Articles - Countering pandemic challenges using data driven solutions

Resilience is a buzz word that has emerged from the pandemic; everyone’s emotional and practical spirit has been tested. The insurance market needed to adapt to virtual servicing of customers overnight, accelerating the pace of digitisation. Empty roads and full homes created changes in risk that have been borne out in claims . Fraudsters quickly took advantage at insurance application and claim .

 By Martyn Mathews, senior director of commercial and personal lines, Insurance, LexisNexis Risk Solutions
 At the same time, the pandemic has sparked an increased level of entrepreneurialism in the U.K offering fresh opportunities to commercial insurance providers.

 Policy changes
 Any fear that there would be a seismic change in motor insurance shopping behaviour in the pandemic, has not been evident in the policy history data LexisNexis® Risk Solutions collects. The volume of people switching and renewing from 2019 to September 2021 remained relatively consistent and comparing 2020 to 2019, the number of policy cancellations actually decreased year on year. This is despite the on-going disruption to new car sales and changes in car use driven by the pandemic. This situation is likely to change however during the course of 2022, as the FCA’s pricing regulations take effect, underlining the value of policy history data to keep pace with the changing dynamics of the market.

 Driving behaviour
 But while traffic volumes reduced by around 23% in 2020 and claims volumes fell, road fatalities only dropped by 16% resulting in a year-on-year mortality rate increase of 7% . Telematics data bears this out showing that as the roads emptied during all three national lockdowns, driving behaviour became more irresponsible . Crucially, this has also continued post lockdown, meaning far more serious crashes for insurance providers to manage .

 Whether this is a long term trend or an outlier, there is clearly an increasing need to better predict claims losses. As a consequence, underwriters are increasingly turning to policy history data, knowing that cancellations and gaps in cover have a direct corelation with claims loss. They also know that in a lockdown, if a cancellation or gap in cover occurred, the risk should be viewed quite differently. Crucially, the market has been able to gain this insight through policy behaviour based Covid attributes, helping to ensure lockdown-led policy changes can be distinguished from those before and after the pandemic.

 Rising value of claims
 Against this backdrop claims costs are rising due to ever more complex vehicle technology, a rise in demand for new and used vehicles pushing values up and increased vehicle repair costs due to ongoing supply chain issues.

 In home insurance, not only has there been a lack of housing stock leading to higher home values as buyers look to take advantage of the stamp duty holiday , but the materials to build and repair those homes has risen too . As we continue into 2022, the hike in energy costs means that some are predicting a second wave of materials price inflation driven by increased production costs . Add to this the constant threat of losses from extreme weather.

 This all highlights the need for insurance professionals to access real-time valuation data on the assets they are quoting at point of quote. Whether that asset is a second-hand car or a new-build home, precise data insights can help ensure accurate pricing and effective underwriting.

 Startup surge
 Resilience has also been shown by the UK workforce with 80 new businesses per hour being registered in the first half of 2021 .

 With this opportunity for the commercial insurance market comes the challenge of data validation. In a high volume, low value market, speed is of the essence.

 In a previously barren market, data solutions for securing small business insurance are now levelling up with those available in the personal lines market. Validation checks for SME insurance providers incorporating residential property information, director and financial details using public and proprietary data can now be carried out seamlessly at the pre-quote stage.

 Countering Fraud
 Finally, the debilitating effect of the pandemic on people’s pockets meant opportunistic fraud increased. Fraudulent motor insurance claims increased by 50% comparing 2019 to 2020 . Application fraud was also evident with quote manipulation and ghost broking .

 In the home sector, a rise in people working from home saw an upward tick in accidental damage, spillages and breakages in the home office .

 The use of claims contributory databases, in distinguishing the genuine claim from the fake in motor and home insurance fraud is set a big part in helping reduce the success of fraudsters. At the same time, email intelligence is helping to boost the market’s resilience to identity fraud and ghost broking. It is clear that as the economy stutters to recovery, counter fraud measures will remain essential.

 There is no doubt that the last two years has proved how important it has been for insurance providers to have streamlined access to risk information at all stages of the customer journey – whether that be policy history, quoting, claim, small business, asset or email-based intelligence. No matter what is to come, data driven insights will remain a key ally, enabling insurance professionals to continue to offer accurate premiums and individualised products safe in the knowledge that they have a realistic picture of risk on cover.


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