By James Burton, Director of Product Management, LexisNexis Risk Solutions, UK & Ireland
The market is highly conscious of the financial stresses on individuals and businesses created by the pandemic and how this may play out in the way customers shop for insurance. Some may choose to strip back their cover to what they see as the ‘bare essentials’ raising the risk of underinsurance. Others may be tempted to manipulate the data provided in the application to try to secure a cheaper quote.
Our own study prior to the pandemic found the manipulation temptation to be true for two out of three of the home owners and renters we surveyed . In a similar study conducted amongst motor insurance buyers , 40% said they thought it was acceptable to use the same no claims discount/bonus on multiple vehicles. And, 17% thought it was fine to change information regarding their occupation or age on a car insurance application to lower the cost of the premium (35% of 18-34s were most likely to try this tactic).
Of course the biggest risk is that the customer comes to the decision that they don’t need or won’t pay for insurance – regardless of whether it’s mandatory or not.
Insurance providers cannot risk falling at the first hurdle by delivering a slow, complicated application process with pricing that is out of step with the individual risk profile of the customer today. Instead, the focus must be on delivering a swift service that responds to each individual’s needs and how that might have changed as a direct outcome of the pandemic, while at the same time taking steps to protect themselves from fraud and increased claims losses which can only add to the cost of insurance.
Making this work takes the right combination of data coming in at the right time in the customer journey. Clearly, the more data-led insights you have, the more accurate the risk assessment and subsequent pricing decision about the risk. However, it is also true to say that the more data you need to call out for and assess, the slower the quote process could become.
When you consider how the volume of data has grown and continues to expand, the trick is funnelling this data into the market, so that is can be used in real-time to create a 360 degree view of the customer at speed, at the point of quote.
The challenge of pulling together multiple datasets is one residential and commercial property insurance providers face every day.
They need a complete view of the property, the neighbourhood in which it sits, the perils such as flood and fire, the people in the property and the history of past claims related to that property. In time, industry wide contributory data for home claims will add to this mix to help enhance that view.
In motor, the volume of data available to the market is expanding rapidly to include new insights around motor insurance cancellations and gaps in cover, as a direct consequence of the pandemic, offering valuable context for the actions people have taken during the past year. Asset-based data on the car’s Advanced Driver Assist System (ADAS) features at a VIN level, along with new sources of high quality data on valuation and MOT history will add to this blend of data in 2021, while industry contributed data on motor claims is also coming down the line. We must also consider the work underway to bring connected car data into the insurance eco-system.
This all creates a huge amount of variables to consider at speed in order to deliver the most accurate quote that is truly reflective of the risk represented.
The solution is one data platform where insurance providers can get all the data they need from just one place through direct integration or via their preferred software house.
This platform approach means that high volume, real-time risk data can be delivered direct into insurance quoting systems to help inform pricing and underwriting decisions. At a base level this includes no claims discount data, perils data, public records data, credit and identity verification information, property characteristics, motor policy history and business data all from one single point of entry.
The need for call-outs to multiple providers is eliminated and the potential for delays in quote processing is reduced for the insurance provider and the consumer. But ultimately, with an understanding of a customer’s risk in an instant, built on such a wide array of rating factors, insurance providers can be confident they are offering the right cover for the right risk at the right price – and making the right call for customers at every stage.
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