Most people understand the key provisions of a standard home insurance policy. A majority of consumers will recognise that their policy provides coverage for damage caused by fire, wind, flood, escape of water and accidental damage in the home. Most also know that personal items are covered when they get stolen, and with a contents policy they should know the types of insurance claims they’re covered for, when travelling or outside the home, and limits on pay-outs for very expensive items.
With this is mind, it’s perhaps surprising that a large number of policyholders in our recent LexisNexis Risk Solutions research* continue to express cynicism or dissatisfaction with the insurance claims process. Our survey of over 3,000 home insurance customers, comprised of approximately half renters and half homeowners, found that roughly eight in ten people believe insurance providers try to avoid paying claims at least ‘some of the time’. Another two in three people think it is acceptable to manipulate information they provide when using price comparison sites to shop for insurance.
On the positive side, 18% of homeowners and 20% of renters said they had renewed their current home insurance policy because they had experienced good customer experience. Another 18% of homeowners and 15% of renters said they renewed because they had experienced a good claims experience in the past. Other factors such as being offered a competitive price and good policy coverage were even more important in driving renewals and loyalty, according to our research.
Although the survey results show that most people are satisfied with the price they pay for home insurance – and they renew without shopping around in seven in ten cases – there is still residual cynicism about the consumer-insurance provider relationship and providing accurate information at the time of underwriting or claim.
There is also a widespread perception, especially amongst consumers who have never made a claim or who have not made a claim recently, that claiming against a policy automatically leads to an increased premium.
Insurance claims and premiums: Expectations and reality
- 70% of home policyholders who’ve recently made a claim expect their premium to increase if they claim
- 79% of home policyholders who’ve not recently made a claim made a claim expect their premium to increase if they claim
- 79% of home policyholders who’ve never made a claim made a claim expect their premium to increase if they claim
- 61% of home policyholders who’ve recently made a claim actually experienced a premium increase
- 53% of home policyholders who’ve recently made a claim actually experienced a premium increase
When we consider improving the claims experience – the factors that go into defining how a customer feels about their claim – there’s a lot of unused information currently that can add material value to the process. Or to put it in another way, a lot of information is available that can substantially influence the resolution of a claim and really improve the ability to make better decisions faster and more confidently. This is the factor that I want to explore in this article, the typical information in a home insurance claim that‘s available today and the information that’s going to add value in the future.
Ultimately it is having more granular access to data throughout the insurance continuum that is going to improve the typical claims process and help to drive loyalty to your insurance brand. Better data at the point of underwriting can put the insurance provider in a better position to understand the context of a future claim. Better data at the point of claim can put the insurance provider in a better position to pay out a non-touch or low-touch claim, helping deliver on the brand promise, as well as impacting on other aspects of the insurance relationship.
In the case of a home insurance claim the data that supports the claims decision-making process is often related to weather, typically wind, storm or flood data from the location, property build data such as property age or roof type, possibly a police or fire report if the claim is theft or burglary related, supported in some cases by the customer’s photographs and of course the claims statement. Past claims history at a property, regardless who the current occupant is, will bring another insight, looking for any patterns in weather-related claims or crime-related claims for example. Data on the policyholder as an individual as well as other occupiers will bring another dimension.
It’s going to be helpful to know about the past claims experience with this person too, any past fraudulent statements or fraudulent indicators, their claims history across other insurance providers and other lines of business, including motor insurance. Is this a legitimate claim first and foremost? Are there any patterns in the data that should stop the claims pay-out being completely automated or warrant further investigation?
The typical, honest insurance customer stands to gain a lot from the insurance provider having access to better claims history information and it’s this information that is going to build a better and faster claims process.
Fraud checks impact on the claims experience
There are 110,000 detected fraudulent insurance claims every year in the UK, worth over £1.2 billion or £3.3 million per day, equivalent to over £11,000 per fraudulent claim**. The recent increase has been mainly due to increases in motor and property scams. In home insurance some recent high-profile cases involved a claims management company employee making multiple escape-of-water and burglary claims as well as staged home fires, staged burglaries, robberies, providing false details to obtain cover and fraudsters impersonating a genuine insurance company to secure policy income for policies which do not exist.
Insurance companies know that organised insurance fraud can come in many forms and it comes with increasingly sophisticated tactics.
There is no shortage of valuable information that can improve risk management, that can help confirm legitimate damage and repair costs earlier in the process and avoid unnecessary litigation, unnecessary expenses.
A customer may have mistakenly estimated the cost of repairing a fence or replacing a carpet. Efficient use of existing datasets may at least help identify where these outliers are perhaps creeping into the quotation process.
And on the other end of the spectrum, if it’s obvious from the data that it’s a truly fraudulent claim, then an insurance provider would have the confidence to know if a claim is worth defending and investing in that.
There is a need to educate consumers about the possible consequences of insurance fraud or mis-statements – such as invalidating policies or prosecution – and the wider economic and social costs of insurance fraud.
But we believe this educational process must be complemented with improved technology and business processes that will help to improve further both the accuracy and the perception of home insurance pricing. Access to accurate claims data can help home insurance providers to improve the efficacy of pricing, underwriting and claims processing. This will help to reduce the temptation to commit and the incidence of fraud and will improve the detection of fraud, resulting in better outcomes for providers and consumers. Insurance providers that fail to use claims data for this purpose will face greater risks, including the possibility that they may lose market share.
Consumers have a generally positive view of the price of home insurance, according to our research, while those who have filed claims recently have been generally pleased with the experience and the result. But it also reveals that an ever-present perception that insurance providers try to avoid paying out claims and that they ‘punish’ consumers for filing claims. The increased use of indirect and online interactions with providers may have increased the motivation and temptation to commit application fraud or claims fraud. That temptation may have increased as a result of the COVID-19 pandemic causing financial distress for some people.
But overall, less than two in ten people say they feel the need to shop around every time their home insurance policy comes up for a renewal. They give a mix of reasons for this.
- 22% of home owners renew with the same home insurance provider because of good policy coverage offered
- 16% of renters renew with the same home insurance provider because of good policy coverage offered
- 21% of home owners renew with the same home insurance provider because of competitive price
- 18% of renters renew with the same home insurance provider because of competitive price
- 18% of home owners renew with the same home insurance provider because of good customer service experience in the past
- 20% of renters renew with the same home insurance provider because of good customer service experience in the past
- 18% of home owners renew with the same home insurance provider because of good claims experience in the past
- 15% of renters renew with the same home insurance provider because of good claims experience in the past.
Appropriate tools can aid in the assessment and speed of claim processing.
For more information on this research download the free white paper ‘A Clearer View of Claims to Help Fight Fraud’.
* LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on an online survey of 3,083 residential homeowners and renters (including 1,576 homeowners and 1,507 renters). The research was completed during 2019.
** Association of British Insurers (ABI) 2020 fraud data
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.