At the moment in the insurance market with tight regulation, low yields, low interest rates, economic uncertainty, challenges with managing big data, general insurers in the UK are facing difficult times. Comparison websites are taking a piece of the value chain, and surveys have shown that most customers don’t trust their insurance provider. In fact insurance is even less trusted than the banks.
On the other side of the coin, it is important to communicate how hugely valuable insurance is for society.
This is something the insurance industry doesn’t do a good job at communicating, the things that many consumers and businesses take for granted: the vital protection provided for our assets and the role of protection as a stabilising force in the economy.
There is still a large degree of underinsurance in certain sectors in the UK. Women for example are vastly under-represented in life insurance and long-term savings.
There is a huge gap for long-term savings in the UK. In the West generally there’s been some warnings about the ageing population and risks of some kind of collapse of the pension and life industry.
Underinsurance can happen for many reasons, including customers buying the wrong policy, or specifying the wrong sum insured, because their insurance needs are not reviewed and they don’t have access to advice. Smartphone engagement for insurance, autonomous and semi-autonomous cars and the Internet of Things are all bringing huge lifestyle changes but also enormous cyber risk and other new risks to our everyday lives.
Yet – powered by data enrichment and a more personalised approach to the customer – the insurance sector can bring solutions to all these problems, which equals a great challenge but also a great opportunity.
Our company recently took part in a forum at the Instech 2020 conference where we discussed some of the myths associated with big data and the negative way it is represented in the media, when in fact data is such a positive force for change and a key ingredient of protection.
After all, insurers use data in a positive way to give better pricing and to weed out fraud to the benefit of genuine customers. Without a data record on a customer they will tend to price higher or they may decline cover all together, even when other aspects of the risk such as the vehicle or the home may be known.
More external data and big data doesn’t automatically bring business improvements
Data is vital to pricing appropriately and the whole landscape has been changing over the last few years with big data and access to external data becoming an arms race that no insurer can afford to ignore. There’s now a requirement to take data from more external sources rather than just relying on what the customer says in their application. This has begun moving into commercial too, not just in personal lines insurance.
There is also a common assumption that larger datasets and a better spread of data points always lead to the insurance algorithm performing better, when in fact this is not always the case.
Whilst getting access to data and insight-driven decision making is all important, at LexisNexis Risk Solutions we expend a lot of effort on data quality, testing, looking at how to question the integrity of the data and sense checking it for the real world.
There is a trend for more and more data to be used by the insurer which is not generated in-house. In a data-powered market like UK general insurance, and with the dominance of price comparison sites, we know there are multiple millions of quotes flying around daily which have to be served in sub-second, in real time.
This requires a lot of processing power and data insights derived from contributory databases. The analytical horsepower required to compete in this market, and increasingly other insurance sectors too, will only increase.
So big data is not only about looking into the future, with new data pools and some of the esoteric solutions that were discussed at Instech 2020. There are some clunky parts of the insurance process still remaining, where claims data and other data at the point of quote, can still be smoothed, helping to strip out costs with a smart approach to data.
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.