Articles - Time to home in on home claims data

In just six months, the way we occupy and use our homes has altered dramatically, and the change in risk this creates will be felt in the market’s claims experience. Already there have been reports from the industry about a rise in fire accidents in the home. Pandemic puppy purchases ; boomerang kids returning from Uni; furloughed workers turning to DIY; home-offices in the shed; school tuition from the kitchen table; online keep fit classes – many homes are getting a lot more use this year than ever.

 By Neill Slane, Senior Vertical Market Manager, Claims, Insurance, UK & Ireland, LexisNexis Risk Solutions

 This could bring about a rise in the number of claims due to accidental damage and conversely, there could also be a lower number of claims due to burglary. 

 We need to also consider external factors at play that won’t have changed – flood; windstorms; subsidence. The market will be bracing itself for the next extreme weather event given the high cost of storms Ciara and Dennis at the start of the year and the impact further lockdowns could have on claims costs if tradespeople are unable to enter a property.

 Pricing in home insurance does, however, remain competitive – the latest Consumer Intelligence report shows the cost of buildings and contents insurance has risen 0.5% in the last 3 months (to an average premium of £151), with prices rising just 2.3% in the last six years .

 This all creates a challenging dynamic for home insurance providers when assessing risk, made more complex by the fact that 14% of homeowners are now considering cancelling their contents insurance given they are now mainly based at home, and 11% who are suffering financially as a result of the pandemic are looking to reduce or cancel their policy entirely .

 The financial strain on individuals as a result of Covid-19 will be a key concern for the market – there is clearly a need to keep prices competitive but there may also be fears about the impact this could have on claims fraud and quote manipulation. Prior to the pandemic our own consumer research found:
 • 66% of home insurance buyers think it is acceptable to manipulate information given to price comparison websites to get a lower home quote
 • 59% of UK homeowners shop around when their policy is up for renewal, to get the best value for money.
 At LexisNexis Risk Solutions, we have always expounded the value of creating the most holistic view of risk at quote and claim to price fairly and accurately, support customers during the lifetime of the policy and expedite claims.

 The home insurance market can now access geospatial data including perils data such as flood, fire and subsidence alongside 42 further data enrichment sources from one access point, at point of quote.

 Adding to this mix, we have reached a point now in the home insurance market where we can bring in a new dimension to that view using industry contributed claims data through the creation of a market-wide home claims history database. 

 Claims data provides a much greater understanding of the nature of prior claims – the circumstances, the settlement, the parties involved.

 Richer claims data can then allow for greater pricing segmentation, helping individuals with the right kind of claims history to benefit. Rather than simply understanding whether the individual had a prior claim or not – it will allow the insurance provider to understand the type of claim, when it occurred and how much it was settled for. It can also be used at point of claim, for example, to help the insurance provider assess whether an accident at home aligns with what has happened in the past. In essence, it gives the market valuable context to make pricing and claims decisions.

 If we do see a rise in claims due to more home occupancy, the insights provided through a contributed claims database could help insurance providers better distinguish between the individuals who meet their underwriting appetite and could be incentivised to buy or renew with the offer of lower premiums, versus those assessed as being outside of their niche.

 Prior claims for the property also needs to be considered. For example, understanding whether a property has a history of weather related claims continues to build the picture of risk and enables insurance providers to consider developing propositions to help customers mitigate those environmental risks.

 The impact of Covid-19 on home insurance risk has underlined the need for a full view of a policy’s potential risk at inception but also the value of market wide claims data in assessing that risk. Claims data in combination with public records data, and quote history data can help build a better picture of the customer at the point of quote and claim to deliver appropriate premiums and help reduce the market’s potential exposure to claims fraud.

 With repeated reports of home working largely remaining ‘the norm’ for some time to come, unemployment rising and local lockdowns occurring, it is clear that home insurance providers may need to think differently about how they assess risk – claims data could be their ally in this new world.

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