“We are only in May and yet 2017 has already seen the insurance sector face an onslaught of challenges. Aside from the uncertainties around Brexit, and a snap Election on 8th June, the Ogden discount rate dropped dramatically, then the whiplash reforms were shelved for the second time, and from Thursday the new rate of insurance premium tax will be implemented. Motor insurance is just one sector of the market to be hit, which is already under huge pricing pressures and the basic affordability of car insurance is really in question.
“Fundamentally, insurers and brokers have the power to take back some control by gaining a clearer view of risk at all stages of the insurance process, leveraging data to make the right decisions for their customers and their businesses. This is going to be key for insurers to maintain their current minimal margins in spite of the increase and consumers to not have to take on tax increase as a premium hike.
“In times like these, you need to use every tool at your disposal to understand individual risks, segment customers and deliver more tailored, valued propositions. With GDPR on the horizon it’s also vital that the industry helps customers understand the increasingly important role their data will play in delivering products and pricing relevant to their risk.
“From our perspective, customer data ultimately holds the key to fairer premiums. For example, a correlation between motor policy history and loss cost has now been established through contributory databases, giving insurers a much better picture of risk at point of quote. Additionally, the broker market now has access to powerful datasets via their own software houses through the integration of IIL with LexisNexis Risk Solutions. By better pricing risk at the point of quote and at renewal, the industry can continue to meet the needs of consumers while navigating the ever-changing fiscal environment.
“The current Government has made clear that there will be no concessions for telematics policies, so right now, it really is up to the insurance industry to work together in finding ways to support customers with fair pricing whilst reducing exposure to poor risks and helping to improve the poorest drivers. This is particularly important for people who pay the highest premiums in accordance with their risk and therefore will be the most severely hit by the IPT increase. The cost of offering telematics insurance is falling dramatically through advances in technology – creating appeal for the mass market who want to be priced based on their driving behaviour.
“But the fact is, the insurance industry has never sat back waiting for a magic wand to solve all its problems. This is one of the most innovative financial markets in the world and immense progress has already been made in supporting access to more affordable insurance, underpinned by analytics to evaluate risk and the expansion of data agnostic technology to collect driving behaviour data. In addition, the constant drive to create a clearer picture of customers at all stages of the journey is uncovering new and exciting data attributes.”
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