This is the time for data for good to shine

Authored by James Burton, Managing Director UK and Ireland, LexisNexis Risk Solutions

Inflation might be falling, nevertheless, around 6 in 10 adults (62%) in Great Britain have said they are spending less on non-essentials because of increases in the cost of living, according to the Office for National Statistics.  Consumers are still struggling and as a proportion of their income, the poorest in the UK spend more on energy, food and bills like insurance, than the better off. The threat of insurance customers letting policies lapse and losing the safety net of cover, is very real.

The industry continues to work hard to prioritise access for all to insurance, not only does this benefit consumers who are then less likely to be without protection if the worst happens, but it also widens the potential customer base for insurance providers.  As data enrichment advances, it becomes ever more possible to segment the market offering a more personalised approach to insurance provision.  By supplementing the information already held on customers with further data points to better understand an individual's risk, a more accurate picture of a customer’s needs and preferences can be achieved.

Increased segmentation means that insurance providers can now use data to help them offer more tailored solutions.  Examples might include encouraging a homeowner who has had an escape of water to use water leakage sensors, which could lead to a reduction on their premium, or exploiting property characteristics data to highlight a policy that might be more suited to their home, possibly even cheaper.  In an era of climate and cost induced rising insurance premiums, using data in this way to offer tips and tricks to customers to help reduce the cost of their policy, could go a long way to engendering greater trust and loyalty.

To help customers get the best overall value from their insurance policies, though, providers need to see the whole insurance story, across all of their lines of business.  With data often in silos between different departments, be that property, motor, claims or underwriting, painting the complete picture can be tricky. 

Tackling that problem, insurance providers are increasingly turning to proprietary linking technology to match disparate identity information and create a single customer view from multiple datasets and touchpoints.

No longer does a customer’s home policy have to stand separate from motor, rather, it becomes possible to see that Mr B changed addresses, claimed for a leaky roof in his old house and added his teenage daughter to his motor policy in the last six months.  This single customer view helps providers take a more personalised view without relying on the customer to confirm details the insurance provider should already know.

Building that picture further with cross-market claims data coming this Spring should help insurance providers gain an even deeper understanding of risk to help determine the right product at the right price.

As well as gaining a cohesive understanding of the risk of the individual, the same needs to be done for the home or vehicle.  In motor for example, using data to factor in the presence and performance of the Advanced Driver Assistance Systems (ADAS) features on a vehicle can make a real difference to a quote.  We know some insurance providers are offering discounts for drivers with ADAS, based on data insights from LexisNexis® Vehicle Build.

Meanwhile, accessing real-time information on a vehicle’s status, mileage, value and history, including how well it’s been maintained will all affect cover.  Knowing these details could help an insurance provider ensure that a customer is not paying over the odds, for example, if they drove less than usual in the last year or their vehicle has a Full-Service History and never has advisories outstanding at MOT.

In home insurance, precise pricing down to the individual address has never been more important as we face increasing climate risks but also imagine the power of knowing if a basement home is at risk in a flash-flood so that there’s time to move possessions and people out of harm’s way. That’s what new data enrichment solutions such as LexisNexis® Basements Indicator can help with.  It combines multiple data sources to create a unique attribute that helps property insurance providers identify whether a basement or an underground level may be present in a home or a commercial building.

Then we can consider the claims history of the home or the car to help do more for the customer. Again, this is where cross-market claims data should confirm for example that a new home has a history of claims that the new owner should be aware of to help mitigate an issue arising again in the future.

According to the National Institute of Economic and Social Research (NIESR), for the bottom half of the income distribution, the recovery of living standards to pre-pandemic levels is not expected until 2027-28.  The worst is not over for many, so as the UK continues to navigate its way out of economic hardship, using data for good and helping insurance customers achieve cheaper, or more appropriate cover is critical.  Not only is this good practice, it may also help make insurance something consumers become more engaged in and value.