A recent report by Consumer Intelligence revealed 14% of homeowners are considering cancelling their contents insurance now that they are mainly based at home, and another 11% are suffering financially as a result of the pandemic are looking to reduce or cancel their policy entirely. Part of the challenge is the perception of contents cover which may be seen as a ‘nice to have’ that only activates when a theft occurs rather than understanding the full extent of the benefits – accidental damage, out of home cover for example.
Although prices of home insurance in the last six years have only gone up by 2.3%, the increased economic pressures on individuals as a result of COVID-19 will also be a key concern for the home insurance market right now, along with the potential risk of claims fraud, exaggerated claims and quote manipulation.
These factors combined with the changing risks created by the pandemic have highlighted the increasing importance of creating a holistic view of risk at quote and claim, allowing insurance providers to price fairly and accurately, support customers during the lifetime of the policy and expedite claims efficiently. As the risk dynamic changes, the data the market uses to assess risk may also need to change and that’s certainly a focus for us as data and analytics provider to the sector.
From a surge in puppy purchases, students returning from university to live with mum and dad again, through to home offices created on the kitchen table or in the garden shed, not to mention the gym sessions happening in the living room and new found enthusiasm for DIY projects, homes are multi-tasking centres that we would not have imagined six months ago. And with the change in use, comes a possible rise or fall in the types of claims the home insurance market will experience.
Recent industry reports have already highlighted an increase in domestic fire accidents and while some corners of the market are bracing themselves for more accidental damage claims, on the flip side there could be fewer household burglary claims. ONS data has revealed a significant a fall in crime throughout lockdown.
Other external factors such as severe weather events must also be considered as we near the Autumn and Winter months. The pandemic has almost overshadowed the fact that £360m was paid out in claims from storms Ciara and Dennis earlier this year. The ability to get on the front foot in future events to manage home insurance claims could be hampered if we see a continuation of local lockdowns or even another national lockdown.
However, the good news is that the data insights available to home insurance providers to help them understand risk are growing. At the same time, the speed of access to these insights has become faster for easy integration within quoting and underwriting processes and at point of claim to inform claims management strategies. For example, the home insurance market can now access geospatial data including perils data such as flood, fire and subsidence alongside over 40 further data enrichment sources covering everything from property data through to data on the individual, all from one access point, at point of quote – creating a comprehensive understanding of an individual property’s risk and the people that live there.
The next big advance is the creation of a market-wide home claims history database. At point of quote, this could provide a clearer understanding of past claims – the circumstances surrounding that claim, the settlement reached, and the parties involved. Building this greater context and understanding of past claims should enable the market to make much more informed decisions for pricing, renewals and MTAs. Bringing this data in at point of claim will also allow providers to understand how a new claim ‘fits’ with what may have happened in the past – informing the appropriate treatment strategy for that specific claim.
Ultimately it should help insurance providers price more fairly and deliver an improved customer experience at a time when consumers are looking for real value from their insurance provider.
Clearly, if we do see an uplift in accidental damage losses resulting from increased home occupancy, putting those claims into context will be vital for the market in helping insurance providers determine which customers should be incentivised to stay and which no longer fit their underwriting criteria or may become less appealing to retain.
As part of this picture, prior claims for the property also need to be considered – for example past damage to the property from windstorms, escape of water, flood. How often has this happened? How much did each claim cost? This data could be valuable in driving the development of new propositions that actually help policyholders mitigate the risks.
Of course claims data only increases in power when combined with public records data, and property data, helping build a better picture of both the customer and location at the point of quote and claim, to deliver appropriate premiums and help reduce the market’s potential exposure to claims fraud.
Whether we experience further lockdowns or not, it seems clear that the changes to the way we live and work could become more permanent. With the pressure on household finances growing and unemployment rising, the value of market wide claims data in assessing risk and reducing fraud is hard to deny.
By Neill Slane, senior vertical market manager, claims, insurance, UK & Ireland, LexisNexis Risk Solutions