Mind the data gap in small business insurance

Martyn-Mathews,-senior-director-of-commercial-and-personal-lines,-LexisNexis-Risk-Solutions,-Insurance

Authored by Martyn Mathews, senior director of commercial and personal lines, LexisNexis Risk Solutions, Insurance

More than three million UK workers want to start their own business in 2022 according to a recent survey. Indeed, in the first three months of 2021 there were 137,000 new businesses across the UK, a 14 per cent leap on the previous quarter and the highest figure since quarterly records began in 2017.  This might be good news for the continuing recovery of the UK economy, but without adequate data validation and enrichment solutions, it also poses a real risk assessment challenge for insurance providers.

Kitchens, garages, garden rooms and attics being used for commercial enterprises need to have adequate and appropriate insurance protection. The private car or van used for travelling to meetings, for delivering goods to customers or collecting supplies needs commercial cover.  Then there’s liability and professional indemnity insurance to consider.

Without onerous and meticulous data validation, it’s all too easy to see how new entrepreneurs risk costly underinsurance in the event of theft, fire, flood damage or some other accident that could bring their ambitions to a grinding halt.

Unlike personal lines insurance where risk assessment using data validation and data enrichment has become highly automated, full validation of commercial insurance risks can take precious time for the customer, the broker and the insurance provider. The temptation for the customer may be to secure the bare minimum of cover to keep costs low and the buying process quick. Without knowing more about the business and the individual behind it, it’s difficult for brokers to advise on the risks of this approach.

To fully assess risk, the business name needs verifying; the directors, owners and the business address needs to be matched against multiple datasets and the business trading address needs to be assessed.  It could be a residential address, but it could also be a high street, a workshop, an industrial site, office block or large industrial site. All of these different types of addresses must be captured for commercial underwriting. If a business is trading from more than one location, more than one risk address needs to be captured.

With the plethora of new businesses amid ‘The Great Resignation’ it has needed a levelling-up of the data chasm between personal lines and small commercial lines to help brokers present the fullest picture of risk for small businesses to their insurer partners. 

Commercial PreQuote from LexisNexis Risk Solutions is a brand-new data validation solution delivered through the Acturis e-trading platform or direct from our own platform. It takes a three-pronged approach to provide validation about the property, the business and the people behind the business.

Firstly, it incorporates LexisNexis® Property Insights, meaning that where residential property information is needed, brokers can validate the risk based on data about the property from year built to rebuild cost.  Brokers can also call on  data surrounding the business including key information about a business, its financial position and an indicator of potential business failure, helping to provide a further layer of validation.  Finally, LexisNexis® Risk Insights is the insurance-specific customer verification and enrichment solution and this offers attributes derived from public and proprietary data, so that brokers can validate the risk related to the individual behind the business.

With low interest rates, government support and more people shopping online, the hunger for new business start-ups looks set to continue for some time to come.  Brokers can now benefit from access to more accurate, pre-validated information about any small business and its proprietor, prior to securing quotes.  This will help them to tap into the growing small business sector with greater efficiency, as they accept or decline risk to match their profile. 

Meanwhile, kitchen table businesses should benefit from a more customer centric service with more accurate quotes and added insight and efficiency from their broker.

 

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About LexisNexis

At LexisNexis Risk Solutions, we believe in the power of data and advanced analytics for better risk management.

With over 40 years of expertise, we are the trusted data analytics provider for organisations seeking actionable insights to manage risks and improve results while upholding the highest standards for security and privacy.

We enable insurers and brokers to improve decision-making, increase profitability and transform business performance with actionable insights from our data and analytics solutions. For more information, please contact risk.lexisnexis.co.uk/insurance or enquiries-info@lexisnexis.co.uk.

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