Insurance Times head researcher Savan Shah speaks with Keith Binley, managing director of LexisNexis Risk Solutions on the trends emerging from the Insurance Times Etrading report, the data analytics solutions insurers and brokers should be using and the potential market threat of Amazon.
Disruption in the industry is coming from the changing needs and demands of customers, how should brokers approach data analytics and solutions?
We conducted some research at the start of this year that really demonstrates the challenging trading environment for brokers. In motor insurance, 84% of respondents used a price comparison website as part of their policy selection process, with 68% going on to purchase online. Just 5% buy in-store, while 24% will buy their policy while speaking to someone over the phone (a rise of 4% since 2015).
In such a competitive market, data analytics should be used by brokers to improve the customer journey, deliver right first-time quotes, pass on the right risks to the right insurance partners and improve workflow efficiencies. In essence, brokers need to see data analytics as something that makes each part of their business work better to deliver a more customer-centric service. For example, in home insurance, data prefill can cut the number of questions they need to ask customers, reduce referrals and increase pricing accuracy. In motor, the sector’s first market-wide, insurance policy data-based risk score can help identify the potential lifetime value of a customer as well as help identify the likelihood of someone cancelling his/her policy, prior to policy inception. And in commercial property, data can be used with mapping software for portfolio management.
Brokers should approach data analytics as a key component of their business, enabling them to leverage the growing volumes of data to make quicker, smarter decisions to support both the consumer and their insurance panel.
Insurer question sets was a big topic of concern this year in the Insurance Times e-trading survey. As LexisNexis Risk Solutions works with around 90% of the insurance market, how do you think insurers can strike that balance of building a question set that asks the right questions?
The volume and nature of questions asked of consumers at the application stage, particularly in home insurance, has been one of the sector’s biggest challenges. If the questions are too difficult to answer, customers will drop out or make their best guess. If it takes too long to get through the whole question set, the same issues arise. Aside from the poor customer experience, this can lead to the significant problem of underinsurance. The logical solution is to prefill some of the data for the customer using various data sets. For example, a customer would input their name and address in the application and this would pull in verified data for that address, on the number of bedrooms, bathrooms and the year the property was built. The customer just needs to check this information is correct and move on.
Going forward home prefill could also include past policy and claims information as well as more detail around the property and any environmental risks. The more verified data that is prefilled, the less onus is put on the customer to provide or potentially guess this information. All they need to do is confirm any changes.
Following a series of demos and a great deal of interest at the BIBA Conference this year, we’re just about to launch our new data prefill product - LexisNexis® Home Prefill - and Hood Group is the first insurance provider to take advantage of our new, exciting solution.
LexisNexis Risk Solutions works with insurance providers to create a better customer experience, can you provide any examples of work you have done that has resulted in better outcomes for insurance providers and their customers?
This comes back to the point about leveraging data analytics to improve the customer journey and create greater efficiencies. The No Claims Discount (NCD) module, Policy Insights and Home Prefill are prime examples of this.
The NCD Module replaces the need for a consumer to provide proof of their no claims history with an automated check against data contributed by other insurance providers. It also helps insurance providers improve their pricing accuracy so that they deliver the right price for the risk. The fact that over 90% of the market now uses the NCD Module speaks volumes about the benefits it is bringing to the sector and its customers.
From here we established a way to improve pricing accuracy and deliver operational savings by identifying a correlation between policy history and claims loss – we call this Policy Insights. For example, in our analysis, people with a gap in cover in the past year had up to a 50% higher loss cost than those that didn’t and people with two or more policy cancellations had up to a 70% increase to loss cost.
Along with reducing cancellation costs, this approach helps insurance providers avoid high risk cases and therefore lowers claims exposure and the associated claims handling costs. It gives insurance providers a number of new policy attributes that offer a deeper picture of risk, going above and beyond traditional insurer risk predictions.
In home insurance, we’ve all seen the TV ad showing a man being interrogated by an insurer for information on the type of locks he has on his home. Insurance providers recognise that there are some pieces of data that consumers simply won’t know without some effort. Our Home Prefill solution launching in August works at the application stage to reduce the number of questions consumers are asked at the first point of contact. They simply enter their name and address and the relevant property data is automatically prefilled, reducing the question set by around 15%.
You provide several solutions to brokers; can you give an example of how one of your solutions has better prepared brokers to compete in a competitive market?
Brokers are always looking for ways to reduce their customer acquisition costs and improve the quality of risk passed on to their insurer panel. Attract™ for Motor is the sector’s first market-wide, insurance policy data-based risk score, which can assist brokers to accurately predict insurance claim losses at point of quote as well as a customer’s propensity to cancel.
Our analysis has shown that policyholders who cancel within the first 30 days of a policy are twice as likely to cancel again in future, which is then a factor for claims propensity. We also found that where cancellations were insurer or broker led, the worst decile had three times the rate of cancellations of anyone else in the sample. However the very best decile were only a fifth as likely as the rest of the portfolio to cancel.
Gaining this level of insight prior to policy inception can support brokers in making more informed decisions about the risk versus the benefit of taking on that customer and keeping good standing with their panel. It also assists in identifying customers who offer the greatest lifetime value so that brokers may then decide where to focus their energies at acquisition and renewal.
The beauty of Attract™ for Motor is that we can deliver the scoring direct into insurer and broker systems with sub-second response times at point of quote, helping to streamline the customer quoting process.
From a technological point of view, how should the insurance industry be preparing for the potential of Amazon entering the UK insurance market?
