By Neill Slane, Sr. Manager, Home Insurance, UK and Ireland, at LexisNexis Risk Solutions
Verifying true identities has historically been time consuming and difficult but a combination of data sources which bring together different information and insights, can give a clearer view of an individual’s risk. A person’s claims history, along with public data and customer-hosted private data can highlight areas of exposure or the need to adjust prices to meet the true risk that has been identified. Developing this fuller picture also helps protect customers from the risk of underinsurance – a problem that often only comes to light at claim.
This level of data enrichment is already happening in motor. Through significant advances in understanding private motor risk and the breadth of data now available at point of quote, motor insurance providers are uncovering risks on named drivers, by looking at prior cancellations, gaps in cover, and NCD entitlement that would otherwise go unseen. The logical next step is to take many of the principles being applied in motor to the home insurance market.
Home insurance market could face a ‘perfect storm’
With fraudulent claims in household insurance increasing by 52% last year , household finances under pressure and predictions of a drop in gross written premiums for the home insurance market due to the COVID-19 pandemic, the insurance sector needs to mitigate against what could be a ‘perfect storm’.
The ‘fraudster’ and the ‘chancer’ who deliberately change material facts to lower their insurance quotes are not going to stop – after all insurance is often seen as a grudge purchase. Therefore the ability to correctly validate identity and risk is crucial to ensuring customers are priced fairly and accurately and insurance providers are able to create a balanced and profitable portfolio.
A consumer study we conducted last year underlines the greater depth of understanding data could bring to household insurance risk assessment.
66% feel it’s acceptable to manipulate quote information
The study found that 66% of UK homeowners and renters feel it is ‘somewhat’ or ‘completely’ acceptable to manipulate information given to price comparison websites to obtain a lower quote. This was particularly prominent amongst those who have filed a claim in the past and seen their premium increase. The study also found 59% of UK homeowners shop around time their policy is up for renewal to get the best value for money.
Risk beyond the proposer
As with motor policies, many home insurance policies are taken out with a joint policy holder – for example, of the 2 million quotes that we receive through the LexisNexis® Informed Quotes platform each day, 60% of the personal lines quotes include either a named driver or a joint policy holder. It therefore makes sense to apply risk assessment processes to both parties on the policy, much in the same way the market is now able to understand named driver risks.
Address history for assessing household risk
For home insurance, address information holds far more predictive power than the market may appreciate. From our research we have identified quite significant differences to loss costs, relative to total book based on the number of previous addresses a policy holder or holders has had.
• No previous addresses show a 27% increase for a single policyholder and 16% for joint policyholders
• Single policyholders with a history of four addresses, show a 20% increase and 16% for joint policyholders
• For both single and & joint policyholders with one previous address, the change in loss cost relative to total book decreased by 12%
These findings are not too dissimilar from the risk we have seen related to changes in cars based on analysis of policy history data. While switching cars is easier than switching address, recent analysis shows the more often people switch vehicles the more likely they are to cancel.
Home claims
Marketwide home claims data is the big next step in understanding the true risk in the household insurance market. The timing for this development in contributory data is ripe and seed contributors are already on board.
It is these sorts of insights that will allow insurance providers to understand their customers and the risk they are underwriting to a much more granular level than has previously been possible. Building a complete view of the customer across all their insurance requirements, rather than a siloed view, based on just one policy will allow insurance providers to meet intensifying customer expectations and get a 360 degree of the risk of that customer to their business.
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