Data, set, go - Preparing for new insurance pricing practices

Authored by Martyn Mathews, Senior Director of Personal and Commercial Lines, LexisNexis Risk Solutions, UK

Motor and home insurance providers will need to ‘know’ their existing customers better than ever before as a consequence of the FCA’s new measures. Customer data management and data enrichment are therefore set to come centre stage in the renewal process.

Based on our internal research, currently around 15-20% of the data enrichment available to the insurance market is currently used at renewal. Some of this may be due to legacy technology or pointed to the lack of understanding of the value of data at point of renewal, plus there hasn't always been the need to validate information at renewal stage.

This is all set to change.

With just a few months left to prepare, leveraging all existing data held on a customer, should be high on the priority list. It sounds simple, but customer data management has been a big challenge for the market not least due to high levels of switching and the volume of merger and acquisition activity.

By using a unique identifier such as LexID®, customer data from claims, marketing, quotes, different lines of business or customer databases that come part and parcel from a merger or acquisition can be connected and the result is a ‘single customer view’. In other words, a consolidated and accurate view of every customer based on their history with the insurance brand or brands can be created through linking and matching technology.

This enables insurance providers to gain a deeper understanding of their existing customer base, providing an effective starting point for a new approach to renewals.

While the single customer view has multiple benefits across an insurance business, in pricing it means insurance providers can build a much more holistic view of risk based on every previous touchpoint with the customer that crucially, keeps pace with changes over time.

Approaching policy renewal, there are existing customers that shop around and request new business quotes from their current provider. The unique identifier can be valuable in flagging these customers to support pricing consistency and retention strategies during the quote process. 

As the FCA rules require renewal pricing strategies to be consistent with current new business pricing, it makes sense that the risk assessment processes at renewal may need to become more aligned to the data enrichment processes used in new business. 

Across the board, we expect to see an increasing demand for market-wide policy history, quote behaviour information and claims data to build the understanding of risk for an individual across all lines of business. 

More data shouldn’t mean a slower quote process for new or existing customers. Data enrichment platforms such as LexisNexis® Informed Quotes allow a swift risk assessment at individual, asset, household and postcode level with intelligence delivered on all individuals associated with the quote in a single transaction, for example additional drivers and joint policyholders in addition to the proposer or main driver.

Quote behaviour data is also going to be vital in helping the insurance market respond to the new pricing regulations. LexisNexis® Quote Intelligence can connect related quotes – even where a key detail such as address or vehicle are different, record a customer’s quote volumes, highlight where customers have made a change between quotes and provide a deeper understanding of when a customer is shopping in relation to their policy start or renewal date. This brings a further dimension to the understanding of risk, enabling insurance providers to offer the most suitable products at the right price.

In essence, insurance providers can take advantage of one gateway to a host of data enrichment datasets during the quote or renewal process, undertake due diligence checks and validate information supplied by customers to help deliver the consumer outcomes the FCA’s pricing remedies are intended to create.

It’s not just about offering the right price at renewal, it’s offering the right policy. With a holistic understanding of risk, insurance providers can know that the product that's being offered to the customer is suitable for their needs, and they may be able to identify cross-sell and add-on products relevant to the individual. This will help demonstrate to the FCA that they are doing more to consider how they offer fair value to their customers.

The change in pricing strategies will be driven by data. Only through better customer insights can the market deliver fair value and fair choice to consumers.

If you would like to talk to Martyn Mathews about the issues raised in this article CLICK HERE, leave a message and youTalk-insurance will pass your enquiry on