Insurers can provide advantages to policyholders by helping them avoid making claims in the first place

Insurance companies “have a choice to make” on whether to raise policy prices to combat inflation or to “work much, much harder on frequency”.

This is according to Matt Paterson, founder of Silverbeam Consulting and an insurance sector consultant focused on claims management and strategy.

Speaking to Insurance Times, Paterson said that addressing claims frequency means that insurers can offer the “ultimate” customer service by reducing the need for costly inflation-impacted claims.

He explained: “In motor, for example, using the data you’ve got on customers – from dash cams, the police and road safety organisations – you can put all that into the melting pot with the wizardry of analytics and make it useful to customers by saying ‘I’m going to help you not crash’.”

UK general inflation currently sits at 9.4%, according to a statement from the Office for National Statistics released last week (20 July 2022).

Inflation is, therefore, driving up the cost of claims for insurers. Earlier this month, a Willis Towers Watson report predicted that motor claims inflation would accelerate in 2022 following a 6.2% increase in 2021.

This acceleration is already showing – last week (18 July 2022), Direct Line Group predicted a fall in its profits directly related to inflationary pressures.

This followed the release of motor insurer Sabre’s half-year financial results on 15 July 2022, which attributed a 71.6% net loss ratio for H1 2022 to the impact of inflation.

Proactive approach

Paterson added that insurers had “accepted that frequencies were frequencies and nothing much could be done about it.”

He explained that this attitude should change as technology – such as the improved use of data and telematics – meant that claims frequencies could be addressed.

“If you can help your customers crash less, then that’s a win-win,” he said. “The customer doesn’t have to claim, which is a great outcome from them, and from an insurer’s perspective, they don’t have to deal with the loss or the hassle that a claim creates.”

Paterson is an advocate for a “proactive approach” from insurers, rather than accepting the tendency to be reactive to claims.

He said: “We can mechanise the data that we now have on drivers and road safety to try and help people to not have accidents – I’m talking about motor, but this extends into practically any form of insurance.

“In household, for example, you can use telematic technology to detect a burst pipe or water leak and prevent a costly claim from happening.

“That’s the ultimate customer service in the insurance sector – stopping customers from using our products in the first place.”