Jonathan Guard
Jonathan Guard,
Director, Commercial Insurance, UK & Ireland, LexisNexis Risk Solutions

May 29, 2019

The explosion in available customer data (both personal and commercial), the growth in data analytics techniques, and move to online quotations for SME insurance, are prompting insurers to look at ways of improving the customer journey for commercial motor, SME and commercial property customers.

Speed, being prepared to partner around new external data sources, new players in the ecosystem, to pivot around new delivery models, and use of data enrichment to price better, and understand better a commercial customer’s needs: these are going to be vital in preparing for the future.

More options for digital delivery of business and SME insurance cover

Micro SMEs increasingly have more options to go direct to insurers, by phone and via digital channels, to service their needs, rather than through a broker. With this in mind, one large SME player re-launched two digital tools for SMEs, the Business Insurance Wizard and Business Guardian Angel. The tools provide access to expert advice and guidance that is personalised to educate business owners about their specific insurance need. The Business Guardian Angel app goes one step further than simply advising on insurance by providing a source of tailored news, blogs and videos about running and protecting small businesses.

Such examples are highlighting the extent of innovation coming from within and outside the industry, and the trend for insurance carriers and brokers partnering together to bring some of the technology solutions, whether it is the broker or the insurer that has the best customer interface, and integrating the necessary data into it.

Forward-thinking insurance leaders are pursuing opportunities to create data-driven solutions in core and adjacent markets.

A recent Allianz report found the issues of biggest concern to UK SMEs include some new and uncertain risks such as data loss or data misuse through cyber crime, the impact of Brexit as well as theft or malicious damage to business equipment or property, more advanced technology being adopted by competitors, and the risk of a significant interruption to their business.

Half of UK businesses fully understand their risks

Only 50% of respondents in the Allianz survey said they fully understood the risks facing their business. Similarly 50% of SMEs said that they would welcome further information from an expert source about these risks.

SME insurance is one of the fastest-growing sectors and it is the one where insurance providers are increasingly depending on the right alliances, requiring deep knowledge and insight about the insured business. Providers must be prepared to innovate around value-added services such as delivering advice related to cyber, business contingency risk, and benchmarking the optimum services (and optimum level of cover) for specific business types, business sizes and sectors.

Our recent survey of UK commercial insurance providers* found that only 68% of commercial motor insurance providers use some form of business data of any type in quoting and underwriting processes.

There are major gaps and opportunities in terms of where UK commercial lines insurers are utilising data sources such as company director data (including past business history and insolvencies), prior claims and a wide range of other potentially useful data sets.

Data about a business used in commercial motor quoting/underwriting

  • 51% of commercial motor insurers use business activity data (such as business sector)
  • 51% of commercial motor insurers use a market risk score
  • 46% of commercial motor insurers use a custom insurance risk score
  • 44% use claims history data
  • 25% use business profitability data
  • 16% use number of employees
  • 13% use turnover data.

Data about a business used in commercial property quoting/underwriting

  • 70% of commercial property insurers use claims history data
  • 66% of commercial property insurers use business activity data (such as business sector)
  • 65% of commercial property insurers use a market risk score
  • 40% of commercial property insurers use a custom insurance risk score
  • 26% of commercial property insurers use business profitability data
  • 22% of commercial property insurers use number of employees
  • 14% of commercial property insurers use turnover data

The survey showed that both business data and company director data are used more widely by commercial property insurance providers than by commercial motor insurance providers.

In both commercial motor and commercial property, business data and company director data is used to some extent to improve claims processes.

A narrow majority of commercial motor insurance providers use company director data in pricing and underwriting. But two thirds of those not using such data seem to be unaware of the potential benefits, and are not interested in doing so.

More pressure to deliver for the SME insurance segment

Technology constraints and issues with accessibility of data are the most commonly cited reasons for limiting the use of business data, company director data and other external data sources. This was the case for both commercial property and commercial motor insurers.

Commercial lines insurers place a greater value on the insights from company director data, for example, once they start using it.

Our study also showed differences between attitudes of larger and smaller insurance providers, with the former much more likely to already use market risk scores and information about an individual’s involvement in previous businesses, and more likely to also perceive this information as ‘highly valuable’.

The pressures on the SME insurance sector are only going to continue but new tools are out there in the form of enriched data to improve insurance pricing and delivery. These strategic paths with tactical solutions can help you not only to survive the challenges, but also to grow in an increasingly digital future.

*LexisNexis Risk Solutions commissioned a survey of UK insurance professionals with responsibilities related to commercial motor insurance underwriting or pricing, in the case of a first group, and commercial property insurance underwriting or pricing in a second group. 77 interviews were conducted for each of these surveys, via telephone and online. LexisNexis Risk Solutions was not identified as the sponsor of this research, which was completed during November and December 2017.

For more insights from these research results download the LexisNexis Risk Solutions commercial insurance white paper ‘Digging Deeper: Using Business Data and Company Director Data to Inform Insurance Risk Management’.

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