In Series: Data Sharing - Sharing is caring

With an increasing amount of data available to insurers to help combat fraud, underwrite appropriately and improve claims handling, the question of how information should be used has never been more pertinent.

However, while sharing data in certain areas could benefit the wider industry, will firms' fears of losing their competitive edge prevent collaboration?

Working together as an industry has a number of benefits, and there are already several examples of insurers sharing data effectively.

In particular, the Claims and Underwriting Exchange, which is run by a subsidiary of the Motor Insurers' Bureau, MIB Management Services Ltd, has helped insurers pool claims data to identify fraud, and its use in the industry is growing.

MIB MSL director Ashton West explains: "We've made the necessary changes to enable members to use CUE data at the point of quote.

"Application fraud is a growing issue, and identifying this as early as possible in the process is key to managing the problem successfully.

"It will lead to more accurate pricing, fewer cancellations, improved claims handling and fewer complaints at the claim stage due to non-disclosure."

Given the benefits on offer, combating fraud is certainly an area where insurers are more than happy to work together.

"Sharing data works well when it relates to fraud," says Emma Bate, a partner with DAC Beachcroft. "There are no issues around competition; quite simply, the more data you can share, the better."

Further initiatives are being implemented to strengthen the fight against fraud. These include the Association of British Insurers' jointly funded project with the DVLA to provide details on driving offences and disqualifications.

The initiative will be in place by 2014 and will help identify drivers who have not disclosed information at the application stage.

Insufficient sharing
However, for some, efforts to share data do not go far enough. Andrew Pemberton, director of Argent Rehabilitation, says that more data sharing in the personal injury sphere is needed, especially around the cost of treatment.

"If insurers could access this type of information they would be able to see whether someone had already had treatment for an injury," he says.

"This could alert them to cases where an individual has a pre-existing condition or is acting fraudulently."

The same is true of no-claims discount information, another area where insurers are keen to collaborate.

Gareth McChesney, head of motor and home at Allianz, says: "We still operate this really old manual system where policyholders have to obtain a paper copy of their NCD for their new insurer. It's really old-fashioned."

Other countries, meanwhile, are already a step ahead when it comes to data sharing. In Germany, for example, details are shared centrally.

"It wouldn't cause a problem to share such data and would greatly improve the customer journey. The industry should work together to make it easier for customers," says Selwyn Fernandes, managing director of LV's direct business. "This would make the process easier - it wouldn't create a cartel."

Data no-go
While there is a willingness to share information in some areas, Mark Harrison, managing director of Business Insight, believes that collaboration enthusiasm could depend on the size of the company concerned.

"For smaller insurers I can see the benefits of pooling data, as they don't always have enough of their own to identify trends," he explains.

"But would larger insurers be prepared to give them their data? It could mean giving away their competitive advantage."

Pro Insurance chief executive Richard Lawson says that smaller players can often feel at a disadvantage.

"Although the smaller players have more to gain, they can often feel the big guys are dictating to them, and this prevents the necessary co-operation," he adds.

And while sharing NCD data would help to improve the application process, some would like to see much more openness around data sharing generally.

Peter Thompson, managing director at Junction, explains: "It's not just about having access to the data. It's about how it's interpreted. This is what gives an insurer the competitive advantage."

If more data is shared among insurers, this will need to be explained to policyholders in line with the Data Protection Act.

This requires insurers to use a privacy or fair obtaining notice explaining what data is being shared and why. As an example, the FON on CUE was recently updated to enable insurers to use the data for point-of-quote decisions.

Bate doesn't expect these requirements to restrict the amount of information that is shared. "These notices are handled very pragmatically," she says.

"You get the odd person who exerts their rights, but generally it works well and shouldn't prevent more data being shared."

Third-party preference
While there is certainly room for more co-operation among insurers, using an independent third party brings a different angle to pooling data.

Lawson says: "[Third parties] can be apolitical, so you won't come up against issues around the size of insurers and what they stand to lose or gain."

Using independent third parties can also help improve the quality of the data collected. While data held on an industry-funded hub can only be as good as the information supplied by the insurers, a third party's business survives on the strength of its data, giving it an additional incentive to ensure its data is accurate and delivers benefits to its customers.

This is already happening with CUE, where access to the database is provided through third-party suppliers. Members are able to choose which supplier they contract with for their CUE data, and the suppliers compete on price, quality of service and their ability to match records.

As well as helping to enhance the data, a further benefit of working with a third party is data analysis expertise. One example of this is telematics: although insurers are excited about the data this technology will generate, there is some uncertainty about how it will be interpreted.

For example, while bad driving habits such as speeding and taking corners too fast may suggest a higher risk, this is not guaranteed.

"It's a huge step forward for insurers, and they will benefit from having specialist providers to analyse the huge amount of data generated by telematics," says Harrison.

Being able to turn to external support may even become a necessity as the amount of data and the ways in which it is used expand.

"Insurers don't have enough experienced underwriters and analysts to understand all the data that will become available," warns McChesney. "This will need to be addressed."