It has become standard practice for insurance providers to leverage data enrichment to assess an unknown applicant at the point of quote to help smooth the customer journey, price accurately and reduce the risk of fraud. This has not, however, generally been the case for renewals. With changes to pricing practices on the near horizon, many insurance providers will need to consider a fresh approach to risk assessment at renewal.
The FCA has stated that if insurance providers do not have sufficient information to satisfy themselves that a renewal contract is consistent with a consumer’s demands and needs, they will need to obtain and consider that additional information before proposing a renewal. The good news is that the market already has the tools at its disposal to help meet the FCA’s requirements.
The choice and quality of the data available to insurance providers has grown exponentially in the last few years, not least due to the depth and breadth of industry contributed motor quote and motor policy history data that’s now been accumulated. This can help insurance providers understand cancellation probability, for example, and can even offer valuable context for changes in policy behaviour as a direct consequence of the pandemic. Through COVID-19 attributes, insurance providers can understand if cancellations or gaps in motor insurance cover occurred during one of the UK’s national lockdown periods during 2020 and 2021.
The growth in data sources also includes real-time environmental data, highly granular property characteristics for a home through to vehicle centric data including mileage, MOT history and even the presence and performance of Advanced Driver Assistance Systems (ADAS).
These advances in insurance-specific data, combined with the emergence of data platforms, deliver a single access point to data enrichment that can streamline how insurance providers ingest data. It will also provide swift quotes to customers for instant risk assessment at individual, asset, household and postcode level. This helps insurance providers build a comprehensive understanding of the risk of an existing customer as their renewal date approaches. In turn, customers can be offered a premium based on a fuller understanding of their risk, at that point in time, and offer products suited to their current needs.
In practice, this could mean that a customer whose car has actually increased in value over the past year and has had no claims since their last renewal could be priced based on this wider understanding. The addition of ADAS data to renewals can also bring a new layer of insight for accurate pricing, allowing insurance providers to reward the customer for the investment they have made in the safety of their car. This could also prove to be a good incentive to stay rather than switch.
In home insurance, a customer who has stayed with the same provider year on year may need a complete reassessment of their cover and pricing prior to renewal. Insurance providers can use address level geospatial intelligence data to help understand perils risks such as fire, flood, subsidence, local hazards and crime rates. Highly granular property characteristics data can help build a more complete picture of the property risk, based for example, on the number of bathrooms, the roof type and listed status. These insights will soon be complemented by industry-wide claims data to bring a further layer of intelligence when assessing risk for renewals.
Of course, data enrichment works best when the customer data being enriched is as accurate and up to date as possible.
Therefore, the starting point for a sound renewal strategy using data enrichment is ensuring the data currently held on a customer is fully leveraged. The question insurance providers need to ask themselves is whether all areas of the business – marketing, underwriting, claims – have the same record and view of that customer and if not, how best can an accurate, single customer view be achieved.
This is where linking and matching technology can create one holistic view of the customer that can be the foundation for further data enrichment. This process involves consolidating data stored in multiple silos to create one true record for the customer, which is assigned a unique ID. As well as providing the basis for all future engagement and enrichment, the unique ID can also help identify when an existing customer has applied for a quote as a ‘new customer’ to help ensure pricing consistency in line with the new pricing rules.
The data available to the market to assess risk for renewals and new business is growing rapidly, and the data sources and platforms now exist to allow this data to be ingested into the insurance ecosystem at the right time and at the right points in the customer journey. By building a single customer view pulling on all existing data held then expanding the picture using data enrichment, insurance providers can demonstrate to the FCA the steps they have taken to deliver fair pricing and fair outcomes for customers at renewal.
By Martyn Mathews, senior director of Personal and Commercial Lines, LexisNexis Risk Solutions