In Series - Personal Lines: All change
As the applications of data sources increase and improve, it pays for personal lines insurers to learn how to adapt.
Risk assessment, the claims settlement process and underwriting in the personal lines space have changed dramatically in recent years, driven by insurers’ increased appetite for more data to deliver greater insight and improve the bottom line in a very competitive market.
Historically, risk assessment centred on the need to understand the impact of hazards that affect the willingness to offer cover and to set a sensible price. The claims settlement process relied on data contained on the claims form, verified against the original proposal.
Today, however, the picture is very different with the reliance on accurate information throughout the customer journey paramount.
Data sources today are wide ranging with insurers using their own information and third-party data sources. There is now a wider use of credit and fraud data at individual level, which is particularly useful where there is little additional data available.
The use of credit bureau information is much more common among insurers. Public information, such as county court judgments and insolvencies, including aliases and those from undeclared addresses, and data from the electoral roll are now used within the pricing and underwriting of risk.
Looking to the future, it is inevitable that the increased use of data in personal lines, will equate to more effective checks and validation as early as possible within the customer interaction process particularly the point of quote.
Meanwhile, possible regulatory changes could open up access to wider data sources and as more information becomes available in real-time the ability to change pricing algorithms will also impact on insurers’ ability to change pricing more quickly and respond to market forces.
At present it can take weeks for an insurer to update pricing algorithms, which make it difficult to be nimble. Being able to be more responsive to rapid or unexpected changes to market conditions are also to the benefit of consumers.
The wider use of new data sources will no doubt have a positive impact on the way personal lines insurers conduct their business too. With more effective use of data, insurers will be able to monitor changes in customers’ circumstances aiding the renewal process, management of mid-term adjustments and improve fraud detection.
The speed at which data is obtained will improve, smoothing the customer journey and providing more effective ways in which to validate information or provide information up front, such as the pre-population of application forms with addresses and vehicle details.
The key to the future is how the wealth of data insurers already have, which is incredibly valuable, is dovetailed with external data sources for an increased insight.
Insurers recognise the importance of this and are looking to leverage external data assets with their own known fraud and claims experience to gain an insight into their portfolios.
The challenge is not only using more data in a more dynamic and intelligent way, but also in a more co-ordinated way across all stages of the customer journey. Ultimately the wider use of new data sources should help in driving more competitive premiums for the consumer and at the same time increase underwriting profit for the insurer too.
Graham Odiam is head of insurance, Callcredit Information Group
This article was first published in the 4 April 2013 edition of Post
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