By Jonathan Guard, Director, Commercial Markets, LexisNexis Risk Solutions
Data enrichment will be their ally in this process and can help to automate what have traditionally been manual processes.
However, in recent research amongst commercial property insurance providers, conducted by LexisNexis Risk Solutions , the market is not adopting digitisation to the extent it could be. In fact the market appears to be divided over the pace of digitisation in commercial property insurance suggesting a good portion of the sector risks losing market share just at a time when new opportunities are emerging.
A report from JLL , a leading global provider of real estate and investment management services, presents a vision for 2020 which suggests encouraging prospects for commercial property insurance. The report predicts the rise of innovation districts in conjunction with universities and local authorities; more investment by landlords in their commercial properties as leases shorten and occupier expectations change; demand for space for urban logistics and life sciences businesses (such as pharmaceutical and environmental firms); and office rental growth in London and other major commercial hubs.
The report also predicts higher levels of investment in the commercial property market from overseas as well as investment in IoT to create integrated digital workplaces. With property businesses and the business community as a whole predicted to embrace data and technology more fully for their own governance and operations, it follows that they may expect their insurance provider to be doing the same to deliver a slick and competitive service.
It seems the market has some way to go before this becomes a reality. In our study, we found 77% of commercial property insurance providers use manual underwriting processes, leaving just 23% using mostly digitised underwriting. Furthermore, only around half of the insurance providers we spoke to (55%) said they think the pace of digitisation in pricing and underwriting has become more prevalent in the past two years.
The application process for commercial property insurance has seen the biggest digital transformation with 42% of insurance providers stating this is all or mostly digital. This is not wholly surprising as insurance providers recognise they need to keep pace with the streamlined application process most people experience in personal lines. This is particularly relevant for the small business sector where the owner may also be the buyer of insurance.
In contrast, the claims process remains almost totally reliant on human skills - only 17% of providers say claims processes are all or mostly digitised. Clearly, commercial property claims can be complex and high cost, demanding human expertise to manage the claim, but even so, the level of digitisation in claims is lower than expected.
While opinion is split over the pace of digital transformation, based on our research, the sector recognises the significance of data enrichment to gain a more holistic view of the risk with 77% of insurance providers using or planning to use data enrichment. Here, perils data on flood, fire, subsidence risk has the highest value to the market, followed by insights on prior claims related to the property and the policyholder.
The key is to build these insights into the quote process and throughout the customer journey in an automated way for faster, more accurate decisions. With an instant view of the property risk the opportunity also becomes more real for insurance providers to take a proactive role in helping customers mitigate those risks. Sharing past claims data risk for example will flag to a customer the risk of flood so that they can take action to lower their risk in the future.
An industry-wide contributory database of prior claims data for commercial property would certainly benefit the entire market and help to build a more detailed picture of the state and history of a business and its owners through instantaneous insight. However, for commercial property insurance providers to truly leverage the opportunities coming, they need to transform, integrate data and automate decisions and take their businesses as a whole into the digital age.
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