Insurers are facing an increasing challenge when it comes to accurate risk assessment and consumer information disclosure at the point of quote.

Whether it is in the form of a misstated no claims discount, customers not having the correct information to hand or outright fraud, several studies we’ve conducted show that a rising number of customers think it is acceptable to submit incorrect information when applying for insurance.

When we polled motor insurance customers in 2013 the results were quite surprising: one in four people believed it’s acceptable to omit information at the point of quotation. In an identical survey in 2015*, this number had increased to one in three people.

Some 57% of people won’t report an incident or small accident to their insurer, preferring non-disclosure to keep their premiums low.  Even more worrying for the insurer, 57% of them feel their claim should still be paid even if they have supplied inaccurate information. Part of this could, of course, be down to not knowing what information they should be disclosing at the point of quotation rather than deliberate misrepresentation.

In another consumer survey from 2016** a similar number of homeowners (68%) said that some omissions or adjustments are acceptable in the application process, to keep their insurance costs low.

Only 23% of home insurance customers said that omitting any form of personal information or adjustment is unacceptable. However, non-disclosure of past claims is somewhat less acceptable: 59% of consumers feel it’s not acceptable to withhold any claims information, regardless of the size or number of claims. This still leaves 41% of people who feel it is acceptable to omit some degree of claims information.

Against this backdrop, it’s no surprise the need exists for more externally-verified data for underwriting and pricing purposes.

Our analysis suggests a significant number of consumers under-state or misreport some elements of their policy history. There also appears to be more likelihood of a correlation between consumers who under-state claims information, and the cost of their claims being higher than those who do not misstate.

From the viewpoint of the industry, a majority of insurers see the insights into a customer’s policy history through digitization as being useful to improve the customer journey, price more accurately, reduce application fraud, and attract better risk.

In our survey of motor, home property and commercial property insurers*** 91% of them said more information on a customer’s policy history would be extremely, very or somewhat useful for improving the customer journey. Another 88% of insurers said it would be useful for more accurate pricing.

Usefulness of a customer’s policy history

  • 61% of insurers said a customer’s policy history is extremely/very valuable for improving the customer journey (29% said somewhat useful)
  • 60% of insurers said a customer’s policy history is extremely/very valuable for more accurate pricing (27% said somewhat useful)
  • 58% of insurers said a customer’s policy history is extremely/very valuable for reducing application fraud (31% said somewhat useful)
  • 55% of insurers said a customer’s policy history is extremely/very valuable for attracting a better risk (28% said somewhat useful)

There were some differing views between property and motor insurers in terms of how they would like to apply policy history data. Whereas more accurate risk pricing was considered most important by commercial property insurers, improving the customer journey/reducing application fraud were considered the most important factors by motor insurers. For home property insurers, attracting better risk/reducing application fraud were considered most important.

We carried out the research to understand what our customers need, in order to improve and support their businesses in future. The results give us confidence that our investments in policy history data have been well placed, and in tune with our customers’ needs, as we move ahead with launching Policy Insights this year.

* LexisNexis Risk Solutions Consumer Insights Study 2015 was a consumer panel of 1,314 adults, insured drivers and policy decision makers, interviewed.

** LexisNexis Risk Solutions carried out an anonymous survey, the UK Home Insurance Consumer Study, 25 January–1 February 2017. The sample was 1,500 residential homeowners in the UK, who owned their current residence for two years or more, home insurance covering their primary residence, equally or solely responsible for home insurance decisions.

***LexisNexis Risk Solutions carried out an anonymous survey, the UK Insurance Underwriting Digitization Study, 8 December 2016–9 January 2017. Mixed mode of data collection: online panel and telephone interviewing. The sample was 170 insurance professionals, 55 personal motor, 52 personal home and 63 commercial property. The respondent must spend 30% of their time in underwriting-related activities for a given line to be assigned to answer questions specific to that insurance line.

For more insights from these research results download the LexisNexis Risk Solutions white paper ‘Defining your digital strategy in a disruptive world‘.

Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurers.

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