By Carla McDonald, product director, claims, LexisNexis Risk Solutions, Insurance, U.K. and Ireland
Considering that even the largest insurance providers may only have around 15% market-share each, the claims data held by individual insurance providers is unlikely to provide the granularity of data they crave.
Added to this, prior claims, specifically for the asset being insured, has also been a blind spot for the insurance market. After all, customers can’t be expected to know the claims history for their home or vehicle prior to their ownership or occupancy.
Consequently, there has been a heavy reliance on self-declared claims as part of the insurance application process. For that, a good memory and a good deal of honesty is often needed from the applicant. And, unless the insurance provider has previously managed a claim for that home or vehicle, they have been in the dark when it came to prior claims for the asset being insured. This view and lack of detail can not only impact pricing accuracy for the customer but it hinders the ability to offer the right product for the risk, which can ultimately create a poor customer experience.
Against this backdrop, opportunistic or organised fraudulent insurance claims continue to cost the insurance industry dearly. Aviva has recently reported that the proportion of fraud detected on motor injury claims last year grew by 10.7% and bogus home insurance claims shot up by 45% .
All this points to one thing. The time is right for highly granular cross-market claims data. The insurance market is now moving as a force to make this happen through the first contributory claims database to comprise of home and motor claims, with the ability to cross-check between each.
Not only can users access a clear vision of an individual’s claims history within a market sector, helping tackle non-disclosure of claims, but the cross-search functionality enables insurance providers to better predict claims losses based on the individual’s claims history, understanding that a motor loss can be predictive of a home loss and vice versa.
As the data flows in from contributing insurance providers, early adopters will benefit from access to home claims data for a person and a property including the type of claim, the circumstances and the settlement. Motor claims data will also become accessible allowing insurance providers to cross check claims history across motor and home for the first time. This data can be injected at application, point of quote, mid-term adjustment or claim.
Claims data has been used in the U.S. in this way for some time so we know how U.K. insurance providers should benefit. For example, in the U.S. we found that 41% of consumers under report previous motor claims and people with undisclosed motor claims have a 34% higher average claims cost, compared to people with the same number of disclosed claims. Meanwhile people with three or more motor claims incur home claims losses that are approximately 40% higher in cost than those without any motor claims.
Knowing an individual has had three or more motor claims, could signal to an underwriter that the cost of a home claim could be up to 40% higher. As well as factoring this into pricing, understanding the risk in this way may mean ancillary services or different products could be offered to the individual to help mitigate or reduce the chances of a home claim in the future.
Insurance providers are also very conscious that as fraud rises, customers are raising the bar on service expectations. Most customers want a swift quote and empathetic claim experience, they don’t want to answer lots of questions about a stressful claim they had four years ago that has been pushed to the back of their mind. Shared claims data can help solve that challenge.
In today’s digital first, customer-centric environment, insurance providers need to remain agile, selling the proactive benefits of insurance in response to consumer’s needs. The advantages of claims data in this regard are abundantly clear. If you know a customer has had prior claims with several prior insurance providers for escape of water, that risk deserves some further investigation. In contrast, when you know a customer has had one non-fault claim on their car insurance in the past six years, and no home claims, that customer may be priced competitively with a good degree of confidence.
Through industry collaboration, contributory claims data offering a cross-market view of claims, is just around the corner for seamless injection into the customer journey. It will play a key role in helping insurance providers accurately and precisely assess the risk presented and make the right decisions for the customer. Now is the time to get on board…..if you aren’t already!
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