By Jeffrey Skelton, MD, LexisNexis Risk Solutions, Insurance, UK&I
The volume of data available to the insurance market is growing exponentially, in-turn reducing the distance between the dots.
When you consider the data from connected cars, homes, offices, personal devices – the data gaps may disappear altogether offering great potential for a new era in insurance.
The mass adoption of smart devices means that a future in which an insurance application can be completed in less than a minute or a claim settled in the same time is not that far away. Data is the backbone to this capability. It comes down to extracting data that is meaningful and actionable then using that data throughout the customer journey to reduce complexity and bring simplicity.
Seamless connections to one of the most powerful and growing hubs of insurance specific data is democratising how the market accesses and uses data.
Home grown data
In the UK, industry contributed data has created significant efficiencies in motor underwriting – NCDs can be validated in real-time – speeding the delivery of quotes and reducing the onus on the customer to provide proof.
The motor market is just starting to use policy history data and quote behaviour to help determine risks related to gaps in cover, cancellations as well as understanding named driver risk and can assess consumers more fairly based on their insurance policy history not just their credit or claims history.
The next phase in this process is to bring in deeper, more granular claims data contributed by the market. This is starting in home, followed by motor and commercial property. Bringing in greater insights about claims – the circumstances, the settlement figure – will add a further layer of granularity when assessing risk.
Cross fertilisation
As the data insights grow, the lines will become more blurred between home, personal motor and commercial. If you understand the flood risk for a property and the crime level, applying that intelligence to underwriting a motor policy for the same individual makes perfect sense. By the same token, real-time data on flood events offers the opportunity to mitigate the risk for both the property and the vehicle. The next stage will be to bring the level of data enrichment we’re seeing at point of quote to transform the claims process and help improve the sector’s resilience to fraud.
Consumer needs are changing
Cross-pollination also means a more cohesive view of the customer can be achieved and this will put insurance providers in a far stronger position to support their changing needs, particularly in response to the global pandemic.
Most customers tend to buy insurance hoping they will never use it. If insurance providers have a greater understanding of their customers, the opportunity to segment and provide tailored services becomes possible, moving away from price driven decisions. Insurance becomes protection every day rather than just when disaster strikes. The flow of data from connected products and assets really adds to that exciting potential as it gives insurance providers an opportunity to understand changing risks throughout the lifetime of the policy.
The Internet of things and connectivity is taking the understanding of risk to new levels. Insurance providers in the not too distant future may soon be able to determine the risk related to the vehicle, the property, the mobile phone based on both static and dynamic data, and combine that with data on the individual. Using those insights throughout the customer journey will help ensure the customer has the right cover for the risk at the right price and that they are supported during the lifetime of the policy. Most importantly, they may have a greater understanding and appreciation of what they are buying.
Vehicle centric insights
That process is already well advanced in motor. We’re now starting to see the framework being created for connected cars to communicate directly with insurance companies which will be crucial in enabling consumers to access insurance based on their cars’ connectivity and ADAS features.
But right now by linking data on the ADAS features the vehicle was born with to real life insurance claims, we may be able understand what features have the most impact on reducing collisions. This creates a great opportunity to educate and reward consumers for the safety features in their vehicle as well as how well they drive in that vehicle.
Connected homes
Connectivity in our homes and buildings also holds the opportunity to change the market dramatically, but here change is happening at a slower pace. While reports suggest the pandemic caused a spike in investment in home technology and video gaming , smart home gadgets are still relatively expensive, and the reason for purchase is more to do with convenience or a previous escape of water claim than for a discount. However, in the next few years insurance providers may take further steps to encourage adoption to help understand the impact of smart home tech on risk and also push towards a path of claims prevention.
Consent to connect
There is little doubt that the demand for insights from data is only going to grow and data on and from assets will be a big part of this. Data can do a whole lot more than help price risk – it can help the market deliver the protection consumers want. As such, consumer consent must be a key focus for the sector and its data partners as part and parcel of the process of building products and services around connected data.
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