other broker platforms.

 By streamlining the data acquisition process for brokers so that a 360-degree picture of an individual’s insurance background can be built instantaneously, customers can enjoy a smooth on-boarding process, a better customer journey and overall experience.

 Meanwhile, by knowing their customer better, brokers will be in a more informed position to support the delivery of products and services that are suitable for the customer’s needs, their pockets and that will offer ‘Fair Value’ from an FCA perspective.

 There’s no doubt that growing competition, changing customer behaviours and ever-increasing regulation is driving the need for data enrichment in the broker arena. As deeper, wider and more granular insurance derived data becomes available to the broker market it will have a large part to play in keeping the customer, insurance partner and regulator happy.

 Indeed, as we head rapidly towards the BIBA Conference 2023, it’s worth remembering that at the 2022 BIBA Conference, Sheldon Mills, Executive Director, Consumers and Competition at the FCA said that ‘innovation is key to ensuring that firms continue meeting the changing needs of consumers and businesses’ and emphasised the importance of data-sharing to help drive this ’.

 Let’s not forget though, that while data enrichment will help meet the needs of the FCA and insurance partners, there are other benefits too. For brokers of all sizes, reducing overheads through fewer manual processes and costs associated with cancellations, matching more individuals at Point of Quote and better assessing fraud can all have a massive impact on the bottom line. Data enrichment does a lot more than keep the wolf from the door; it can also help to feed broker businesses, helping them thrive in an increasingly competitive market.

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