By Jeffrey Skelton, MD for Europe, LexisNexis Risk Solutions
It has also accelerated opportunities and allowed agile insurance providers to view disruption as a way to find new ways to serve customers and in doing so gain competitive advantage. For example, here in the UK, due to the change in the way people are now living and working, we're seeing the market accelerate short term policy products, providing consumers with more flexibility in their motor insurance to accommodate for fewer car journeys being made.
At the centre of innovation is the ability to leverage data. The pandemic has put the power of data on a world stage, in a whole new way. However, to put data at the heart of decision making you need to work out what’s just interesting data as opposed to meaningful insights that will help decide the next best action – whether that’s how to price a policy or manage a claim. This difference is vital given the growth in data sources which could easily overwhelm and distract.
We must all focus on meaningful insights because they create a shift in how we think, how we evolve, and how we address a challenge to gain a competitive advantage.
To demonstrate this point, last year we invited insurance providers to sit down with us, look at the data that we have, and the data that they have and see if we can bring those things together in order to bring more value to their business.
Broadly, we learned three different things - sometimes the data didn't tell us anything so it can be set aside, or the data reconfirmed what the insurance provider knew or had suspected, so getting confirmation from a third party was very helpful. The real opportunity came about when we found ways to create solutions that really solve industry problems using the meaningful insights our data and the insurance provider’s data revealed. For example, we can tell insurance providers about someone's policy behaviour, we can tell if they renew with the same provider, switched, or left the market altogether.
Seeing these behaviour trends is important because a shift in behaviour or being able to identify a new pattern in behaviour, could be an indicator of the propensity to file a claim or be identified for fraudulent activity. The pandemic has disclosed some of these behaviours and exposed how this type of disruption can alter consumer policy behaviour abruptly.
During the pandemic we actually saw a decline in the number of people cancelling their policy and there have been fewer gaps in insurance cover during this time. We expected that financial stress, mixed with repeated lockdowns would have had a significant impact on the number of consumers seeking new motor insurance. On the contrary, consumers appeared to have invested their newfound time at home to shop around more for a competitive price. And therefore, switching providers.
These interesting data sets can be leveraged to address a challenge and influence an insurance provider’s market strategy.
Going further, to look at the policy behaviour data from a benchmarking perspective, we can see if there are any significant shifts in the market as whole and by market segment – broker – large and small - intermediated insurer, direct insurer. For example, we can identify the number of people renewing with their existing insurance provider, or if there's a shift in shopping behaviour, or if there is an increase in those who have exited the market, by market segment.
We can also see how many times people have modified their No Claims Discount value and the number of mid-term policy adjustments made prior to a claim, which could also be a potential indicator of fraud.
Cancellation trends can also provide predictive attributes on the future claim risk associated with a consumer. We know there was an unexpected decrease during the pandemic so if a consumer did cancel their motor insurance cover, insurance providers need to understand the context to help support fair pricing when they take out a new policy. A cancellation is truly meaningful from a pricing perspective when you can look at it from a wider perspective.
This past year or so has created pressure points and pain points across every industry, but it's also opened up some unexpected advantages. Past policy and quote behaviour data is giving the insurance market the power to adapt to changes in risk for improved pricing accuracy at new business and renewal. With the FCA’s pricing rules on the horizon, attaining a more granular understanding of risk will heighten in importance.
With these types of meaningful insights, insurance providers might feel empowered to change how they approach their business and gain competitive advantage.
|
