By Tom Lawrie-Fussey, senior director of product management, U.K. and Ireland, LexisNexis Risk Solutions
On the flip side, insurance providers are also fighting hard to balance the books. In April, the Association of British Insurers (ABI) announced a 31% rise in vehicle repair costs and an 18% rise in motor insurance claims payouts year on year. When adjusted for inflation, since 2014 the average cost of a car insurance claim has outpaced average premium increases.
To help keep motorists mobile, the ABI launched an affordability roadmap to tackle insurance costs , outlining 10 steps with a combination of actions that industry, government and regulators could initiate or improve upon. Data enrichment also has a pivotal role to play in three of the ten points – namely - helping consumers make more informed decisions; tackling fraud; and advocating for safety-focused vehicle technology. Data solutions can work to improve pricing decisions, lower the risk of claim and improve the customer experience. Ultimately, the astute use of data has the power to reduce loss costs for motor insurance providers and in turn, lower premiums.
Help consumers make more informed decisions
The ABI suggests that the industry be more transparent around which vehicles are costly to insure, so consumers can make more informed decisions surrounding vehicle purchase. The good news is that insurance providers will soon have streamlined and automated access to Thatcham Vehicle Risk Data (VRD). The VRD is used to assign an industry-standard ABI Code and Group Rating score to vehicles and is integral to how insurers assess and rate risk for all wheels-based insurance products. Insurance providers will also be able to benefit from our extensive linking and data normalisation expertise to match vehicles to Thatcham VRD with greater consistency.
By being more transparent with this data in terms of how it is used and its accessibility, insurance providers can build awareness and trust amongst consumers. Ultimately, the more intelligence insurance providers can access on the vehicles they are insuring, the more accurate the premium and the more likely they are to be able to deliver a swift claims experience.
Tackle fraud and uninsured driving
There are macro-level strategies which the ABI is pursuing to help drive down fraud, such as working with the government on its fraud strategy and developing an Insurance Sector Fraud Charter. As these longer-term initiatives develop, judicious use of data in the meantime can help tackle fraud and minimise the number of uninsured drivers on UK roads.
Examples include the use of email address intelligence which is already flagging the risk of fraud at the point of quote for insurance providers in a seamless and frictionless way. Highly granular cross-market claims data will add further detail to the picture, helping insurance providers identify fraudulent behaviours, from quote to claim.
As consumers seek to lower their premiums, many financial advice websites now encourage motor insurance buyers to think carefully about how they describe their job role and offer unique tips on how to answer questions on proposals ‘to get the cheapest quotes’ . Yet, fraud prevention also extends to quote manipulation. In fact, in our 2022 study of motor insurance buyers, 21% confirmed they think it is completely acceptable to manipulate the information they provide for a cheaper motor quote. Responding to this challenge, insurance providers can now access data to identify potential misrepresentation, including the possibility of fronting, through changes to declared information for proposers and named drivers between quotes. This helps protect insurance providers from inaccurate pricing and potential fraud, while consumers avoid their policies being rendered null and void if deliberate misstatements are uncovered at claim.
Advocate for safety-focused vehicle technology
Cars with Advanced Driver Assistance Systems (ADAS) are a third less likely to have a claim, according to our data. As the ABI pushes for making safety features, including advanced driver distraction warnings and intelligent speed assistance, mandatory in new cars as they are in Europe, data providers have been working tirelessly to ensure the insurance sector understands this technology to price effectively. Knowing precisely how certain ADAS features reduce accident risk is vital for fair and accurate pricing, which is why many insurance providers now use a point of quote solution to confirm the presence and purpose of ADAS at the Vehicle Identification Number level – in other words, the ADAS for that specific car, not one like it.
This level of detail also gives insurance providers the perfect opportunity to increase pricing transparency and make customers aware of the ADAS fitments that reduce claims. This might encourage greater adoption and use of existing technology on their vehicle, helping to cut insurance claims across the board.
According to The Joseph Rowntree Foundation , the average family is still spending £270 more a year (2024 prices) on essentials compared with Q1 2021, meanwhile the cost of essentials was ranked No.1 concern by the public, and a total of 73% were either worried or very worried about essentials given their personal circumstances. These stark facts, coupled with the significant and sustained cost pressures faced by insurance providers, serve to remind us that using all the tools in the data toolbox is imperative.
Only then can insurance providers help to reduce their own losses while helping to keep essentials like car insurance affordable for all.
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