The product supports underwriting by informing insurers on vehicles’ in-car safety features
Data and analytics company LexisNexis Risk Solutions has kicked off an initial test phase of its brand new Vehicle Build product – this provides insurers and brokers with data around vehicles’ standard and optional extra safety features in order to better inform the underwriting process.
The new ecosystem, which will sit within LexisNexis Risk Solution’s existing data system, hired analysts to collate data on the advanced driver assistance systems (ADAS) safety features of each car manufacturer. This could include, for example, adaptive cruise control, automated emergency braking and lane departure.
Some of these features will be a standard provision within vehicles, others may be an optional extra selected by drivers when they purchase the car.
The importance of arming insurers, brokers and MGAs with this data is because of the impact on claims frequency and severity, explained Martyn Mathews, senior director of personal lines at LexisNexis Risk Solutions.
He told Insurance Times this week: “There’s a shift now towards recognition that the vehicle itself either is equipped with features that have a significant potential impact on risk pricing in terms of claims frequency and severity.”
The Vehicle Build product, therefore, is “saying what did this vehicle leave the factory with? What extra features were chosen by the individual? [Insurers] can now accurately understand the risks associated specifically with that vehicle.
“Understanding that now means an insurer can take a proper risk assessment,” Mathews added.
Mathews revealed that LexisNexis Risk Solution analysis confirmed that the number of ADAS features within a vehicle has a direct correlation to claims frequency.
If a car, for example, has one to three additional safety features, this leads to a 4.5% reduction in claims frequency. Cars that have four or more additional safety features correspondingly see an 11.7% decrease in claims frequency, while cars that have a cluster of different extra safety features can expect a 15.2% reduction in claims frequency.
“More safety features means fewer claims,” Mathews added.
However, this isn’t the end of the story. The severity and cost of claims is also important, noted Mathews. Although safer vehicles, on the whole, lead to fewer claims, these claims are often more expensive due to the extra technology in the vehicles – this not only makes parts more expensive, but also requires more skilled repairers to conduct the work, bumping up repair labour charges.
Helpfully, the Vehicle Build product has standardised the terminology that different car manufacturers use for ADAS features. Mathews, for example, commented that the firm’s analysts found 40 different terms across car makers for automated emergency braking and 20 different terms for adoptive cruise control.
LexisNexis Risk Solutions has started testing Vehicle Build this month, speaking widely to insurers about the product at its conference on 27 February at the Institute of Engineering and Technology in Savoy Place.
Vehicle Build’s formal launch is expected in the spring, around April or May.
The data surrounding in-car safety features is phase one of Vehicle Build, Mathews said. Phase two of the product development will centre around collecting consented data. This means that when purchasing a new car, drivers would be asked for their permission to share data, with the aim of being able to buy cheaper car insurance.
Mathews described this as the next stage of telematics, making the model more mass market because there is no need to fit a device – all the information would instead come directly from the car.
The inspiration for Vehicle Build came from insurers, who asked LexisNexis Risk Solutions to innovate in this area for their benefit. As far as Mathews is aware, Vehicle Build is the only solution offering this type of data for the insurance sector.
Vehicle Build is a global product that can be localised for the UK market.
Although Vehicle Build is primarily for insurers, Mathews sees great potential for the product to be used by brokers too.
He said: “I can certainly see where there would be a lot of excitement amongst brokers who are working on retention. [For example,] what else do they now know about [a policy] which makes that risk more attractive to other insurers so they can re-broke effectively as well. Our brokers are telling us that actually they’d like to look at using the data at that stage.
“Brokers now are data savvy, they’re data hungry, they’re working hard on the behalf of their insurance panel. Anything they can do to show that they’re innovative, to help them get their net rate discounts and so on from insurers is definitely the way forward.
“There’s a lot of uptake already, particularly from the large national brokers, who are really, really keen. These guys want to know more.”
A selling point of Vehicle Build is that the data can be operationalised by insurers and brokers, added Mathews.
“You’ve got to be able to operationalise it in a meaningful way because just having reams and reams of data means absolutely nothing if you can’t do something with it,” he explained. “That’s why I’m proud of this ecosystem we’ve created that allows insurers to do that, look at the whole world but get it down to a manageable chunk that’s meaningful to their business.”