Articles - Ensuring insurance non shoppers get fair pricing and value


2022 started with what is possibly one of the biggest changes to the general insurance sector for decades, with the introduction of the Financial Conduct Authority (FCA) pricing rules. The FCA’s goal of stopping price-walking, simplifying the ability for customers to stop automatic renewals and ensuring insurance products offer fair value has made it imperative that insurance providers leverage the data they already hold on existing customers and apply data enrichment to create a more rounded understanding of their needs.

 By Martyn Mathews, Senior Director of Personal and Commercial Lines, LexisNexis Risk Solutions

 This may be particularly true for those customers who stay each year without shopping at renewal. Insurance providers need to understand what motivates some customers to remain loyal without shopping around, compared to those that will always search around to see if they can secure a ‘better’ deal, whether that’s based on cost or product coverage or a combination of both.

 If an individual rarely shops around at renewal, it might simply be a matter of inertia or there could be more to it. Are they uncomfortable with the prospect of shopping for insurance because they find it difficult or too time-consuming? Could they be identified as vulnerable individuals and at risk of not achieving the same outcomes as other customers? Or could it be that they are satisfied with the price and policy and just don’t feel the need?

 Endeavouring to understand this behaviour is vital to ensuring these customers are not only priced fairly but have a frictionless quote experience that offers access to products and services that are appropriate to their individual risk.

 To help shed a light on why some people may be non-shoppers, LexisNexis Risk Solutions undertook analysis of 500,000 motor insurance quotes in 2021.

 Who are the non-shoppers for motor insurance?
 The sample analysis of 500,000 policyholders who have stayed with the same insurance provider for the past five years identified that 61 is the average age of policyholders who have not shopped around for cover during this time. This is more than ten years older than the average motor insurance customer . Whilst a link between age group and not shopping around for insurance cover is not considered an indication of vulnerability, knowing this average age may become important because it could help insurance providers understand whether the way they have priced this age group could be a factor in their decision not to shop around.

 Non-shoppers are retired, affluent empty nesters
 As well as determining that 61 is the age of the average non-shopper, the analysis also highlighted that these customers tend to be more affluent than those people who do choose to shop around at renewal. They also tend to be retired with children who have left home.

 Perhaps the assumption that older people are less technologically savvy and therefore do not shop around resulting in an unfairly priced policy is a misconception? The analysis may suggest that this category of customers have a higher regard for brand loyalty compared to potential cost savings that may be gained from shopping around. Either way, these insights into insurance shopping habits can help insurance providers consider the suitability of products and pricing for these long-standing customers. As much as any other category of customer, the insurance risk of these customers should be determined as accurately as possible based on all data currently held about the individual, using linking and matching technology to create a single customer view and priced fairly using the same data enrichment processes an insurance provider would use for a new customer through the same channels.

 Who are the shop-arounders?
 Those who traditionally shop around, tend to be policyholders with younger families, based on our analysis . Understanding this fact itself may help insurance providers to determine the most effective marketing tactics, timing communications to occur at the points when customers are shown to start investigating new providers and policies. Perhaps the insurance provider might choose to lead the charge by encouraging those who might be buying on price alone to take into consideration the whole of the insurance cycle in their path to purchase, including the scope of the policy and the type of claims experience they should expect.

 No matter what the marketing message, however, a consolidated, accurate and up to date view of the customer will help ensure the right level of cover is offered at a fair price, empowering underwriters and pricing professionals to ensure customers have optimum cover for the lifetime of their policy.

 The single customer view
 In conclusion, a deeper understanding of existing customers is essential as the insurance industry adapts to meeting the new pricing rules. Linking and matching all historical data held on an individual to create one ‘true’ record might identify if a home customer has also been a motor customer in the past, or vice versa, thus demonstrating whether they may not be averse to shopping around for cover and switching insurer. It might also be easier to identify if a past claims experience may have influenced their decision to shop or stay.

 To borrow a much-used phrase, ‘levelling up’ fairness in the renewal process will see the increasing use of granular data, analytics and technology to help ensure the most suitable policy at a fair price for everyone.

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