Articles - Data validation key to know the customer in commercial SME


Risk-based decisioning and personalised products have been essential to driving profitability and efficiency for insurance providers serving the commercial market. As traditional underwriting methods have given way to e-trading in commercial SME, some challenges still remain such as referrals, ambiguity around eligibility and fraud. At the heart of the commercial insurance market is huge reliance upon a duty of disclosure.

 Martyn Mathews, senior director of commercial and personal lines, LexisNexis Risk Solutions
 
 However, the verification methods used in commercial SME can vary from broker to insurer, from account handler to underwriter.

 This may be due to the fact that commercial insurance providers have been settling for second best when it comes to data - until recently there has been a big difference between the availability of data for personal lines and that for commercial.

 The challenges of data enrichment in commercial compared to personal lines become obvious when you look at the complexity around business verification, for example, and matching the details provided by the policyholder with validated datasets to confirm the accuracy of the information provided.

 It may simply be a person’s name for a sole trader, but more often than not, there is a trading name to consider as well as potentially multiple directors to vet as well. Partnerships are very common as are professional partnerships such as a firm of solicitors or accountants, and while limited companies need to be registered bringing in a naming convention, there are several thousand unlimited companies in the UK that need to be understood and considered as well.

 Then the business name, directors, owners and address need to be matched against multiple datasets to create an understanding of the full risk. The business trading addresses could be a residential address, but it could also be a high street, a workshop, an industrial site, office block or large industrial site. All of these different types of addresses need to be captured for commercial underwriting. If a business is trading from more than one location, more than one risk address needs to be captured. This is especially the case for property owners’ insurance. A portfolio could have a dozen different properties on it, so each address needs to be captured for the risk to be assessed, quoted for and ultimately underwritten.

 It is absolutely critical for an insurance policy to be set up in the correct name, from both a legal and regulatory perspective, but it's also essential that the data returned is specific only to that business.

 Due diligence upfront is a requirement for all Commercial insurance brokers and having the right tools accessible for these checks is key to being able to deliver this.

 The solution starts with matching routines that hone in on the precise business and its location. Business data can confirm how big a business is, how long it’s been trading, what its financial position is but also importantly gaining a depth of understanding as to who is involved in its management through the use of publicly available person data.

 An unprecedented rise in new company registrations means it's never been more important for commercial insurance providers to understand the trading history of a business before taking out an insurance policy .

 Now, with property data we have specific insight into the residential building - to confirm when a property within a portfolio was built, the rebuild cost and the construction. This all helps commercial insurance brokers meet their Know Your Customer obligations using accurate validated information and allowing presentation of the correct risk to the market.

 Commercial PreQuote, for example, offers a single integration into broker software platforms so that data can be injected into the policy lifecycle prior to quote, meaning by validating and verifying information, the quality and accuracy of the quote can be improved. In-turn, more quotes can then be traded, referrals reduced, and ultimately better operational efficiency can be obtained.

 Brokers can also enjoy increasing eligibility on e-trade platforms having had access to business, property and person data at the point of quote, and there can be less time spent on referrals.

 Broking account handlers can free up their time to assess more complex risk, which needs rationale, rather than just ticking the box about floor or wall type.

 With access to data enrichment tailored by product opening up to the commercial insurance market, a future in which an insurance provider is able to pinpoint exactly where their appetite sits or predict the likelihood of a commercial prospect facing financial difficulty within the next 12 months is now within reach.
 
  

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