LexisNexis releases data, allowing brokers to undertstand why policies are being cancelled
LexisNexis® Risk Solutions has uncovered the scale and impact of policy cancellations on the sector.
New analysis of the data from the LexisNexis Motor Policy History contributory database has identified 1.3 million policies were cancelled in the past year, which is close to a third (32%) of all new policies written.
Recognising the impact cancellations can have on broker business, LexisNexis Risk Solutions discusses how it is now possible for cancellations data to be used as a risk factor during the broker quoting process. This has the potential to save an insurance provider with circa 100,000 policies on their book between £125,000 and £375,000 each year - not an insignificant sum of money. This is aside from any bad debt brokers may face following a direct debit cancellation.
LexisNexis Risk Solutions has identified:
- 800,000 individuals had three or more cancellations in the last five years
- 15% of new policies were cancelled in the first 1-15 days; 37% cancelled within 16-100 days and 48% cancelled within 101-364 days of opening the policy.
- The more cancellations an individual has, the more likely they are to cancel in future
- If an individual has a current CCJ present, there is a 64% higher risk of a policy cancellation
- Attempts at fronting have a correlation with an individual being more than twice as likely to cancel a policy
LexisNexis has estimated that between 10% and 30% of the current customers on insurance providers’ books have had a cancellation in the past and present a higher risk of future cancellation, higher claims cost and potential fraud.
Martyn Mathews, senior director of Motor Insurance at LexisNexis Risk Solutions, said: “Whether a cancellation occurs within the cooling off period, half way through the policy or as a result of a new business renewal, there is a cost implication for the provider, the industry at large and, ultimately, consumers.
“For the first time, brokers can understand the reasons why cancellations are coming at a point of quote,” says Martyn Mathews, senior director of Motor Insurance, Telematics & Connected Car at @LexisInsurance @LexisInsureUK #Biba2019 pic.twitter.com/R6HwJHqagW— Insurance Times (@InsuranceTimes_) May 15, 2019
“For brokers in particular, often operating on slim profit margins, cancellations are a major headache. By the time a customer decides to cancel their policy, the insurance broker has incurred marketing and administration costs, as well as aggregator fees in most cases. Also, in many cases, the customer may cancel the policy and the direct debit, making it difficult for the broker to claw back any instalments owed or cancelation fees that may apply.
“Timings of cancellations are also a big indicator of potential fraud. However, data can help to reduce this issue, because it allows the broker to establish what factors increase the probability of cancellations.
“This new knowledge around cancellations demonstrates how contributory data from across the sector, combined with data analytics skills, can create important new insights that allow brokers to make data-driven decisions and give their customers more accurate pricing. The BIBA Conference 2019 is the perfect platform for us to showcase the power of cancellations data to the broking community.”