It’s quite easy to get distracted by potential market threats but we need to remember the UK insurance market is highly innovative and insurance providers big and small are already investing heavily in research and development to secure their place in the industry of the future.
Look at the number of insurtechs that have emerged, the tie ups between smart tech providers and insurers, the way telematics insurance has grown and its impact of road casualty figures amongst young drivers.
Also look at the way people are now buying insurance compared to just 5 or 6 years ago and consider the growing number of data sources now available to help determine risk.
The Insurance industry is already changing in response to consumer demand, leveraging data to achieve a 360% degree of the customer to make fair and accurate pricing decisions. Data and analytics hold the key to how the market will continue to evolve – the quantity of data will continue to grow with the expansion of the Internet of Things and insurance providers will have the advantage in gaining meaningful insights from it to deliver the products and service their customers want.
BGL Group switched to using the NCD module at point-of-quote for car and van insurance, a move aim to improve customer service. How does this solution improve their offering to customers?
Honest answer here - could you easily lay your hands on your proof of NCD? For BGL Group, it had long been apparent that requiring new customers to post in a paper certificate of their no claims discount was not only vulnerable to loss, fraud and error, but was starting the customer experience off on the wrong foot.
With millions of motor quotes serviced every year, BGL Group needed the ability to confirm that the information provided by the majority of potential customers on their no claims history was accurate.
The LexisNexis Risk Solutions No Claims Discount (NCD) Module is a contributory database of consumer no claims histories supplied by the industry’s insurance providers. It operates on a contribute-to-use basis and enables its users such as BGL, to replace a manual process of checking a customer’s NCD with an automatic check against a database.
By replacing the paper trail with the ability to access records supplied by other providers, BGL Group could verify the majority of no claims histories, saving their customers time and hassle as well as their business. Through shifting the use of the module from a post-sale check to instant verification at point-of-quote, BGL Group has further improved its customer service levels and is now able to identify and deal with potential discrepancies at the earliest point in the customer journey.
With over 90% of the UK insurance industry contributing to the LexisNexis Risk Solutions No Claims Discount module, the service already gives BGL Group the ability to access no claims discount histories for the majority of potential customers.
We witnessed in our recent etrading research, almost 40% of 740 brokers had to wait up to a day for an etrade referral to be cleared. What solutions such as the Informed Quote and Informed Broker platform can help reduce this waiting time for brokers?
Speed of response is crucial for brokers and this can be a challenge in some lines of business. The answer is to apply data enrichment up front, at point of sale to improve the customer verification process and reduce the need for referrals or post-sale checks which can lead to pricing or terms adjustments.
LexisNexis® Informed Quotes and Informed Broker act as a single ‘pipeline’ delivering high volume, real-time data enrichment to quickly verify and price customers at point-of-quote. With Informed Broker, the customer verification data is delivered at point of sale via proprietary links with all major brokers and software houses. The ability to verify customer details in this streamlined way helps brokers pass on the right risks to their insurer panel, reduce processing time and administrative costs while delivering an improved level of service to customers.
The provision of this data through all major software houses at sub-second speed is evolving the risk assessment process for insurance providers across the sector, enabling them to make faster and more informed decisions while delivering a better customer experience.
QBE, Travelers and Hiscox have all adopted LexisNexis® Map View, what benefit will this have for brokers and the end customer?
The great thing about LexisNexis® Map View is that it’s so versatile. As well as enabling perils to be visualised and calculated right down to the building outline, brokers can now use Map View to calculate risk exposures and accumulations for an entire property portfolio. This includes historic flood data going back to 1946.
Brokers can also use the system to create monitored zones, tying a geographic location to business activity, marketing activities, patterns of cancellations or renewals, density of quoting, for any region or town a broker wants to measure.
For the end customer, aside from the reassurance their premium is a true reflection of their risk, Map View now includes real-time flood alerts, with the system updating every 15 minutes via a direct link to the Environment Agency. The alert will show the specific location of a flood as well as any potential exposure when there is a severe weather warning, allowing brokers to take a proactive approach to managing their portfolio with the opportunity to alert their local customers.
What new innovative technological solutions could be entering the market in the next 5-10 years?
I believe we will see more use of connected technology as a means to mitigate risk, and insurance providers will look to leverage the data from this technology to support pricing and underwriting. It’s the telematics model we support in motor insurance today but at a much greater scale and across multiple market segments.
Contributory databases will play an even more important role in the future as new data sets emerge, allowing insurance providers to gain greater insights and additional value from new rating factors.
You can see the potential of improved pricing and risk mitigation in smart home devices and the connected car through the data from inbuilt and aftermarket devices.
The motor manufacturing market in particular is where we see some the greatest shifts occurring with the growing penetration of connected cars. Within our telematics division, we have a dedicated focus on supporting this market. Our goal is to enable motor manufacturers to leverage the data from connected vehicles and link with the insurance sector to deliver usage based insurance and greater consumer choice, through the LexisNexis Risk Solutions Global Telematics Exchange.
However, consumers must be the ones to drive all these changes – they need to be given tangible benefits from industry access to their data, to better serve their changing needs.
The Insurance Times Etrading report is out now to order:
- Discover how over 740 brokers view each stage of etrading on the leading insurer platforms and software houses in UKGI.
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- Discover how brokers rate their chosen route of trading in areas such as security, navigation, products, referrals and more!
- Learn what brokers really need from insurers and software houses to compete in an evolving industry.
- Determine your strategic plan by learning from brokers feedback in 10 key etrading subject areas.
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