By James Burton, senior director of insurance product management for U.K. and Ireland, LexisNexis Risk Solutions
With new pricing rules on the horizon , recent innovations in vehicle data that can be delivered direct into the quote process, can not only offer a much clearer view of the vehicle for more accurate risk assessment at new business and renewal – they can provide a way to do more for the customer.
Every vehicle has a unique story that can be revealed through data, which could be predictive of future claims losses and can therefore be a powerful factor in pricing. Knowing, for example, that a vehicle had a series of MOT advisories can be an indicator of risk. Or that its value has decreased at a slower pace than expected over the last few years could help improve pricing accuracy.
This type of additional insight can help insurance providers build a more accurate picture of the vehicle risk and allows them to generate a fairer premium for the customer.
In our work with the insurance market to deliver near real-time vehicle data direct into the quote and renewal process, we have found that insights related to a specific car can be just as powerful for underwriting as insights used by insurance providers for the person or people being insured to drive the vehicle.
Leveraging highly accurate data about the vehicle’s mileage; MOT history; its valuation; the number of present and past keepers as well as the exact dates of owner changes can offer a fairer basis to assess risk and can help eliminate the chance of underinsurance and avoid disputes over the car valuation during the claim settlement.
Vehicle data also helps to overcome one of the biggest issues still facing the UK motor insurance market, which is the traditional reliance on customer self-declarations at quote and renewal.
At new business, vehicle data can be used to validate questions in the quote journey – such as how long the car has been owned for, engine capacity, the current mileage and the estimated mileage for the policy duration.
But it’s at renewal that this data offers huge value in the new pricing environment. Vehicle data offers an informed and legitimate reason to re-contact the customer during the lifetime of the policy. For example, the insurance provider can see that the customer’s MOT is about to expire or the value of the vehicle has increased or perhaps their car has reappeared for sale. This provides an opportunity to speak to the customer before they leave. It provides a valuable way to engage with the customer and do more for them.
When the renewal quote is being calculated, the insurance provider is able to understand both the current and future valuation of that individual vehicle based on a wide range of vehicle advertisements and sales data through our recent collaboration with Cazana. This same valuation data is used by the Financial Ombudsman Service when settling vehicle claims disputes .
They can also use MOT enrichment such as previous test dates, pass/fail, advisories, and overall trends during the current ownership period. They can see whether the customer’s mileage was as estimated in the past year or was actually above or below this level. Plus, they can look at the number of present and past keepers as well as the exact dates of owner changes. This all builds a much more comprehensive view of the risk for pricing.
As Cazana states: “Vehicles are like fingerprints. No two are the same. Each has a unique risk factor written into the metal and understanding this is the key to pricing quotes accurately and competitively.”
Motor insurance costs have fallen 8.4% in the last 12 months , largely due to lower claims volumes experienced in 2020. Insurance providers now need to prepare for an increase in claims as travel starts to recover to pre-pandemic levels while at the same time ready themselves for a new pricing regime from January 2022 . Knowing more about the ‘metal’ within the renewal process could offer insurance providers a competitive advantage, a new way to engage with customers to support retention and the means to ensure the renewal price offered is right for the risk.
In essence, vehicle data-based insights can help to solve pain points for the market when used in combination with proprietary data, high-quality, third-party data and technology. One access point to a wide array of insurance insights related to the person and the vehicle can help insurance providers navigate the multiple challenges facing the motor insurance market and do more for their customers during the lifetime of the policy and at renewal.
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